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Reinventing business on purpose

Reading Time: 3 minutes

by Nathanael Muscat 

A demarcation lines between industries and offerings become ever more blurred, purpose is fast emerging as a key strategic driver for sustainable growth. Traditionally, high-growth strategies involve the creation of new markets, extending the range of products and service, or disrupting the industry. All of these approaches focus on the forces external to the company.

A purpose-driven strategy, by contrast, concentrates on the internal forces of the organisation, although this is by no means an inward-looking approach. Simply put, purpose establishes the raison d’etre of a company.

A mature purpose orientation

Research by Thomas W. Malnight, Ivy Buche and Charles Dhanaraj published in 2019 surveyed leaders from 28 companies across the United States, Europe and India that registered an average compound annual growth of at least 30 percent for five consecutive five years. The study found that, in these businesses, the company’s purpose was clearly spelled out and integrated into its core functions.

Very often, purpose is a tangential aspect of businesses that companies whip out in their marketing campaigns but remains a hazy idea beyond that. On the other hand, the research team discovered that the high-growth companies they were analysing had all developed a strategic view of organisational purpose and made it the centre of their business. The study concludes that rebuilding a company in the image of its stated purpose becomes transformative in two ways: it redefines the playing field and reshapes the value proposition.

New frontiers of opportunity

The paper argues that businesses that constrain themselves to one sphere, constantly competing for market share, are destined for low growth because expansion comes at a high cost. Instead, organisations driven by purpose have the strategic flexibility to think in terms of ecosystems that fulfil their meaning, not markets that need their products.

This approach means that organisations have to re-evaluate and, frequently, reconfigure their core competencies to deliver new products for new demands. But change does not merely follow opportunities that come the company’s way; on the contrary, it is a firm sense of purpose that attracts opportunity.

Sharing purpose with partners

Businesses with purpose have the elasticity to innovate and propose new value offerings that address the needs of multiple stakeholders who respond to its broader mission. The researchers outline three fundamental methods that help companies reshape their value propositions.

The first is observing trends and acting on them to translate purpose into fresh offerings to a changing market. The second method is investing in trustworthy relationships that help stakeholders grow and the business to grow with them. The third way is identifying pain points across different sectors and responding to them meaningfully.

Purpose in practice

Purpose-centric organisations, according to the research team, take either a retrospective or a prospective approach to the strategy. Companies of the former type typically dig into their own heritage and legacy to refine their reason for existence; they ask what makes them unique and what events have shaped their business’ development. This approach seeks to establish purpose on differentiation.

A prospective approach observes connections between different organisms that make an ecosystem and looks at possible gaps that are not yet being addressed. In this sense, a prospective outlook is about future possibilities rather than inherited lessons. As such, purpose in this approach is built on aspiration.

The hard work of purpose

For purpose to be truly a driving force, leadership needs to find ways to reorganise a company from an input-output structure to a mission-supporting one. The paper admits that this is no mean feat, but it describes how such radical shift has also been adopted with remarkable success by a publicly held company operating in a traditional industry.

Together with restructuring, the researchers recommend an active dissemination programme that communicates purpose throughout the company. This is not merely a matter of informing internal stakeholders about change, but of mobilizing them to pursue better and more relevant ways of accomplishing the organisation’s collective mission.

Malnight et al. argue that purpose-driven businesses further benefit from the growth strategy because it facilitates management by unifying co-workers around an articulated, solid goal. Secondly, they claim that stakeholders are energised by a purpose-led company and are more prepared to trust it. Finally, purpose allows a business to connect with a fuller range of social players, forming new partnerships and broadening its impact.

Discovering purpose is a strategic revolution that challenges companies to let go of what they do and grow into what they are.

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