The following is co-written with Cheryl Grise, EY Global Head of Strategy, and Professor Marc Ventresca, economic sociologist, University of Oxford.
Listen carefully to the buzz during the World Economic Forum annual meeting this week and one thing is abundantly clear: Current global realities have changed the game for most firms. Today, corporate capacity for innovation and transformation is a critical imperative to survive - and to thrive. This is transformation beyond the delivery of better products or services. It is the ability to do business in fundamentally different ways, attuned to these new realities.
In Davos this week, Sir Richard Branson joined Barclay's CEO Antony Jenkins, Mondelez CEO Irene Rosenfeld, Unilever CEO Paul Polman, Huffington Post President Arianna Huffington and EY Chairman Mark Weinberger for a discussion of purposeful transformation hosted by EY and the University of Oxford Saïd Business School in collaboration with the B Team. During the breakfast we unveiled initial findings from an EY - Oxford research collaboration, observing that senior executives are pioneering a portfolio of new tools and approaches that leverage purpose to spur and sustain innovation and growth.
Our initial results point to the following trends, challenges and benefits of purpose-led transformation:
1. There is an evolving view of the role of the corporation that increasingly emphasizes the corporation as a partner for societal well-being.
In this period of increased inequality and austerity, leaders speak often about the corporation as both a source of shareholder value and a tool for addressing challenges.
For many in our sample, the times point to a historically distinctive moment, when the institutional foundations of the corporation are contested. Their shared voice argues for a view of the corporation as a partner to address global challenges.
Across industries and geographies, this focus is a move beyond harm reduction, or the corporation taking responsibility for externalities, to now having an active role in creating well-being. This tracks key shifts in the role of the corporation: from "value creation for its own sake" to "value creation without harm," to now actively "building value for and with a wider set of stakeholders."
2. The corporate dialogue on purpose is louder and is changing.
While "purpose" is certainly not new to conversations about commercial activity, more than ever it is dominating the conversation. Our initial findings reveal that pioneering executives are talking about purpose more and more and in different ways. This idiom is new, and consequential.
We also observe an expansion from the traditional mission statement that predominantly focused on products and services (what companies do) and attributes such as trustworthiness and timeliness (how they do it) to corporations also articulating a broader purpose that is their reason for being (why they exist).
This trend toward restating a corporation's identity is grounded in an outward-facing declaration around their role in the global community. On the far end of a spectrum we observe companies fully restating their identity in the marketplace. We find this contemporary usage of "purpose" to be distinctive and promising as a source of corporate action.
3. Executives are using a common language of purpose to engage stakeholders for corporate benefit.
Pioneering CEOs and other senior leaders are speaking a language of purpose that engages employees and customers in new ways, inviting their insights for innovation. This is a language of open-sourced value creation among diverse constituents. It foregrounds "meaning" with an appeal to shared values that invite the extended group of stakeholders - employees, customers, suppliers, regulators and others - to recognize a stake in the growth path of a corporation. Making (shared) meaning in this way is critical work for leaders today.
4. Purpose can be a lever driving innovation and transformation for growth.
These pioneering senior leaders use a language of purpose that links firm innovation and renewal with contributing to addressing significant challenges - or providing for human well-being in ways that go beyond product lines and traditional competition. Taking a view that "purpose drives profits," they seek to involve existing and new product/service lines in ways that achieve this broader purpose. They are also initiating purpose-led transformation journeys in their organizations, spanning from the brand identity through the business model, across business units and functions.
5. There is an implementation gap: Purpose is underleveraged to focus and drive transformation.
A broad cross-section of business professionals and thought leaders recognize the importance of integrated, humane purpose as a core decision-making lens driving core functions like strategy, business models and talent management. But they also report a gap between this recognition and the policy and practice in their organizations. Our research points to still uncharted territory where purpose reinforces innovation in offerings, business models and governance.
Purpose has clear benefits
Today "purpose" and more generally "values" and "meaning" are being considered as a strategic resource. Our initial findings indicate corporations are at various stages of a journey that explores or expands their institutional purpose - and then aligns strategy, business models and processes to execute.
At the organizational level, executives recognize the more immediate benefits, such as providing competitive differentiation and increasing consumer sales and loyalty. It is also recognized as a useful tool to build trust in the wider marketplace.
Embedded into the structure and operating model, institutional purpose may also enhance employee morale, attract talent, increase productivity and decrease attrition.
Importantly, these CEOs anticipate that a purpose-led transformation will enhance organizational agility - i.e., their capacity to adapt to an increasingly dynamic, uncertain and interdependent macro business environment - and do so in a way that engages employees, customers and stakeholders to drive sustainable growth.
These trends and benefits beg two key questions:
Are we making the shift from a burning platform to a burning ambition enabled by a company's purpose? Will this burning ambition be the new driving force helping corporations continually transform and innovate?