Published at 2020, March 10th
Having a clear idea of why a business exists and what higher purpose it serves has a couple of benefits. Here are 5 reasons why “purpose” matters, according to studies.
Over the last couple years, a lot has been told around purpose. That organizations should find their purpose, i.e. what societal goals they have beyond the need of making a profit they need to survive and thrive. If carried out correctly, this search for meaning can lead to significant progress in the areas of corporate governance and corporate development.
But why dig into an organization’s purpose? What benefits does it really bring? Here are 5 advantages that companies most invested in their raison d’être might benefit from.
1 – A Clearer Strategy
Today, within a sector, many companies offer products or services very similar to one another. And when they wonder how to stand out from the competition, they often fall over the same levels: low prices or better marketing techniques to encourage consumption. The problem is that in a tense economic context, these levers are sometimes difficult to use.
Yet there is another strategy organizations can embrace: their purpose. Defining the purpose of an organization’s activities means, in a way, redefining the competitive space of one’s business. A product or service that, in addition to its initial purpose, conveys meaning (such as a reduced impact on the environment or a more positive socio-economic impact), is one that stands out. When an organization clarifies its strategy and redefines its value proposition it differentiates and becomes easier to identify.
These are the conclusions from a qualitative study published at Harvard Business Review. Defining the meaning and the raison d’être of an organization’s activity means repositioning and redefining its strategy, which may lead to growth prospects.
2 – A More Positive Reputation
Many studies point towards this direction: a company focused on having a positive impact objective is better perceived socially. According to the Edelman Barometer, 80% of citizens believe companies should act to solve problems of general interest.
Also, according to a New Paradigm Strategy Group survey, 72% of individuals surveyed believe that a business should have and be managed considering a mission of general interest. According to the latest Deloitte report on trends in the retail sector, the idea of purpose is increasingly becoming an important purchasing criterion for consumers too.
This is quite logical: a company that defines its role in society is better perceived by its stakeholders, and this is all the truer among young people, the consumers of tomorrow.
3 – Increased Customer Loyalty
Consequently, it is quite logical that businesses managed with a sense of purpose that goes beyond economical and financial benefits will have higher consumer loyalty.
According to a recent Sustainable Brands report, 80% of consumers say they are more loyal to a company if it contributes to achieving what can be called a better life – one with balance, simplicity, meaningful connections, personal development, etc. In other words: a company that contributes to having a positive impact on society has increased customer loyalty.
According to the latest Cone / Porter Novelli report, almost 8 out of 10 consumers say they are ready to recommend a product if it comes from a company with a positive impact. More than 2/3 of consumers also said they could more easily share information about this company on social networks.
4 – Increased Innovation Capacity
According to a Deloitte Insights study, companies with a clear purpose (or those that significantly thought about this idea) can be perceived as more innovative by their employees. They would also tend to leave more room for the creation of new business opportunities and new development models.
This is confirmed by an EY / HBR study: business leaders from organizations with a strong focus on their reason to be find that their business more proactive than others and is better equipped to launch successful innovations or organizational transformations.
It seems that by adopting new objectives in terms of positive impact on society or the environment, companies betting in purpose are more open to new fields of innovation and reflection.
5 – Greater Economic And Financial Growth
Finally, logically, all of this leads to higher economic and financial performance. We already knew that investing in CSR was a performance lever for companies. But having a more accurate purpose defined is also a way of increasing profitability.
According to a Kantar survey, companies perceived as having a strong positive impact on society have seen their brand value increase by almost 180% over the last 12 years. The companies perceived as having an average impact on society would have only increased their value by 86% over the same period.
In summary, having a clear and defined higher purpose can lead to a better reputation, to greater consumer loyalty and to higher levels of innovation and economic growth. These are more than good reasons why organizations who haven’t yet given it much thought should focus on finding and working towards their purpose.
[Photo by Jamie Street on Unsplash]