Purpose-Driven Business
Research has shown that companies with a clear 'purpose'—a distinct social mission—outperform those that focus solely on generating high profits, particularly for the benefit of shareholders.
Over the years, the concept of 'purpose' has become increasingly important in the business world. I define 'purpose' as actively contributing to a better world, where a company's social role is taken just as seriously as profitability and shareholder interests. This trend caught my attention years ago. From that moment on, I delved into the importance of 'purpose' for commercial organizations. My overall takeaway is that embracing a social mission is crucial for companies that want to remain relevant in the future. The concept of 'purpose' goes beyond mere corporate profit; it encompasses a responsibility toward the broader society and the environment. This new business model, which pursues both financial and social goals, promises a more sustainable and ethical approach to business.
The shift in thinking
In the 1980s and 1990s, the focus in the business world was primarily on achieving financial returns, with an emphasis on delivering high-quality products. However, this approach has shifted due to various developments. Today, consumers—specifically generations Y and Z—seek an emotional connection with a company or brand. Customers and employees prefer brands that contribute to goals they value. You can view this shift as a movement from 'democracy' to 'emocracy,' a term used by British historian Ferguson to describe a society where emotions and feelings are more dominant than rationality. In this context, my awareness of the significant impact of globalization on people and the environment also grew. This led to my conviction that major social challenges cannot and should not be solved solely by governments or non-profit organizations. The B Corporation certification underscores this by promoting corporate social responsibility, and together with my studio, I help entrepreneurs give shape and color to this. So that an organization is more than just a label and does more than just stick one on.
In 2019, a significant step in the right direction was taken when The Business Roundtable, an association of CEOs from large American companies, signed a document. In it, they committed to investing more in employees, dealing fairly with suppliers, supporting communities, and protecting the environment. With this, 'purpose' was deemed more important than just the interests of shareholders.
This new perspective is proving, not entirely unexpectedly, to be financially profitable. Research shows that 'purpose-driven' companies generate higher revenues, with an average increase of 6% in their stock value and 20% in revenue growth. Nine out of ten consumers prefer to buy products or services from brands that are committed to social causes. Moreover, as a 'purpose-driven' company, it is easier to attract and retain high-quality employees. A clear 'purpose' helps create fans and ambassadors, making 'purpose' a profitable element within any company.
Why successful companies and semi-social enterprises have too little impact
In today's corporate and SME world, there are many conventionally "successful" companies that achieve impressive financial results, such as high revenue, profit, and headcount. However, these companies are not automatically considered meaningful. Their original intent and achieved success seem to have programmed these companies differently, making it a challenge for them to operate meaningfully. The transition to meaningful business often seems too complex for them and has a low success rate. This always raised the question for me: Is this correct? And are social enterprises the only solution?
Many social enterprises start with a meaningful intent and a well-intentioned idea, but commercially viable execution often leaves much to be desired. I notice a misconception that a well-intentioned idea should be intrinsically successful on its own. However, practice shows that despite some successes, such as Dopper and Tony's Chocolonely, many socially oriented ideas fail due to mediocre or poor execution.
In my view, meaningful business for larger companies requires a fundamental change in both the essence and the activities of the company. The company must undergo a complete transformation. This transformation concerns not only the actions but also the very nature of the company. However, meaningful business is a simple task when you start working on it from day one.
Meaningful business revolves around a new mentality and culture within the company and is the result of this new approach. For many people, meaningful business requires a change in intent and mindset. There are few individuals and/or studios that succeed in helping conventionally successful entrepreneurs adopt this new intent and mindset. This process is quite a challenge, but the result is potentially a significant impact. An important question that arises here is: how can you, as an entrepreneur, measure this impact? The answer is quite simple: stability, success, and transformation.
Stability, success, and transformation
Meaningful business requires deep awareness and preparation within an organization. Traditionally, it is thought that a company can only start operating meaningfully after several crucial conditions have been met. A strong desire would not be enough. To clarify this process, Maslow's well-known model is applied, which describes the hierarchy of human needs and also forms a solid foundation for organizations.
The bottom layer of this model concerns stability, which is essential for growth. Without stability, a company ends up in survival mode, where restoring stability is the only priority. Stability in a company means that the basic foundations are in order: there is an organized entity (such as a limited company), there is sufficient cash flow to pay people and resources, the first customers are placing orders, and the business model appears effective. In this phase, everything revolves around transactions and the short term.
Once there is stability, the company can grow to the next level: success. Success means creating value and confidence in the future. The company succeeds in building relationships with customers, the business model is proven, and revenue exceeds expenses. Innovation and the launch of new products take place, the corporate culture takes shape, and the company develops into a brand. Flexibility and structure are brought into better balance.
The top layer of the model is about transformation, the phase where meaningful business can contribute to society. This is comparable to the principle of 'putting on your own oxygen mask first, then helping others,' as stated during safety instructions on an airplane. According to this view, a company could only start the transformation into a meaningful business once the underlying layers of stability and success are functioning well. These layers would form the most important prerequisites for meaningful business, and only from that successful base could the company create added value for others. I believe that a company (however small) that organizes and presents itself differently from the start can operate meaningfully and successfully, thereby serving not only itself but also society.
Meaningful business works down to the recruitment level
In the traditional recruitment process, an important aspect is often overlooked: the wishes and potential of the candidate. Companies generally focus on their own needs, with the central question being what a candidate can do for the company. However, from the candidate's perspective, there is a growing trend where people look not only at the financial aspect of a job but also at the added value of the work and the company to their personal lives. To build a long-term and fruitful working relationship, it is essential for companies to clearly communicate who they are, what they stand for, and what they do. This helps in attracting employees who truly fit the company. Moreover, it is important that candidates are given the space to express who they are and what they want. Through this approach, companies can facilitate the transition from simply finding work to finding fulfillment in work. This leads to more engagement and satisfaction for both the employer and the employee.
The secret of progressive successful scale-ups
The "secret" of fast-growing companies, which do not focus solely on rapid growth but also prioritize a clear and meaningful mission that goes beyond financial success, is relatively simple. These companies strive to have a positive impact on society, the environment, or specific communities, while simultaneously expanding their operations and strengthening their market position.
Unlike traditional startups, which are primarily focused on growth and profit, these scale-ups are driven by a strong sense of social or environmental responsibility. As a result, they enjoy broader support from both consumers and investors. These companies integrate purpose-driven initiatives into their core business strategies and make conscious efforts to address urgent issues and make a positive contribution to the world. Examples of such purpose-driven scale-ups can be found in various sectors, such as technology, consumer goods, healthcare, and finance. These companies are attracting increasing attention and support from consumers, investors, and the wider business community. This is because there is a growing demand for enterprises that not only focus on making a profit but also contribute to creating a better world.
