The Search for Purpose

By Nikos Mourkogiannis

For many years, I worked for one of the world’s leading strategy consultancies. On any typical assignment, watching CEOs evaluating the pros and cons of our recommendations, I would always find myself wondering, “What is really determining their decision?”

With the best chief executives, those at the helm of the most effective companies that we advised, I knew that there was something more driving their decisions than simply the need to make immediate profits. Some advice was deemed a natural fit; some, even though it would be difficult to execute, was taken on as part of a long-term strategy. And some “slam-dunk” options were dismissed immediately, often with a comment like, “This is not what we are trying to do here.” I came to recognize that the more consistent this type of reaction was, the more successful the leadership team, because its members knew where they were going. In other words, while strategic alignment and execution were always essential to success, the most successful leaders were those who knew which strategy to pursue.

All leaders, not just top CEOs, face difficult strategic decisions throughout their careers. The single factor that helps them make these decisions correctly is an understanding of what their organization is really trying to do: its Purpose. That’s because the Purpose of the organization— the shared recognition of the reason why it exists—is the context that determines whether a decision is the right one to make at any particular time.

Purpose does not mean making money. It does not even mean producing goods or services, satisfying shareholders or paying taxes and contributing to society. Those are all the things that an organization must do in order to fulfill its Purpose. The Purpose is a moral conviction: a rationale that explains why a particular group of talented people—leaders and employees—should spend their valuable time working together in this particular organization doing these particular things. For example: Are we here to discover new inventions? To increase people’s happiness? To create beauty and quality? To control the direction of our industry? Or for some other reason?

When a Purpose appeals to the moral conviction of employees, then they are capable of acting with conviction and self-determination, without being micromanaged. When the strategy of a company is aligned with its Purpose, then its moves will make sense, whether in the short or long term. When companies operate over time with a clear and well-aligned Purpose, then they become great and influential.

THE FOUR PURPOSES

For today’s global companies, based on my research, there are four moral traditions on which a successful Purpose can be based:

1. Discovery centers on the search for the new. Discovery put America on the map, men on the moon and the dot-coms in business. Sony, IBM, Google, and many technologically based companies have succeeded by making innovation and exploration the center of their effort.

2. Excellence focuses on providing the best possible product or service. Excellence built the great cathedrals of Europe and today’s most successful professional and creative businesses. Apple, BMW, and Warren Buffett’s firm Berkshire Hathaway have all built their identity around the artistry of their endeavors.

3. Altruism is built on compassion. Altruism is the driving force of any organization that exists primarily to help others, like many political parties or most charities. Nordstrom, Hewlett-Packard, and even Wal-Mart have established appeal around the idea that they are, first and foremost, making their customers happy.

4. Heroism sets the standards for everyone else to follow. Heroism resulted in the Roman Empire, Wimbledon champions Serena and Venus Williams and many spectacular growth companies. Microsoft, ExxonMobil (and its predecessor Standard Oil), and GE have dominated their markets and industries by focusing on their capacity to win every competition.

To be sure, Purpose is not monomaniacal. Wal-Mart beats the competition; Nordstrom provides excellent service; and IBM has had its heroic moments. But the underlying rationale for the decisions made by these companies becomes clear when you study their histories, which always have to do with fulfilling an idea, often set in place by a leader or a leadership team, about “what we are really trying to do here.”

Companies do not adopt such Purposes by accident; they are deliberately chosen by the leaders, often with original forms of expression. Thomas Watson, Sr., didn’t say “our Purpose is discovery.” He put signs reading “Think” in everyone’s office. In doing so, he was making it clear that discovery was the essential constant at IBM, and every other action people took, including financial security, was secondary. The adoption of a Purpose, and the alignment of corporate strategy with that Purpose, is the single most important job that a leader has to perform. And most CEOs know it: “Purpose” is what they most want to talk about, though they do not always call it by that name.

PURPOSE AND CORPORATE STRATEGY

Corporate strategy is a highly complex business—witness the range of articles and books published on the subject, the number of professors who teach it at business school, and the legions of consultants who make a living from it.

However, at its heart is a very simple idea: to enjoy competitive advantage is to be able to generate more wealth than other companies in the same industry year after year. Not all companies are driven to achieve this, but most public companies need to do so, if only to continue appealing to shareholders.

So how do you generate more wealth than other competitors? In the 1980s and 1990s, many companies assumed that efficiency was the key, but they soon discovered that their competitors could easily make the same changes to their operations (for example, through outsourcing or streamlining).When productivity equalized, they were all competitively back where they had started from, but with lower margins. Companies then realized that the key is not efficiency per se (although this is of course essential to any successful business), but differentiation.

Michael Porter expressed this idea most cogently in his influential 1996 Harvard Business Review article, “What is Strategy?” Competitive strategy means “deliberately choosing a different set of activities to deliver a unique mix of value”; and different positions require “…different product configurations, different equipment, different employee behavior….”

But anyone reading Porter—and certainly anyone wanting to implement Porter—is bound to wonder just how this fit between a position and all the activities supporting it is to be achieved. Even more importantly, how can it be achieved so that others are reluctant to try to imitate it? One could argue that Porter’s answer to this is rationalist: in most cases a company can make a strategic decision because it enjoys distinctive strengths or a position in the industry well suited to that decision. Indeed, companies do not all start from the same place, and the additional costs and difficulties of moving to a strategic position will vary from firm to firm.

However, in practical, day-to-day experience, the difference in strengths and position from one company to the next can rapidly change, depending on the capabilities and commitment of the people involved. The underlying crucial issue is building those capabilities and solidifying that commitment. In any company, those depend on a flow of ideas and a web of routines and relationships. Some routines and relationships are formal—like the budgeting procedures or the innovation management procedures that some firms adopt, or the allocation of decision-making authority. Some are informal—the personal networks that allow individuals to access knowledge across and beyond the company or to assemble teams on an ad hoc basis, or to influence the way decisions are made and so move events forward.

Whether formal or informal, the single most important factor shaping these routines and relationships is the organization’s Purpose: they all rest on a set of shared understandings among everyone involved. If the organization’s Purpose is mere expedience (making as much profit as quickly as possible, or solving problems with the least effort and cost), people will tend to do things and have contact with people to gain only short-term advantage. If the organization’s Purpose is Discovery, Excellence, Altruism, or Heroism, then people will tend to be guided, consciously or not, by those values when doing regular tasks and building relationships at work. And when it comes to the introduction of new ideas, nothing helps people overcome the fear of adopting them more than the shared understanding that they thus serve a higher Purpose (for instance, saving people’s lives).

These shared understandings then underpin all kinds of internal organizational strengths—motivated employees, effective teamwork, knowledge sharing, efficient factories, creative product development teams, good brand management, a spirit of co-operation, flexibility and so on.

PURPOSE AND DECISION MAKING

It was many years before I understood why, when presented with a series of strategic options, some leaders always seemed to make the right decisions and some leaders always seemed to make the wrong decisions. The most successful leaders understood that the best option is the one that the organization will act on most effectively—in other words, the one that fits best with the Purpose.

So, if you are a leader within a company that seems muddled in its strategic direction, spend some time thinking about what drives you and your organization. Perhaps there is a divergence between the two. Perhaps your organization needs to discover or rediscover its Purpose. Ask yourself which leaders and which organizations you most admire. Then ask yourself what drove them to success. Was it Discovery, Excellence, Altruism, or Heroism?

Could that Purpose be the driving force in your own organization?

Originally published in MWORLD, Winter 2006/2007

The Search for Purpose

john_byrne

2008-06-22

Businessweek