Purpose and 20 transformative companies
When reflecting on purpose in the context of company transformations, it reminded me of a recent podcast I ran on Digital Disruption: buzzword or reality? where we explored the validity of the term ‘disruption’ or whether it was more accurate to talk about simply remaining competitive and continually evolving. My guest argued that digital wasn’t ‘magic dust’ that miraculously transformed companies. Digital was merely one subset of a wider company effort.
So, how much of a difference does having a strong purpose make to a company’s ability to transform – digitally or otherwise?
If Transformation 20, a study by Innosight of the world’s most transformative companies is anything to go by then the answer appears to be: ‘purpose can make a very significant difference’
The report discusses that: “whatever motivates a leadership team to embark on strategic transformation, it’s often easier in the short term not to undertake the challenge (or delay the decision for just one more year), which is why stories of successful corporate change efforts are so rare”.
In my recruitment career, I have encountered quite a bit of resistance to embedding a company purpose. It has been met with cynicism and a ‘nice to have’ but the purpose was seen as not being intrinsic to higher sales and profits. The evidence provided below dispels that theory however and has substance because their research screened the S&P 500 and Global 2000 using three criteria:
• New growth: success in creating new products, services, new markets, and new business models
• Repositioning the core: How effectively has the company adapted its traditional core business to changes in its markets
• Financials: Has the company posted strong financial and stock market performance
Let’s cite first-placed company, Netflix where CEO Reed Hastings announced in 2013 a vision and purpose to move from simply distributing content digitally to become a leading producer of original content that could win Emmys and Oscars. If anyone has watched ‘The Crown’ you’ll see clear evidence of this in action.
Since unveiling that new purpose, Netflix revenue has increased dramatically, its profits have rocketed. The purpose has very much been fulfilled. Netflix’s challenge will now be keeping the momentum.
Other CEOs in the report talk about how important embedding purpose is. It’s about pushing decision making out from the centre to all business units so every employee feels like it has a stake in the business. As one CEO put it: ”Ownership culture is central to everything”.
It’s very interesting to run through the above visual and look at the spread of companies by industry and geography. Digital, and embracing technology more broadly, will have been an important part of these 20 companies but it starts with the people. And most importantly bringing them on a journey to make ambitious plans very much a reality.
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