Why Purpose Creates Value?


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The purpose of a company is not used much by businesses. For that matter it is not used much by people for themselves.

Companies are satisfied by having a vision and a mission. These normally outline the business vision and mission. How are they going to create profit and be advantaged in the marketplace?

But they normally do not start with a purpose. Many of us humans and many businesses do not have a purpose in life other than to have a comfortable one with enough money. One is reminded of Alice in Wonderland asking the Cheshire Cat, which way she should go. To which the Cat asked where do you want to go, and Alice replied she really didn’t care. The Cheshire Cat answered it does not matter which way you go.

I am not suggesting meandering is all bad. Most of us meandered into what came our way. And managed to do well. Had we had a purpose, would we have done things differently? Would we have taken a different path? Would we have pursued other goals? Would we have been more successful, and happier?

Purpose helps you answer who you are, what you want to be, how you belong and how you can feel whole and get a sense of accomplishment.

An Uncle who always wanted to paint was forced into the family business and did well. When he retired, he started to paint again, and was so much happier, because he was doing what he had always wanted to do.

This is true of companies. Yes, they strategize. But their strategies must emanate from their purpose.

The purpose keeps you focused on why the company exists beyond the financial reason, if any. The purpose is about the company and the outside world and what the company stands for and what it will do for others. The mission and vision are more for internal guidance, though we try to use them externally, also. The purpose gives you an identity, and tells everyone who and what you are and what you stand for and believe.

Vision aligns you with the goals, and mission tells you how to accomplish them. Vision tells you what the future will look like for the company and where you will land up.

Purpose is in a sense why, vision is what, and mission is how.

Mission answers the question of how you will achieve the vision.

Investors or a group of people starting something must ask the purpose or why they are establishing this new venture. They then answer what is the venture meant to be in the future and then how they get there.

So, for an entrepreneur, the purpose maybe to prove that my ideas are better than others, or that I can shake up the world or that I can do something different. Or people will get convenience from what I do. The idea may be to do service to the people, or to make the world a happier place.

What the idea is the vision and how to achieve it is the mission.

The purpose is there to inspire the stakeholders why you and your company matter, what your company stands for, what it believes in, why your company is important and why what you do has a meaning. This then links you to your values, and how you can create value for the stakeholders. This outlines your culture, and why your company should matter to the followers or stakeholders.

Purpose tells people what they are to do. It influences decisions and culture and behaviour.

Thus, the purpose of a food company could be to make food available to the poor, or to add nourishment. Another company may wish to reduce poverty among its stakeholders.

Or for another company, confronting climate risk may be the purpose.

Let us take easier examples:

An author may write: The purpose of this paper is to advance the knowledge in (this field). Or to show you my results.

The purpose of my visit to (this country) is to have a good time. Or to learn about the people. Or to understand business etc.

What you do in the visit and how you do it follows.

Ted Talk’s purpose is to spread ideas. What they will do and how follows.

Therefore, combine your passion and ambitions to make a purpose.

The Business Roundtable and Davos have state that the purpose of a company is to create value for all stakeholders. This is a good starting point but is a catch all and has to be distilled down a little more. Sustainability, the environment and society have taken a legitimate place in the purpose.

You can see a good purpose in life, in a business, in a family, gives you a direction and a long-term goal, keeping you always focused. All this creates value for you and for your business. Businesses that have a commitment to purpose tend to get more loyal customers, better employees, have competitive advantage and increase their chances of success, while focusing on the environment and society. Purpose guides life as it did for McArthur and Tiger Woods, has an impact on behaviour, gives a focus on direction and goals and makes life meaningful and full of value.

A great purpose is ‘Work as a professional and live as a human being.’

Purpose creates value all round. Happy to hear your comments.

Republished with author's permission from original post.

Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value (jcv.sagepub.com) and runs the global conference on Creating Value (https://goo.gl/4f56PX).


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