A purpose-driven business considers how it is improving the world through building innovative and profitable solutions that also change the world by empowering consumers, creating choice, building awareness and generating wellness.
But being purpose-driven also has many advantages for your business, especially when starting up and during growth.
Here are five reasons purpose matters:
More and more research is validating the claim that millennials work for purpose and are less motivated by their pay check. Millennials will soon be the largest part of our workforce and for many startups the primary pool of talent and drive.
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More than ever a clear purpose is an integral draw card to recruit vision-aligned and committed talent who are looking for meaning in their work, beyond financial remuneration. I know from speaking with many of my peers that it’s alignment between our personal beliefs and goals, with our work, that drives a sense of fulfillment.
Shared goals with employees will promote loyalty and lead to a more driven and productive workforce. Employing purpose-driven people can also help to ease the cash demands on startups when there can be limited cash for salaries to attract talent.
Purpose is a great differentiator for those seeking external investment. When pitching to potential investors, founders should articulate the positive change they believe they can enact on society, as well as emphasise the equal (if not greater) opportunity to deliver robust financial returns through their product or service.
Stemcentrx, a mission-driven business that aims “to develop therapies that cure and significantly improve survival for cancer patients” was acquired for $10.2 billion by pharma giant AbbVie Inc. This transaction was one of the five biggest sales ever of a venture capital-backed company and was achieved in part because of their mission-driven approach.
The acquisition is a means for Stemcentrx to grow their capabilities and research, not an end.
Many impact funds and family offices look for a clear purpose and positive impact on the community when making investments. Additionally it adds a deeper connection to the investment selection process if a founder can connect with an investor on a shared mission level.
Company purpose, when aligned with customer goals, leads to higher customer satisfaction. When a company designs their purpose around benefiting their customer, they are building a resilient product or service.
SoFi is a consumer lender that helps early-stage professionals with student loan refinancing, mortgages and personal loans. SoFi’s purpose describes helping their “members get ahead and find success” through use of their products.
Through their innovative credit assessment technology, SoFi is able to lend money to those who may not have been able to get a loan from a traditional bank, helping their customers “accomplish the goals they set and achieve financial greatness as a result”.
With aligned goals when your customers succeed and benefit, so does your company.
4. Risk management
A purpose-driven business is an important risk management tool to help your company stand the test of time. Designing your business with a positive purpose and societal benefits reduces systematic risk arising from potential corrections from political, regulatory, social and environmental risks.
Take Martin Shkreli the now infamous hedge-fund manager turned Turing Pharmaceuticals CEO. In mid-2015, Turing acquired the U.S. rights to a lifesaving drug for AIDS patients and then at Shkreli’s direction, increased its price by more than 5,000 per cent, from $13.50 a tablet to $750.
Despite the best efforts of the lobbyists and crisis public relations agency Shkreli hired, the price hike did irreparable damage to his and the company’s reputation. He lost investors and his competitors brought a generic label alternative to market, now being sold for a dollar a dose.
5. Impact and legacy
Lastly, a purpose for your business gives you direction to plan for the legacy and impact that your company is leaving on the world. When things aren’t going so well, your purpose is something you can fall back on and remind you of the bigger picture and help you and your team get over the inevitable hurdles you’ll face in running your business.
It will also help you map your path to get you to your mission.
Consider Elon Musk’s SpaceX and their mission to “revolutionise space technology, with the ultimate goal of enabling people to live on other planets”. A grand purpose no doubt helps Elon Musk’s team get out of bed every morning.