- 5 mins
- Article
- Growing a business
- Enable Growth
Why purpose should be a top priority for founders and entrepreneurs
An effective purpose can boost bottom-line performance: here's how to make it a priority.
Key takeaways
- Defining an effective purpose can be of significant benefit to business performance.
- It becomes more difficult to define purpose as a business grows, so it’s imperative to start early.
You can probably pitch your business in less than a minute, but can you explain why it really exists?
From the moment it’s formed, every business has a purpose – a “reason for being”. By default, it’s defined by the founders’ motivations for setting up shop in the first place.
For better or worse, those early intentions go on to shape the organisation’s culture, vision, and values as it grows.
But purpose has the potential to do more than frame your pitch deck. An effective purpose can have a proven, positive impact on bottom-line performance, but few founders make it a priority to consider their business purpose.
To unlock the benefits on offer, it’s important to understand what makes purpose effective, and how to embed it early.
Simon Clarkson
Founder and CEO, Purposecraft
Purpose has the potential to do more than frame your pitch deck. An effective purpose can have a proven, positive impact on bottom-line performance, but few founders make it a priority to consider their business purpose.
Purpose drives performance
Business purpose comes in different forms and can drive very different results.
To illustrate, let’s compare two tech giants: Google, and X (formerly Twitter).
Google’s mission is “to organise the world’s information and make it universally accessible and useful”. It’s a foundation that’s inspired them to build innovative tools that have reshaped the way the world lives and works. It’s also made them one of the world’s first trillion-dollar companies.
Compare that to Twitter’s original purpose statement: “to connect its users and allow them to share their thoughts with their followers and others through the use of hashtags”.
It’s easy to spot the difference. An effective purpose tells the organisation why what it does matters.
Google is set up to solve big problems, while Twitter is destined to make constant, small improvements.
Over time, a clear articulation of purpose can spark better teamwork and help to inspire employees, stakeholders and partners as they work towards their collective goal.
And that translates into a significant advantage.
Purpose-driven companies outperform their competitors
Purpose is a powerful business tool, not just the opening slide of a pitch deck, and offers significant competitive advantage in some key areas.
Figure 1: Likelihood of consumer behaviour towards company
Customers favour purpose-driven companies
A survey of 8000 consumers found that they are four times more likely to trust, purchase from and recommend purpose-driven companies. They’re also six times more likely to defend a purpose-driven company in a “challenging moment”.1
Figure 1a: Influence on B2B customer behaviour
That preference is true for B2B buyers, too. A quantitative survey of 3000 B2B buyers across multiple sectors confirmed that personal values like pride or popularity play a greater role than business or functional value. In fact, these qualities have twice the influence on commercial buying decisions.2
Figure 2: Productive output of employees
Employees with an effective purpose are more productive
Apart from greater satisfaction, employees with a clear purpose move beyond engagement to being inspired. Data from Bain and Company3 suggests inspired employees are 50% more productive than engaged employees: a powerful advantage particularly for growing businesses.
Figure 3: Company success with innovation and transformation efforts
Purpose doubles the success rate of transformation initiatives
A survey by EY4 suggests that purpose-driven business are significantly more successful at transformation and innovation. Executives from purpose-driven firms are more than twice as likely to report success during major transformation efforts.
Figure 4: Revenue change over 3 years
Purpose fuels growth
Purpose-driven businesses grow faster; they are up to 38% more likely to report double-digit growth over a 3-year period5. As Deloitte concluded from an independent, 10-year study of 50 companies, “Purpose-driven companies witness higher market share gains and grow three times faster on average than their competitors, all while achieving higher workforce and customer satisfaction”.6
Purpose provides a space you can own
Purpose-driven companies can carve out a place for their business to play. For example, when Mars Petcare redefined their purpose as “a better world for pets”, they were able to find opportunities beyond pet food and explore the broader concept of pet wellbeing – a shift that saw them become the largest, fastest-growing division of Mars Inc.7
The evidence is overwhelming: purpose-driven companies perform better. But why should that matter to start-ups?
3 reasons why start-ups should make purpose a priorityThere are 3 clear reasons why it pays to make purpose a priority early in your business journey. | |
|---|---|
1. A clear purpose puts you on the right path from the outset | A lack of product/market fit is the single biggest reason so many start-ups fail.8 Establishing an effective purpose early can guide your long-term strategy and product roadmap to maintain product-market fit. That saves time and money by reducing the chances of new product failure, so you can invest in growth activities like sales and marketing. |
2. The advantages of purpose compound over time | As we have seen, purpose-driven companies enjoy real advantages in terms of customer value, productivity, transformation and innovation success, and revenue growth. These advantages come at no extra cost beyond the time and thought required to understand and integrate an effective purpose. Acting early provides a huge advantage due to compounding effects. For example, a 50% advantage in productivity per year, all else being equal, would result in 17 times greater output over 10 years. |
3. Purpose is easier to define early on in your business’s journey | Defining and embedding your purpose gets more difficult as your business grows. More people means greater complexity, and less chance of finding a purpose that genuinely inspires everyone involved. It’s also worth remembering that the early choices businesses make play a big part in the way they can respond when their credibility is challenged. Far better to be ready to respond authentically in a crisis than it is to try and react to questions or concerns from the market. It’s simple: start as you mean to go on. |
Make purpose your priority
Understanding your business’s purpose, or the reason why it exists, can give you a significant advantage.
The data speaks for itself. Purpose-driven companies outperform their peers in areas of customer value, productivity, transformation and innovation, growth, and identifying an arena they can own.
For start-ups, the advantages are even more profound.
An effective purpose helps to ensure product-market fit, gives you an advantage that grows with your business – even in times of crisis – and sets you up to build an inspired organisation.
Ready to craft your purpose? Reach out directly to the authors.
