Even before the pandemic took hold, leading businesses around the world were looking at their strategies and operations in a new light. Recognising that operational efficiency, customer experience and great products were not enough to win, they embraced purpose as a competitive differentiator. Beyond COVID, brands that put purpose at their centre have the opportunity to outgrow the market.
With the pandemic reshaping consumer behaviours and values, this could be the moment for forward-thinking brands to set themselves apart through their purpose. Indeed, consumers are looking to brands to show more purpose and higher ethics. A Mastercard survey found that half of South African respondents (45%) will give more value to brands that act in a responsible, transparent and honest way.
International research meanwhile indicates that when a person sees a logo of a brand they know is purpose-driven, they automatically associate it with words like “responsible,” “compassionate,” and “ethical.” And when someone considers a brand purpose-driven, they’re also more likely to remember it, buy it, and want to work for the company that makes it.
So, what exactly is a purpose-driven business?
Professor Colin Mayer offers a succinct definition: a purpose-driven business is one that aims to “produce profitable solutions to the problems of people and planet, and not to profit from producing problems for people or planet.” A purpose-driven business doesn’t exist only to profit from providing a product or service—it also considers its impact on society and the environment.
Why do purpose-driven businesses outperform the market?
With the pandemic still battering the world and putting businesses under pressure, ‘purpose before profit’ might sound like a luxury. However, research shows compelling evidence that purpose might be the key to profit and outperformance in companies that are genuinely rather than performatively purpose-driven.
Deloitte, for example, cites research showing that: “Purpose-driven companies witness higher market share gains and grow on average three times faster than their competitors, all the while achieving higher employee and customer satisfaction.” The consulting firm also finds that high-growth brands (those with 10% or more annual growth) translate purpose into action in different ways to lower-growth peers.
According to a seminal article in the Harvard Business Review, purpose plays two strategic roles in helping businesses to grow: it enables them to redefine the playing field, and it allows them to reshape the value proposition. That, in turn, assists them in overcoming the challenges of slowing growth and declining profitability.
How does a business become more purpose-driven?
Here is some advice from management and marketing consultants:
- South African advertising industry legend Pepe Marais suggests starting with identifying one word the business stands for, and defining exactly what that one word means.
- McKinsey says that a business cannot connect with purpose without deep engagement with the top team, employees, and broader stakeholders.
- Deloitte emphasises tying purpose-based metrics to employee and organisational KPIs to ensure alignment and accountability.
- A blogpost on Salesforce notes that purpose should set organisational strategy and guide decision-making from the top.