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The Company Purpose — 1.12
Markus Westerlund
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Today I will talk about something really powerful, which will allow your company to take off. I’m talking about the purpose of the company.
First, let me ask you a question. Why does a company exist? What is the point of it? The answer, which you give spontaneously, centers on the core of your culture. There are many ways to answer this question. In my opinion, however, one answer can be better than the other.
Let me rephrase the question. Why do customers buy from us? Is the answer to this question the reason why our company exists?
Another question. Why do people work with us? Is this the point of our existence or is there a greater idea behind the company?
Why have investors invested their money into our business? Is the ultimate reason to earn money for the investors, who have risked their money? Some would say, of course! Others say that it is necessary, because without investments the company would not exist. Correct, people take out their invested capital by selling their ownership, if they think the returns on their investment are not sufficient. Likewise, the investors tend to prefer the company to increase in value over time.
It is also possible to think, that the company exists because all the stakeholders – the owners, the customers and the employees – believe and care deeply about what the company is trying to achieve.
A belief in good!
They can believe, for example, that the business idea can truly make the world into a better place, and create value for themselves, the customers, and the owners at the same time. This way the company also contributes tax revenue for the government, which naturally it likes very much. The government then does with the tax revenue what the bureaucrats and politicians think is necessary. Tax revenue expenditure is a controversial topic, let’s not talk about that beyond this point.
Everything I just mentioned will happen, you only need to make the right strategic choices.
The Purpose
We have a purpose! The purpose is above all other things in importance. If customers feel like they receive a lot from us, then we, the staff, enjoy our success. The customer buys more from us, and the owner of the company sees that money is flowing in like water flows into the faucet from the tap. The invested capital is generating returns!
I must add, that the investor can be a young family that has invested all of their extra little money they have, in us. The investor must, of course, receive something in return for the risk they have taken upon themselves. Charity is something else. It’s not rude to give people compensation as thanks, it’s the decent thing to do. They have taken on risk and invested their financial capital in us, who are working towards a worthy cause, and they are helping us by investing their money into our cause. So, let’s be grateful for this investment and pay the investors dividends as thanks when appropriate, and increase the value of our company for everyone’s sake.
Purpose into a context
I’ll explain how this can be presented as a concept. Everyone in business has encountered the words vision and mission. Both words are controversial and usually people understand them differently. Sometimes people get the word definitions mixed up. Many use the words without a clear shared understanding. This is why we launched a new way of thinking, by combining mission and vision together into a single word. This is when we started to use the word purpose.
I’m talking about the word Purpose. You lead a company with it.
I have shown these two opposite models to twenty customers during a strategy preparation process, and asked, which model they would like to use. The classic mission-vision model, or the simplified purpose concept? Everyone has agreed that The Company Purpose is the winning path forward for them. They have understood that the purpose concept is the winning path to a successful future for their business.
The above equation, that describes the situation, is absolutely solid in its clarity. Purpose equals mission + vision. Let’s dive into this equation more thoroughly.
The Sun model
Let me introduce you to the sun model. This metaphor is something I came up with on my own, but the idea itself comes from Cynthia Montgomery, a Harvard Business School professor, who has written the book Strategist. This book mentions something she calls System of Advantage. She uses a steering wheel for visualization, but I realized I can use my own sun symbol, which I have used for years in other situations. This created the Purpose concept. The purpose concept portrays how the company purpose shines onto our daily tasks and how it affects our everyday life.
Our tasks are located between the rays of the sun. The space in between are practically speaking various sectors. Each sector can be labeled as things like customers, products, services, sales, pricing, logistics, finance etc. Everything is there.
Purpose Concept - How our purpose shines on our operation
The company purpose has to be clearly visible inside the different tasks. Implementation can take place on different scales, which means some tasks have come further in adapting The Company Purpose. Some tasks haven’t come as far as the others.
If this is our Purpose now, what is like in the future?
In the future the sunbeams will shine stronger and reach further. Our “vision” is to complete the process in these different tasks inside the sectors. However, if the first sun image is the current situation (which often is referred to as the company mission) and the second picture (visible above) is the “vision”, aren’t we talking about the same thing? The Purpose doesn’t change, it only becomes stronger as the company moves into the future.
Case
Here is a case. I have crystallized this myself, so this isn’t an official slide. It is pretty good nevertheless. Look at the bullet points, and try to recognize what company it is. Start by reading the circle in the center: “Stylish furnishing for the many”. Then proceed to read the text inside the sectors. Customers have small living spaces and appreciate design. Prices match the wallets of many. A restaurant is at the front of the department store. Which company is this?
– IKEA, of course!
Cynthia Montgomery uses IKEA as a case example. IKEA has, as a business, created an unbeatable concept that has a long-term competitive advantage, a Sustainable Competitive Advantage. Any furniture company is able to copy any of these bullets, which I call gold grains. Any competitor can try to imitate any single golden grain, like the restaurant concept, but will the competitor be able to perfectly imitate every single golden grain that IKEA has? Practically speaking no, that’s impossible.
The whole IKEA concept is deeply embedded inside the company culture, that it’s impossible to imitate effectively.
Also, Ingvar Kamprad created a foundation, which owns IKEA. The fact that IKEA is owned by the foundation prohibits it from being sold to a third-party. IKEA can’t be bought. If you try to copy them, you are many steps behind by the time you think you are done. Meanwhile IKEA has improved its concept and gone further. What a way to create a competitive advantage by building it on golden grains!
Gold grains
Almost all customers I work with have said, that they are lost with the idea of differentiation. What makes us (the customer) different from the others? I answer by using this example of gold grains: If you’re in the forest looking for a lump of gold, you’ll never find it. The Californian gold rush ended ages ago. The big lumps of gold have already been collected. These days it is not a good idea to try to rely on one thing, one golden grain. Instead, put some effort into finding 30 grains of gold. When you combine them together you end up creating something unique. This will create a sustainable competitive advantage for you.
When you have a Purpose, you learn to adapt it to what you are doing and you create a sustainable competitive advantage from several golden grains. Pretty amazing when you think about it.
This means that you can build a whole strategy with The Company Purpose as a guideline. Once you have a clear purpose concept you can effectively choose what will be the most important focus areas in your strategy.
The Company Vision
When I ask Finnish companies what their visions are, I know their answer already in advance. How come? Everyone’s vision is always the same. They want to be No. 1. When I ask them: Isn’t the number 1 spot a position? They answer, yes. Then I ask them a follow-up question. Who gives you this status? They answer, the customers! Then I ask another follow-up question. What is the great thing you do, that allows you to earn the right to be No. 1? After that question the room usually become eerily quiet. The conclusion is that it is not clear what golden grains make up the company purpose.
I encourage you to build this system, because then you are able to overcome the challenge with differentiation. Recently I introduced this idea to a public company, and both the CEO and the board got really excited about the approach.
This is how the whole concept can be represented. This is good, in the sense, that it can be easily communicated both to the staff and to the customers. If we aren’t excited about our company’s Purpose, how on earth is the same purpose going to be exciting for the customer? Customers realistically only become excited about what we do if we ourselves are excited about what we do.
Dear friend, create the sun model for yourself! Ignite your strategy! That is how you achieve sustainable competitive advantage. Your staff will radiate with joy and excitement and the customers are thankful for it. Your customers will give you’re your well-deserved reward, which means deals and money that flows into your business. This is a win-win situation for everybody involved!
Ignite your strategy! Read more.🔥
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Stradigo
Stradigo is a brand owned by Rdigo Oy (Business-ID: 2120844-1).
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Rdigo Oy is registered in Finland as a Limited company. We are a strategy consultancy located in the Helsinki capital region.
We’ve been in business since 2007. The company name comes from the latin word Redigo, meaning both ‘I shape’ & ‘I renew’.
Stradigo combines the word strategy with Rdigo.