3 Reasons Purpose is the Next Disruptor

At the turn of the millennium, “digital disruption” was well and truly an established term in the marketplace. Despite the dot-com bubble bursting in 2000, the businesses that dared to invest in digitisation of products and process, such as CommSec and iTunes, created the precedent that businesses who invested in digital were likely to achieve more long-term sustainability and security. Nowadays, “a digital presence” is a status-quo for the majority of businesses around the world – it’s not even considered “disruptive” anymore.

 

“Going digital” fundamentally changed the way we do business with each other and shifted the consumer landscape on a massive scale. The companies who took a punt on digital were able to carve out a significant competitive advantage and had the “first-mover advantage”, the continued relevance of Nike and CommBank, the demise of Kodak, and the rise of Apple, Samsung, and Google are all a testament to that claim.

 

What Digital Did 20 Years Ago, Purpose Is Doing Today

The concept of “purpose” is ambiguous, so let’s start with a definition:

Purpose-driven business is the act of aligning commercial objectives and KPIs with communal, societal, environmental, and/or humanity-oriented outcomes. For example, if McBurgers’ global objective is to “be the #1 fast-food brand in the western world”, then a purpose-driven outcome of that could be “to increase the Quality of Life Scale (QOLS) in each region we operate in by 15%”. 

Similar to how a commercial objective will have a set of tactics that work towards achieving the commercially-driven outcome, the purpose outcomes will be supported by a series of tactics that support both the purpose-driven objective and the commercially-driven outcome. In-short, the role of “purpose” is to support the commercial objectives by adding in purpose-driven KPIs that can be linked to commercial performance. The diagram below explains this relationship:

Screen Shot 2017-07-18 at 11.22.00 am

 

There are three key challenges to purpose-driven business that companies are currently struggling to overcome, they are:

1: The identification and alignment of “purpose” with commercial objectives;

2: The measurement of outcomes that a purpose-driven strategy is achieving;

3: Measuring the impact on commercial outcomes that purpose creates.

Vollie helps businesses around Australia with all of the above through online volunteering and CSR support, and you can read about their thoughts towards overcoming these challenges here.

 

3 Reasons Purpose is the Next Big Disruptor

 

1. “Purpose” Does Not Equal “Less Money”

Since 1990, the Domini 400/MSCI KLD 400 (the index for purpose-driven investments in the USA) has returned an average annual total return of 10.46% compared with the S&P 500’s 9.93%. Sustainable practises and purpose-driven business aren’t just better for the environment, but it can also be better on company performance: if you’re not having to clean up oil spills in the ocean, then your resources can be spent on the development and marketing of products and services that are more valuable to the market!

 

2. Customers Are Loyal to Purpose-Aligned Brands

Some of the world’s biggest and fastest-growing markets are heavily influenced by purpose-driven companies. In 2010, a survey by Edelman found that 70% of surveyed consumers around the world said they were more likely to purchase a product from a company that supports good causes while offering fair prices over a company offering deep discounts but no support for causes. In addition to this startling statement, an even bigger surprise was also uncovered: 81% of Brazillians, 78% of Chinese, 77% of Indians, and 78% of Mexicans are more likely to trust brands and companies that are socially responsible. It turns out that it’s not the western world that’s leading the charge on purpose (only 65% of the rest of the world are more likely to trust those same brands), but those who are potentially most affected by the risks that come with a failure to act.

 

3. Purpose-Driven Companies Are More Resilient

An A.T. Kearney report found that during the 2008 Global Financial Crisis, businesses who were committed to sustainable practices outperformed industry averages by 15% in 16 of the 18 industries studied in the report. In a world that has rising complexities on a daily basis, the importance of investing in strategies that increase resilience to volatile markets will continue to rise with them.

 

Head to Vollie for more information about how they can help.

To find out how you can combine purpose into your professional life, read about our Mindful Leadership program here.

 

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