The currency of the word, “Purpose” is at risk. If you haven’t already seen it, you’ll see it soon. “Purpose” is the new “authentic”. Or the “values-based leadership”. And I worry that many a leader will say many a beautiful thing, but not know anything of what they say.
Take Unilever as a case in point. COO Harish Manwani recently gave a TEDtalk in Singapore with the key idea that, “profits are not always the point, but purpose is.”
Capitalism is missing something, he says. Modern economics encourages you that “If you continue to operate in your own self-interest you will do the best good for society.” But what does that actually get you? You can destroy that which we share – water, for example. Or clean air. So, he says, “companies cannot afford to be just innocent bystanders in what’s happening around in society. They have to begin to play their role in terms of serving the communities, which actually sustain them. And we have to move to a model of an and/and model, which is how do we make money and do good? He believes the answer to that is “going to be leadership. It is going to be to redefine the new business models, which understand that the only license to operate is to combine these things. And for that you need businesses that can actually define their role in society in terms of a much larger purpose, than the products and brands that they sell. Values and purpose are going to be the two drivers of software that are going to create the companies of tomorrow.”
For his specific story to prove his argument, he shares how Unilever used Purpose to increase their reach in rural areas of India. My colleague, Tim Kastelle, (with whom I am writing a follow on book what advantages actually fuel performance and growth in Social Era) has studied this and teaches on this case in his class, so I turned to him to get his take.
Was this really about purpose, and profits co-existing? Was it really about a new business model?
And here’s what Tim said:
It’s an absolutely fantastic innovation case study, and a template for how big firms should do it. Their scaled approach was close to perfect. But in all of the early accounts that came from the firm, the main problem that they were trying to solve was that with the high levels of rural population and poor infrastructure, HUL was only able to reach about 60% of the people in India with their products. This program was designed to reach the other 40% (to win market share and grow the topline) – and it has succeeded in that. Yes, there have been a ton of great social outcomes from it as well (though most have been unintentional!), but this was ALWAYS framed as a straightforward commercial problem. I don’t know, maybe I’m over-reacting to his tone in the talk. But it did rub me the wrong way. To me, it sounds like the purpose version of greenwashing (purposewashing?).
So, it turns out that Tim and I had a similar response.
It’s not that we don’t think purpose matters. Just the opposite. We’re very clear (having just done some research) how much it is a driver of performance. But when corporate execs use the words of purpose to tell a story of same-old-business-models with a focus on profits, they risk being called out for it. When you pursue only the veneer of the idea of “purpose”, you miss the opportunity for the larger idea of purpose to change you. You risk ending up with things that are only surface-deep. In the archives of corporate history, this has looked like meaningless mission statements or values carved into the lobby of builds that nobody lives by. What starts out as a good intent gets distorted.
Enough people do this, and the currency of words that matter — like purpose, and communities, and values — gets debased.
It’s not that Harish Manwani is wrong about needing to balance purpose and profits. He’s dead on. As I’ve already written about in Social Era, this is a central aspect of value creation in modern times:
Things we once considered opposing forces – doing right by people and delivering results, collaborating and keeping focus, having a social purpose, and making money – are not in opposition. They never have been. But we need a more sophisticated approach to understand business models where making a profit doesn’t mean losing purpose, community, and connection.
The companies that do stand for something – a purpose that is shared with their community – can bring a real coherence to their work, and have a real advantage in the modern market. People want to believe in something real, of substance. Purpose brings out the best in people and the best people.
But let’s not purposewash something that was never started with that goal. It only hurts your long-term credibility, the trust that shared purpose builds. It would be better to say “we have evidence the two can co-exist, and now the leadership question is can we / will we use it to shape the direction from the very beginning.”
When our organizations embody the values we talk about, and use them from the beginning to shape our collective work, then it is REAL and thus deeply resonant to say “this is who we are”. When you embody an idea, it builds trust. It causes people to follow you. That’s what you’re going for as you navigate your lives and careers in the social era — Don’t just use the words, but embody the ideas. Your actions will tell the story of what you believe MUCH more than any words you choose to use. Ask yourself, “instead of talking about it, what can I do to live it?”
Then, truly, you’ll be walking the talk.
Ha! Well said, Nilofer. We must all avoid purpose-washing.
You are begging the question that purpose always means something other than profits. For a company profit is always one purpose, the primary purpose. Talking about others does not change that, whether it is before or after the fact, nor if those outcomes were even intentional or not. No need to be moralistic about it. The point of their story is as a touchstone for how they can do good and make money going forward. That impact is greater than your criticism of it.
Um, no. That’s not what I’m saying and I’m sorry if it reads that way. I’m saying that purpose is why you exist. I’m a capitalist and believe profits are necessary. To earn the right to do more, you have to earn money. The human equivalent would be breathing. Yes I need to breathe to live. But the point is to breathe in order TO LIVE. I don’t wake up every day saying, “I must breathe” cause that’s kinda obvious. Ideally you don’t either. You hopefully wake up thinking ‘how can I be of service’, to work on things that matter, to help fellow humans, use the gifts you have and so on. If you focused on breathing everyday it would just be too low a bar. That’s what the focus on profits is. Too low a bar. And I think the COO of Unilever actually gets that. But I want him to simply express it in a more genuine and straightforward way. Purposewashing isn’t it.
When profit is the purpose, the outcomes can be either very good for society or they can be very bad for it, and we should be 100% indifferent either way. That is part of the problem that we face with business today. One solution to that problem is to invert things so that we see profit as the means to purpose, rather than purpose as the means to profit. In other words, make purpose the end and profit the means. This takes away nothing from the absolutely critical need to make a profit. Profit is essential, absolutely essential. Without it, nothing lasts in the world of business.
Here’s the issue that I believe Nilofer is addressing here. Purpose means something more to customers than a mere focus on profits. When we, as customers, see a company focus on higher purpose, it has a positive impact on the value of that company’s brand for many of us. We are moving into a new phase in business when purpose is contributing value – real value – to brands.
So when purpose is merely an accidental outcome of pursuing profits – an outcome that could have just as easily gone the other way in terms of generating negative societal consequence – then wrapping a brand in purpose, as though that were the real driving force, creates a distortion in the signal of that brand to the marketplace. That’s the problem.
Much better articulated than I. Thanks, Gideon – I learned something by your answer.
Glad to hear that, Nilofer. And even more glad that you are addressing this issue.
And will be curious to see what Jim has to say …
Excellent post Nilofer as always. I posed a similar question in a recent post, suggesting that while marketers felt comfortable purposefully pursuing profit, they (and investors) might be more challenged if they had to profitably pursue their purpose – but that doing so would validate their efforts in the eyes of consumers. http://markdisomma.wordpress.com/2014/02/10/brands-and-boundaries/
Some of the confusion in the discussion about purpose is that there are different types of purpose, i.e. purpose FOR or purpose WITH. The Unilever example seems like a “purpose for” – as in “look what we are doing for others”. But the real power in a social age is pursuing a “purpose with” — in which the company and its stakeholders pursue a shared purpose together. The purpose becomes bigger than the company. Unilever might not be guilty of insincerity (as implied by the term purposewashing) but rather a weak version of purpose for (social responsibility), rather than purpose with (social opportunity). For more on this distinction, see http://blogs.hbr.org/2013/03/purpose-is-good-shared-purpose/. And thanks Nilofer for shining a light with your usual insight on such an important subject.
That’s an excellent distinction, Mark. I’m right there with you on that:
Companies that understand this new form of partnership build a new kind of leverage. We’ve shown that financial leverage can be a very powerful force, but “engagement leverage” is even more powerful. It makes the organization’s boundaries more porous and extends the firm’s capacity to collaborate well beyond the edges of its org chart.
I like the examples you use in that piece. It really helps to internalize the difference.
Where may one access the research you refer to on purpose and performance?
Hey Carl, are the links embedded in the piece, all linking to research not visible to you?
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