The case for stakeholder capitalism has never been more relevant. In the midst of rapid social, cultural and technological change, accelerated by global challenges including the COVID-19 pandemic and climate crisis, there is a renewed sense of urgency for businesses to become a central part of the solution.
What it means for a business to ‘create value’ is shifting
Friedman’s logic that the social responsibility of business is to increase its profits has been consigned to history long ago. Indeed, there is an emerging consensus among consumers and companies alike that long-term value is most effectively created by embracing the broader needs of all stakeholders. Consumer behaviour is increasingly compelled by something other than price and product: purpose. What is the ‘why’ behind what a company chooses to do? How do they treat their people, the environment and support the communities in which they operate? Do their values align with mine?
In this context, there is a heightened imperative for businesses to integrate social values and commit to sustainable value creation that serves the wider interests of people and planet. They have to lead with purpose.
The business case for purpose-led strategy
pur•pose (n.): A company’s stated role in society, connected to long-term value. It is about producing solutions, doing so profitably (not just philanthropically), and measuring both impact and profitability of these solutions completely and accurately.
What does it mean to have a purpose-led strategy and how does this differ from the way we usually think of ‘purpose’ in a business context? The truth is that a purpose-led strategy can lead to better outcomes for consumers, communities, and businesses themselves.
At the core of a purpose-led strategy is a clear articulation of why an organisation exists, beyond the customer it services, the products it sells and the profits it makes. It forces an organisation to deepen their understanding of what really matters to customers in the context of their lives, as well as their employees and their community. In doing so, a transformative purpose-led strategy widens the objectives and scope of the business and how it measures success, unlocking new business potential and driving operations towards outcomes that people value.
This is an inherently more resilient and flexible strategy, allowing organisations to navigate rapidly changing business and social contexts. Done right, purpose-driven strategy is not at odds with profit and traditional measures of success. According to Deloitte surveys, 90% of customers are willing to switch brands to support a good cause, and 66-73% are willing to pay a price premium for ethically produced products. Purpose-led companies experience 50% less staff turnover, 13% higher productivity, and overall increased employee morale. Unilever is a real-life success story, finding that their purpose-led brands grew 69% faster than the rest of their business in 2018.
Adopting a purpose-led strategy is an essential in today’s business world – if you’re interested in embodying purpose in your organisation, our Social Impact team can work with you.
I lead our Strategy & Business Design practice and our social innovation and impact services in New Zealand. My focus areas are operating model change, transformation of social services and human centred design. I help organisations transform their business through changes to people, process and technology – and to do this in a way that is collaborative, innovative and truly customer-centric. My passion is for bringing together individuals and organisations to address ‘wicked problems’ at multiple levels: changing systems to transform outcomes, redesigning services to be simpler and generate better outcomes, and shifting mind sets to focus on growth, innovation and impact. My work has included leading large scale organisation change with my clients, including redesign of social housing services, welfare payment services, accident compensation services and child care and protection services – through the stages of the design, prototype and implementation.