05 Sep Thriving in an Age of Disruption-The Power of a Compelling Purpose
“The soft overcomes the hard,
everyone knows it but few live by it.” Lao Tzu
There is an old story about a man whose horse and wagon were stuck trying to cross a small river. A philosopher came along and asked him, “Have you discovered the meaning of life?” The man looked at him with incredulity and said, “I don’t have time for riddles, can’t you see I’m stuck in the mud?!”
Many businesses today feel they are stuck in the mud of almost unrelenting change. They wonder if a having new focus on Purpose is perhaps the correct lever to move forwards. To many executives, the idea of using purpose seems soft- and about as silly as the philosopher asking “Have you discovered the meaning of life?”
The Age of Disruption
We live in an Age of Disruption. The nature of disruption is often rooted in emergent technologies that can render seemingly stable businesses irrelevant in a short period of time. Take the example of streaming technology, which decimated the DVD movie and CD music businesses almost overnight. Or new Amazon’s delivery model, which quickly ripped apart the traditional brick and mortar retail world, and today provides a vast array of products that far exceed its initial foray into books.
Technological change has also disrupted the delivery of financial services. Traditional mutual fund companies have lost market share to low-cost ETFs and “robo” advisors, whose performance is as shown to match or exceed human counterparts. New competitors are also on the horizon and they may be upstarts from outside the financial sector. The CEO of one of my large banking clients recently told his leaders, “I am not worried about the other banks, I know what they are doing. What keeps me up at night are the Googles, the telecommunication companies, and many people who are going to realize that in the age of the smart phone you don’t need all this infrastructure to manage money or transactions.”
The Purpose Revolution- A Disruption of Values
Alongside the competitive and technological disruption runs a parallel disruptive force in the form of changing values. We call this value disruption The Purpose Revolution, an emerging global desire among employees, customers, and investors for their working, buying, and investing to provide purpose and leverage social good. Studies by global players like Globe Scan show that as many as 50% of millennials are highly motivated to work for companies whose values align with purpose and over 40% of global consumers now prioritize the social impact of a company in their choice of purchase. Investors, while coming to the purpose party more slowly, are showing a strong trend towards seeing ethical and sustainable business as the right place to invest and have been burned by high profile scandals at places like BP, VW, and Wells Fargo that have decimated shareholder value.
Financial services firms often find themselves at the epicenter of a growing disillusionment with business, exasperated by the financial crisis where this sector bore the brunt of the public’s blame. Studies show that many young talented professionals are increasingly attracted towards purpose-driven enterprises and away from ones primarily driven by profits. In fact, research shows that while half of millennials would take a pay cut to work for a company whose values they believe in, over three-quarters of them believe the company they work for is mostly focused on the growing profit than on the interests of their customers.
How Purpose Can Help Your Company Navigate Disruption
But why does purpose matter in an age of change? Well, there are really three reasons why it matters a great deal. The first is because having purpose will help you attract and keep the best talent. As importantly, when you model your purpose, those people will work harder for your success. Research has shown that people who see their job as a form of service are more committed, work harder and perform better than those who simply see their job as a way to make money or as a career step to something else.
Second, purpose becomes a magnet for customer loyalty in an age of commoditization, where companies must successfully brand themselves to differentiate their goods from the competition. In this age of disruption, consumers are able to choose cheaper goods, thanks to technological advancements, global distribution networks and vertically integrated industries in manufacturing. Yet there are companies like Seventh Generation, Patagonia, Ben & Jerry’s, and countless small local financial institutions that have demonstrated the ability to win much higher customer loyalty by connecting to their customers’ desire to buy from companies they believe in. Many of these companies have shown clearly that having “connection to their purpose” drives and retains customer loyalty, even when their competitors offer similar products at meaningful discounts.
Finally, purpose is often what keeps team members engaged in driving and thriving in a changing atmosphere. I advised Qantas Airlines as they navigated a major financial crisis as well as a large competitive challenge. The company worked hard to connect their employees to the true purpose of the airline to “exemplify the Australian spirit.” Drawing in large part on that pride, the company raised their Net Promoter scores by 60% even while cutting 5,000 jobs! Purpose is often what keeps people working hard and fighting for your business in the toughest times.
Closing the Purpose Gap
But in this new world of social good, there is a gap in terms of the expectations of customers and employees. In business, “gap” means opportunity—if people want something and companies are not delivering it, then those companies who close the gap between people’s expectations and delivery will succeed.
Most companies are currently failing at providing purpose to their employees, customers, and investors. Those who provide purpose are usually sub-optimizing its potential impact. Research has shown that almost 70% of employees say the company they work for is mostly interested in profits and serving its own needs rather than society or customers. Compare this stat to the 86% of employees who “believe it’s important that their own employer is responsible to society and the environment, with over half (55%) feeling it is very important,” and 60% who want their work to have purpose—it’s obvious to see a meaningful gap has been created.
Customers experience the same gap with only 16% saying that they have any significant confidence that the companies they are buying from are “good.” In fact, consumers globally say they wouldn’t care if about 70% of the world’s brands, even ones they buy from, disappeared.
But winners in the Purpose Revolution will help customers connect to their story of purpose and leverage a new loyalty based not merely on product or price.
Can Purpose Save Your Company?
Let’s return to the opening story. Most companies today, especially in financial services, are about to enter unparalleled disruption. We may feel stuck in the mud but just pushing harder probably won’t get you where you need to go. But asking: What is the meaning of your enterprise, and How can you connect your employees, customers and investors to that purpose just might just be the kind of “soft” thing that “overcomes the hard” that Lao Tzu meant.
Dr. John Izzo is the bestselling author of eight books including Awakening Corporate Soul, Values Shift and the forthcoming Purpose Revolution. He has advised over 600 companies across the globe and spoken to over one million people. His clients include RBC, Manulife, Ford, SAPA, and Qantas Airlines.