Continuing to sustainably grow by staying relevant is getting harder every year. A recent study shows that the average lifespan of a company in the S&P 500 index has decreased from 61 years in 1958 to just 18 years. At this rate, by 2027, more than three-quarters of the S&P 500 will be companies that don’t exist today.

Average company lifespan on S&P Index in years
Average company lifespan on S&P Index in years

Intuitively, this doesn’t seem shocking. We all know companies that have exploded with growth only for them to disappear a few years down the line. A quick search on the Internet will bring up many companies that have simply disappeared. There is, however, that one-quarter that will still be around and will manage to sustain their growth over time. There are several factors that contribute to these companies being able to sustain their growth, one of these being a clearly articulated and lived purpose. Recent research has also shown that companies with an explicit commitment to a higher purpose, “outperformed the Standard & Poor’s 500-stock index from 1996 to 2011 by an astonishing 10.5 to 1.”

Purpose in practice

About 16 months ago, we got a phone call from one of our clients, the CEO of a food retail company that has gone multi & omni in every way, serving more customers and customer types with different kinds of formats and with an extended assortment through more channels. What’s more, within 2 years, they have rapidly scaled up having gone from operating in one country with 56 stores to operating 107 stores and expanding their offer to 7 other countries.

This has put enormous pressure on the business in all aspects and with such a rapid growth, the CEO was concerned about the future of the business. The basis, on which the results and growth of the business were being built, was not necessarily growing stronger. The business model, processes, ways of working, capabilities and talent management and organisation model all needed to be improved and strengthened to support the rapid growth. But besides supporting our client in addressing these areas, we also noted that a sense of purpose of the organisation had somewhat faded. People were executing tasks in a way that what they were doing was disconnected from why they were doing it. With so many new people coming on board and the previous generation that had grown the company retiring, there was a risk that the company would lose what made it unique and different for customers, suppliers and talent in a highly commoditised market.

Purpose is found, not created

To help our client, we began a process to rediscover the purpose of the company. Positioning this process as re-discovering the purpose is critical. The purpose of a company is not created, rather, it is found in the company’s history and founding principles, in its employees’ experiences, in the design of its products and services and in how they are experienced by customers and delivered together with suppliers. Also intrinsic to purpose is the impact and role that the company and its products and services have played in society. We, therefore, embarked on an exercise aimed at listening to perspectives on the purpose of the company from the 3 most important voices: 1. The heritage and employees, 2. Customers and suppliers and 3. The world (media, government, NGOs). We did this through

All the findings were summarised into a purpose report.

No right or wrong purpose, only what is right for your company

Together with the Executive Board and a working group representing a cross-section of next generation talent from across the company, we started by reviewing the findings in the purpose report and identifying the key insights from each of the three voices. We then went into an iterative process to generate options to define the purpose in a statement, along with a minimum of 3 goals that would allow the purpose to be measurable and would be meaningful to the different stakeholders. Several rounds of iteration resulted in a purpose statement with 6 goals. The purpose statement and goals that were finally chosen were selected because they:

  1. can be lived through what the business does and is aiming to do
  2. align with the existing vision, values, mission, objectives and business model
  3. drive the growth of the current business, new growth opportunities and enhance innovation
  4. reduce costs (and therefore drive profitability) and mitigate against potential risks
  5. improve the company reputation (and therefore license to operate)
  6. are engaging and inspiring for employees and talent in the market
  7. bring value to all relevant stakeholders (customers, suppliers, employees, government, NGOs and shareholders) and makes it clear the role the company wants to play in society

These seven decision-making criteria to select the purpose is critical because they ensure that the purpose can be delivered through the day-to-day business. This co-creative and energising process also brought with it the commitment from the Board and the next generation to connect their own personal purpose to the organisational purpose.

Purpose is lived by using it as a foundation for decision making

Explicitly articulating the purpose is not enough to realise the benefits from it. The purpose, just like the company’s vision, mission, brand and values must be part of the decision-making framework. These aspects all make the foundation of who a company is and need to be consciously and continuously applied in the decisions and actions taken on a daily basis.

We had shared with the team an example of an international telecom company that had defined an inspiring purpose with goals and had failed to embed it in its product offering, marketing and innovation processes. The impact of not doing this resulted in poor decision making that otherwise would have unified and renewed the company for continued growth.

Having defined the purpose, we worked with the Board and the next generation working group to define a roadmap to bring the purpose to life by embedding it in their products, services and processes. It now serves as the basis to set strategic priorities for this year and the years into the future. The business is now also sharper and more focused on the specific societal and environmental issues that it addresses in how the business is delivered.

a matter of choice

A clearly articulated & lived organisational purpose increases the chance for any company to be successful and to stay successful for a longer period of time. In a highly commoditised world, where business cycles have become so short that some offerings become obsolete almost as quickly as they’re created, a purpose that is emotionally engaging and intellectually inspiring energises employees, creates emotional connections with customers, helps to gain the trust of society by tackling relevant issues in the course of delivering the business and ultimately pays off in increased profitability.

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