The point of purpose in the digital era
Your company’s first steps towards its digital transformation have taught you that digital is not going to remain an add-on to business as usual but will radically change the way you do business, the “how”. But what drives you as a company and determines your success is not the “how”. It’s the “why”. Your purpose.
Purpose: what is it?
It is the answer to questions like these: Who are we as a company? Why do we exist? What do we believe? What do we want to fight for? Why do our people get up in the morning and come to work? Why do customers choose us? Your company’s purpose is always more than making money. Customers give your company money because in return you deliver something of value to them. Talented employees choose to earn their salary with your company because they believe the work they do there is meaningful.
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Purpose: why does it matter more than ever?
As we approach the digital era, four trends are driving the urgency for purpose. First, thanks to the internet, markets have become extremely transparent, making it easy for customers to compare price and quality and making it harder for companies to distinguish themselves from competitors. Products and services become commodities and the danger of a race to the bottom looms large. Purpose can be a powerful differentiator.
Second, as online self-service takes over standard customer interactions, the human contact that remains becomes supremely relevant. A company with a clear purpose has a story that appeals to consumers. It brings authenticity, sincerity and consistency to customer service.
Third, in the digital era the lines between industries are blurring. Value chains are evolving into value networks, where companies need to work with partners up and down the value chain, but also with competitors. This complexity can tip a company into an existential crisis. Who are we? This happened for example in the insurance business, where I have a background. Was our insurance business about assessing risks? Or about helping customers and enabling them to secure their financial future? Or were we a bank with a broad financial portfolio on shelf available to customers? Finding our purpose brought clarity.
Finally, with companies embracing agile organization models, responsibilities are shifting to individual teams, close to the customer. One of our clients, for example, has replaced its divisions and departments by squads operating as part of tribes. There is a risk of teams becoming too autonomous, and losing touch with each other and with the management. The common denominator that holds an agile company together is its purpose.
(Re)defining your purpose
There are companies that defined their purpose 10 years ago, based on Simon Sinek’s Start with Why method, and built their organization and strategy on that. Other companies start feeling the need for purpose when they are already in the midst of their transformation. Even in that stage, (re)defining your purpose is a worthwhile exercise.
It is a process of soul-searching. Aegon went back to its roots. Its founder was a vicar who believed everyone had a right to a decent burial, whatever their means. So he started a savings system for his parish. The company was started to help people meet a future financial need. Aegon’s purpose today is much the same: to help people achieve a lifetime of financial security.
Your company’s purpose existed from its first day of business, whether you were aware of it or not. But as markets change, your purpose may also change. PostNL, for example, was always very prominently present in local neighborhoods delivering the mail, a core need for customers - until the advent of internet. So the company is looking at what other value its postmen and -women have in their community. With their proximity to customers, they now aspire to be a neighborhood’s “eyes and ears”, sending snapshots and videos of irregularities to the town council through a smartphone app.
So you know your purpose. What next?
Knowing your company’s purpose has consequences for your strategy. For Aegon, for example, it meant that the people side of the business gained importance - which was quite a change for their corporate culture, where the spotlight used to be on developing the best and most advanced (and complex) insurance products. And it meant that there was scope for activities outside insurance, such as digital financial advisory services and banking.
Obviously, raising awareness of your company’s purpose and implementing the necessary changes in your organization need to be managed carefully. Your purpose should be realistic, dovetailing perfectly with your aspired business model. Your purpose should be perceived as authentic, and not as the new manager’s hobby horse. A purpose that is right for your company comes from its very heart, so the changes should be an evolution rather than a revolution. All the company’s actions, both long-term and short-term, should be consistent with each other and with the purpose. And everyone from the top down needs to walk the talk. Outsiders should be able to guess a company’s purpose from what it does. That is the proof of the pudding.
A purpose that works brings passion and drive to your organization. Just think what you can achieve when your customers believe in you and your employees love working for you. Bound by your purpose, you are a match for the challenges of the digital era. What is your organizations’ purpose?
Digital DNA Summit: from doing digital to being digital
The ones who know how to adapt to changing environments have the greatest chance of survival. This is also the case for companies that have to operate in the rapidly changing business environment of digital disruption.
Becoming truly digital is difficult. It doesn’t happen by accident, it is highly intentional. But how do you evolve and take that next step towards digital transformation? How do you rewire your organization and become fit to survive in the digital era?
At our Digital DNA Summit we explore the different paths companies can take to become digital.