the starting point of great companies

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Now everybody wants to talk about purpose

If you want to lead your company, you must think about purpose

Purpose: The Starting Point of Great Companies is about your business’s ultimate, fundamental strategy: why does your firm exist beyond the easy answer of making money? The clarity of your answer will determine everything from your company culture to your staff’s morale.

The primary insight of Purpose is that people are inspired and motivated by factors beyond the bottom line: they crave a meaning behind their actions powerful enough to give them motivation to complete the work and hope that their work is moving them towards a better future. Mourkogiannis discusses the four primary business purposes: Discovery, Helping, Achievement, and Heroism, and gives many historical examples of businesses that have recognized their purpose.

Purpose: The Starting Point of Great Companies is one of the rare books about leadership and business strategy that can fundamentally change how you view your business.

— Josh Kaufman, author of The Personal MBA: Master the Art of Business

Explore the key points of Purpose

Why do some succeed in business, while others don’t? Sure, it has a lot to do with economic brilliance and charisma, but that’s not the whole story. A company’s purpose, the set of moral ideas that guide it, is crucial for lasting success.

Purpose is the moral backbone that we rely on to make decisions, whether it’s in everyday life or when the stakes are much higher. With purpose, we can discern between choices that are right and worthwhile, and those that are easy or technically correct.

Let’s put this into real terms. Do you want to serve your customer, or maximize your returns? This is a question Wal-Mart founder Sam Walton could answer without a second thought.

Driven by altruism and compassion, Walton was dedicated to serving his customers. His sense of purpose reverberated throughout the whole company. From senior managers to store staffers, everyone at Wal-Mart was ready to make customer service a top priority. This gave Wal-Mart an edge over its competitors, which it outperforms time and time again.

The reality is, without purpose, you’ll only make decisions with the short term in mind – strategy simply isn’t enough. Take Enron, a corporation whose collapse was one of America’s biggest corporate bankruptcies.

They had strategies, but lacked purpose. All they were interested in was making money, and were prepared to do anything to do so. This led to poor decision making, which involved dangerous strategies and concealing losses. Unsurprisingly, Enron’s actions caught up with them in the end; a testament to how dangerous a strategy without purpose can be.

You now know what purpose is, and why it’s important. So how can you acquire it? Well, purpose takes four forms, each of which stems from ethical traditions that have developed through the work of different philosophers from Classical Greece to the modern era. Let’s start with the purpose of discovery.

This purpose is tied to the work of Danish philosopher Søren Kierkegaard and the existentialists, and their powerful arguments for the ethic of choice. Kierkegaard asserts that it’s simply not enough to hide behind rules and conventions, and blame them when things go badly. Instead, individuals are responsible for the choices they make.

Kierkegaard uses the biblical tale of the sacrifice of Isaac to illustrate this principle. As you may well know, Abraham intends to sacrifice his son Isaac after hearing the voice of an angel encouraging him to do so. Abraham claims that it is God who tells him to do this, but ultimately, it’s Abraham’s choice – he is the only one who can be held responsible.

In the same way, it is only we who can be held accountable for what we do. So what does this idea have to do with making new discoveries? Well, French existentialist Jean-Paul Sartre builds on this idea, and proposes that since we are responsible for our actions, we ought to constantly question things and decide what is best for ourselves.

By using the purpose of discovery as our guide, we should always be ready to question, to create something new and to explore the best decision open to us.

This is exactly the attitude that kept Tom Watson of IBM on a quest for that which is “beyond our present conception.” Watson’s purpose for discovery led him and his co-workers to consider situations from different angles, just as existentialists prescribe.

THINK became IBM’s slogan, further emphasizing the importance of doing away with conventions and tradition to find new ways to solve customers’ problems. IBM even chose to predominantly recruit freshly graduated college students, ensuring that the status quo was constantly being challenged.

Once you’ve discovered a new and innovative way to do business, you’ll need to execute it to the best of your abilities. Enter our second purpose, excellence. The ethic connected to it is virtue, developed by Greek philosopher Aristotle.

Aristotle concluded that people cultivate virtues as a means to become successful and achieve their desired end: fulfillment. In fact, Aristotle even had a particular word to describe the state of fulfillment, success and flourishing: it was called eudaimonia, and for Aristotle, this was the function of Man.

By performing your vocation or role in a community to the best of your ability, you could achieve eudaimonia. But in order to get there, you had to nurture virtues, or positive characteristics; these could range from courage and honor to wittiness. Though the particular set of virtues varies depending on your modern context, it’s the time commitment necessary to gain them that is most important.

Top investor Warren Buffett is a stunning example of the purpose of excellence in action. Throughout his career, he has been driven to reach fulfillment in his community by nurturing the virtues that the best investors need.

His role in life is mainly to allocate capital in order to achieve the maximum return on equity. Fulfillment for Buffett is the optimal performance of that role – he strives for excellence for its own sake, not for profit. He has a fairly modest salary compared to his peers, for instance.

Buffet dedicates all his actions toward excellent investment. For example, he honed his mental arithmetic skills, enabling him to remember 2,000 annual reports and all the 7,500 shareholders he is involved with. Buffet’s purpose of excellence has led him to earn $40 billion.

Scottish historian and philosopher David Hume is renowned for his development of an ethic of compassion. This is connected to the purpose of altruism.

For Hume, the fundamental motivation behind any action is to increase happiness. While this might sound selfish or hedonistic, our happiness is actually a function of how we’re able to make others, as well as ourselves, happy. Hume argued that we have a natural sympathy for others.

Adam Smith developed this idea further through his concept of utilitarianism, which posits that the right action is the one that results in the greatest possible happiness for the greatest number of people. So, our actions are driven by the prospect of pain or pleasure that others might be exposed to.

In this way, the ability to empathize is central to good decision making, especially in a business context. In the first book summary, we gained an insight into how Wal-Mart achieves the success it does. Founder Sam Walton was acting in accordance with the purpose of altruism, ensuring that his decisions made as many customers happy as possible.

Walton came from a relatively poor area of rural Arkansas. His upbringing gave him a powerful sense of empathy that made him determined to help as many people as possible. How? By increasing access to low-cost, quality material goods in order to improve standards of living.

If his purchasers got an exceptionally good deal, instead of increasing his profit margins, he would pass the gain on to the customers as much as possible. He also ensured that this goal traveled down the company hierarchy. Management information systems were conceived so that managers would be able to focus on the needs of local customers across the US.

All of Wal-Mart’s actions are centered around its customers, making Walton the David Hume of modern American business!

Although many of us might find the work of German philosopher Nietzsche to be impenetrable, his ideas contain one of the most useful ethics for business leaders: heroism. This isn’t simply the desire to win, but the will to be bold and dare to do something that nobody else has tried.

Nietzsche believed that only few people are truly free and thus capable of leading. Those who do not have such capabilities choose to follow those who are endowed with leadership skills. But those who do exhibit them will realize that they should exert their influence, and take on the role of leader with ambition.

Henry Ford is a brilliant example of a leader with heroism as his purpose. His goal was to reshape society through his automobile, and his ambition led him to use his company as a means of exercising his will.

Ford was not interested in following standard business practice or making compromises. Instead of waiting for customers to tell him what they wanted, he gave them what they didn’t know they needed. Ford pushed forward with his products in the firm belief that they would change the world.

But Ford was most interested in exerting his power, regardless of whether it would alter his company’s direction or impact social welfare, and this sometimes led him to make risky decisions. He was so determined to revolutionize the auto industry, that he recruited ex-convicts as workers, partly to rehabilitate them, but also for the benefit of his production line. Ford even went as far as hiring thugs from Detroit, which led to problems with physical violence among workers.

In this way, heroism is a powerful purpose, but also one that can get out of hand when not balanced with other ethical principles. The interplay of all four purposes – discovery, excellence, altruism and heroism – will boost your company in several ways. Read on to find out how!

As Prussian general and military theorist Carl von Clausewitz said, physical factors in war are “little more than the wooden hilt, while the morale factors are the precious metal, the real weapon, the finely-honed blade.” The same is true for businesses.

Just as soldiers with high morale are more likely to win a battle, companies in which employees have high morale tend to be more successful. In fact, a 2003 study by insurance company Towers Perrin found a positive correlation between strong employee morale and returns to shareholders.

So, the better your employees feel about their workplace, the likelier it is that your company will achieve higher returns. And, by the same token, if employees aren’t so fond of their workplace, your company’s performance could suffer: a 2002 PriceWaterhouseCoopers study found a marked correlation between absenteeism – which is linked to low morale – and below-average profit levels.

But how can you ensure your employees stay engaged with their work? An effective way is to give them worthwhile reasons for doing their work by defining your company’s purposes.

Take 3M, an American multinational corporation famous for its adhesives. The company’s purpose was to solve problems, a principle that their engineers truly believed in. One engineer in particular was so enthusiastic about resolving a customer issue that he ended up creating a brand new form of masking tape, which would lead to the Scotch Tape that we all have in our desk drawers today.

Another employee from the same company invented the Post-it Note to solve his own problem of not finding the correct page in his hymnbook. Simply having a purpose inspired these employees to go the extra mile to make a difference and, in the process, create the products that we know and love.

It often seems that the most successful companies are the most innovative ones. But while innovation is indeed a great competitive advantage, it won’t provide lasting success without purpose to back it up.

Global consultancy Booz Allen Hamilton conducted a survey on the top thousand companies with the largest research and development budgets. The survey found that there was, to the surprise of many, no significant correlation between innovation and the success of the companies.

So what does keep the innovative companies on top? Well, many of them make use of the purpose of discovery to drive their achievements.

Take Sony for example. Founder Masaru Ibuka founded the company to “establish a place of work where engineers can feel the joy of technological innovations, be aware of their mission to society and work to their heart’s content.” This clear purpose allowed the first Sony team to be freely creative, and their journey of innovation began with Japan’s first tape recorder.

A clear purpose enables innovators to radically take risks and change the rules of their industries or businesses. Sam Walton of Wal-Mart’s purpose of altruism saw him radically reinvent his industry, driven by his goal to offer the fairest possible prices to customers.

At the risk of losing employees, but in order to keep prices down for his customers, he would reduce costs as much as he could during buying trips. His employees would walk rather than take taxis, and would share hotel rooms.

Walton even chose to open stores in disused cattle yards and bottling plants, running the risk of a less attractive appearance than that of competitor K-Mart, but keeping prices competitively low all the while.

We’d all like to know exactly how to beat the competition. Unfortunately, there’s no perfect formula, but one of the best ways for your company to achieve a sustainable advantage in the market is through strategic positioning. This simply means that your company must be at a specific position in the market that others can neither choose, nor copy.

Admittedly, that’s easier said than done – but it is still doable! It starts with developing routines and relationships. By coordinating what people do and how they connect to each other, you’ll be able to unite your company under a powerful, unique strategy.

A company without purpose is likely to change strategies unnecessarily. By switching between different tactical approaches in the hopes that one might stick, companies are unlikely to achieve a consistent edge over competitors. Companies without a clear purpose may also stick to old strategies, even if they’re no longer relevant.

With a defined purpose, you’ll find it much easier to coordinate your organization’s routines and relationships. The values of discovery, altruism, excellence and heroism are there to guide your employees in every interaction, and in every task they complete.

Thanks to a reliable, shared understanding created through values, Warren Buffett was able to manage his conglomerate with a very light touch. He didn’t have to tell his employees how to act – they already knew the best choices according to his system of values.

Purpose is a reliable guide for those making the innumerable day-to-day decisions that contribute to a company’s strategic position on the market. Questions like “Should we invest in product development?” or “What kind of training should we give our customer-facing staff?” can easily be answered when your company has strong purposes in place.

adapted from conscioused
Praise for Purpose and Nikos Mourkogiannnis
“Nikos is a world-class thinker. In this book he reinvents leadership and shows what great companies have in common.”
“Across a broad array of industries and businesses, Nikos Mourkogiannis has made a substantial impact; he has an inquisitive mind with exceptional mental agility. He has turned many companies, in loss-making circumstances, into winners in this field. In Purpose he reveals many of the processes that have brought his clients success.”
“Mourkogiannis reinvents strategy by anchoring it to purpose. Strategy that has no purpose is merely tactics; true transformation of an organization depends upon the principles described in Mourkogiannis’s book.”
“An essential resource for today’s business leaders and for the next generation as they face the fresh challenges of this new century.”
“Nikos Mourkogiannis has written an outstanding and very readable book describing the qualities of leadership that are essential to create great companies and keep them great. It is important reading for all entrepreneurs and business executives and those who would like to be.”
“Purpose is timely. Dialogue today is dominated – no drowned – by the language of economics. Mourkogiannis gives us an elegant new language. Most important, at this time when the credibility of American CEOs has been drowned by greed, here is a road map for future leaders in whose wisdom the fate of the world rests. The notes and bibliography alone are worth a read – buy this book!”
“Inspiring a large global organization with a common purpose whilst respecting its diversity is high on the agenda of top management. Nikos Mourkogiannis’ Purpose sheds light on the importance and practice of defining and embedding a sense of purpose in an organization and thereby, of aligning the interests of its strategic stakeholders. I recommend the reading of this outstanding book.”
“Nikos Mourkogiannis’ book brings us back to the central strategic question – the quality of purpose – and grounds it in an exciting analysis of great companies that performed well across the decades. Moral values and social purpose are rediscovered playing a vital role.”
“Nikos glides beautifully on the razor’s edge of where we are in the current reality of the business world today. Purpose is the future practice that is here now. You will find insight that will help you become more aware and centered on the realities of practicing in today’s global business environment.”
“Companies that want a company to last should build them on ideas that have lasted.” Nikos Mourkogiannis makes a powerful argument for purpose and its role. So many of us engage the head, but so few really engage the heart and the moral convictions of our people. Who doesn’t want this in their work? I think this thesis is as important for leaders as anything we do.”
“Nikos describes the importance of “purpose” in corporate life in compellingly persuasive terms. Companies with firm purpose have both self respect and command respect from outside and are far and away the best placed to generate and leverage the benefits of globalization. Beautifully written and required reading….”
“Nikos Mourkogiannis has provided incumbent and aspiring leaders with the needed counterbalance to Bossidy’s Execution. Execution, absent Purpose, can drive once great enterprises off the cliff and once great armies into chaos and destruction. This book reminds leaders of the importance of taking stock of the legacy which has made great businesses great, while renewing the values and character required to flourish for a new era.”
“Books on business usually arouse very little interest. This one is different and is a book for business in our time. I urge all business leaders from companies of any size to read this and more to the point, take its messages on board, for themselves and their colleagues”
“Purpose is the missing piece in the corporate jigsaw of success, often overlooked by companies big and small and their employees. Nikos Mourkogiannis provides a compelling and gripping account of why this is so important, so impactful and so inspiring. This book made me stop and reconsider my organisation and I am sure it will do this same with many other CEOs.”
“This is a well-written, engaging, practical book describing the pivotal need for the understanding and sharing of Purpose, if the leader is to achieve optimal performance from the organisation. The bibliography and the references to philosophy are in themselves good reasons to buy this book.”