In 2019, over 200 CEOs got together to officially challenge the premise that the role of the corporation is to maximize profits and shareholder value at all costs. The growth in Corporate Social Responsibility departments is an attempt to address this shift as customers, employees, and investors demand that corporations play a more egalitarian role in society. According to KPMG’s Survey of Corporate Responsibility Reporting (2017), CR reporting is standard practice for 75% of 4900 organizations studied in the analysis. Yet these statistics belie the lack of real impact that CSR departments have had in authentically connecting profit with purpose. Why?
A recent survey conducted by Harvard Business School’s1 CSR executive program found that 87% of respondents identified philanthropy and operational efficiencies as key outcomes from their firm’s CSR initiatives while only 13% reported business model transformation as the primary benefit. This study underlines the disconnect between the rhetoric and meaningful action that must be corrected to integrate shared values with the creation of economic value.
The answer to this conundrum may lie in a book by David Taylor, “Grow from the Core”, published in 2013, long before conversations about societal impacts started taking center stage across corporate boardroom discussions. Through his insightful analysis on what constitutes sustainable growth, Taylor makes the case that many companies neglect their core business and in doing so miss out on the opportunity for sustainable growth. Inspired by his framework, here is an attempt to connect the dots between profit and purpose…literally!
Follow the Money
While this may sound like the antithesis of a purpose-led organization, Taylor argues anchoring on core competencies gives leaders a practical place to start. Amidst all the noise that incessant change generates, it helps to anchor the core before chasing tactics. In non-wishy-washy terms, David Taylor defines a businesses core as
Your #1 Source of Revenue
Your #1 Source of Profit
Your #1 Source of Reputation
Follow Market Forces
Evaluating your core products and services in the context of your addressable market2 is a little trickier. The primary challenge is to fight confirmation bias3 and overcome organizational inertia through root cause analysis, scenario planning, and focused action plans.
Market Context 1: Your position is primed for acceleration when the growth rate of your addressable market and your core offering exceed the overall growth rate of GDP. Innovative organizations in high-growth industries, often faced with this situation, need to isolate and understand repeatable patterns of success to enable acceleration by design vs. acceleration by chance.
Market Context 2: The growth rate of your core product and service lags that of the addressable market. Controlling for awareness, this situation underscores a misalignment between your core offering and the values that drive purchase decisions in your market. Recalibrating offerings to deliver on intrinsic, economic, and aspirational value drivers of customers is required to encourage consideration.
Market Context 3: Both your core offerings and addressable market have been shrinking consistently. This situation is usually faced by organizations and industries that have prioritized value extraction over value creation for a considerable period. These organizations face an existential challenge as they try to reinvent core competencies to restore relevance.
Follow Your Customer Signals
Market forces are dictated by how customers adapt to macro-level socio-economic factors. From search intent to product reviews, staying connected to customer signals is a muscle that all organizations should build. Demand sensing can come from changes in belief systems, for example, the need for transparency across multiple industries from food to financial, or specific product upgrades such as on-demand mobile options for people on the go. In a digital-first world, data signals emanate from almost every stage of your buyers’ journey offering more opportunities to engage. When we interpret these signals with empathy and activate them meaningfully to align the needs of customers to the solutions you provide, purpose and profit intersect.
In each scenario, acceleration, consideration, or reinvention, building a “listening” muscle that reconciles “outside-in” insight with “inside-out” realities is the primary function of your marketing. In fulfilling the promise of driving purpose with profit, marketing plays a pivotal role in championing the voice of the customer and infusing it in actionable ways within the organization.
The repercussions of disconnected and disenfranchised purpose “islands” within organizations can be extremely damaging to reputation. What is required is more transformative and can only be achieved when the customer values and business values are institutionalized across organizations from head to toe. This integration is what leadership needs to strive for to transform systems of “OR” to systems of “AND”.