Does purpose really drive profit?

Does purpose really drive profit?

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One Question Answers: Does purpose really drive profit?

Yes. And No.

In May this year, 17 expert speakers from 10 different industries shared their answer to this year’s one question. Our newly-launched One Question Answers unites their inspiring and intriguing perspectives.

With a desire to break down industry echo chambers and learn not just what we think but why we think it, this paper traces a guiding thread through their different thoughts and opinions. It answers this one question through the lens of music, politics, media, advertising, marketing, business and more, providing you with actionable takeaways to shape your own strategy.

I urge you to read it once, read it twice, make notes in the margin and refer back to it time and time again. I hope you enjoy our first One Question Answers.

Sarah Producer One Question

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Purpose has internal, as well as external, implications for a brand – according to research from Kantar, employees are 3x more likely to stay with a company that has a clear purpose and enacts it

In the past few years, purpose has become a ubiquitous term in marketing, branding, advertising and pretty much any other industry that sells a product to a consumer. For some in those sectors, purpose has been a positive force, creating an industry-wide narrative that taps into something the company has been doing from the start. TOMS is one such example of this kind of business. Founded in 2006, the shoe brand is one of the original proponents of the purpose-based model. “If we were only selling

shoes all the time, we’d lose the reason why we exist,”

said Lisa Hogg, TOMS’ Director of Marketing and Giving.

What sets TOMS apart, however, is the fact that its profit drives its purpose, not the other way around. Without profit from product sales, the firm wouldn’t be able to invest in charity initiatives or cultivate relationships with NGOs. Similarly, TOMS’ purpose is a key driving factor for customers to purchase its products. Maintaining this delicate balance between the two is not easy - it involves constant dialogue to ensure that stable profit is maintained and utilised in projects that are consistent with the company’s guiding purpose.

On the opposite side of the spectrum, there are the brands for which purpose is an add-on, a marketing tactic designed to conceal the fact that their true underlying purpose is to sell a product. “For an industry that society views as deceptive, purpose is a godsend,” said Tom Roach, a Partner at BBH. “It enables agencies to persuade consumers that they’re not just trying to sell them stuff, but they’re actually making the world a better place.” These brands, with their inauthentic purpose, are ruining the party for everyone else, by undermining trust in the entire movement.

It is the brands in the latter category that are likely to baulk the second that there is a hint of backlash to one of their

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“For an industry that society views as deceptive, purpose is a godsend.”

Tom Roach

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campaigns. “It’s one thing to invest in great initiatives, it’s another to plant a flag and say, we’re going to lose customers, we’re going to lose money, but we’re willing to lose those things in order to take this forward,” said Kantar’s Tara Prabhakar.

For these companies, purpose is purely designed as a profitmaking tool, and so they’re highly likely to abandon it the second that that profit is perceived to be under threat.

The irony is, brands of the latter type rarely get as far as driving profit through their applied purpose, because customers recognise that it is inauthentic. Truly purposeful brands are the ones able to drive profit, because they fulfil a need in society. “Young people nowadays have only known financial and environmental crisis, and they’re looking for purpose-driven brands to act as beacons of hope and sense,” said Alex Weller, Marketing Director at Patagonia. Brands that view purpose as a marketing tool, as opposed to a guiding light at the centre of the business, have misread the modern consumer, and will not see profit as a result. By contrast, for brands like Patagonia, purpose is a north star around which it has built a community.

It is inextricable from the company, meaning that it drives profit by dint of its very existence, because when people buy Patagonia’s products, they’re buying into the company’s purpose too.

As Roach concluded, “Purpose is better used as a business tool by companies wanting to engage with conscious capitalism, rather than as a bolt-on marketing tool. Profit shouldn’t be the primary focus.”

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Case study:

Finisterre

Tom Kay said, “People said that we could have gone harder, faster, bigger, but we had our purpose as a true north, guiding the business journey.”

When it comes to staying true to purpose, Finisterre is the ultimate role model. The brand was borne out of founder Tom Kay’s love for the ocean, and today, its purpose is to emotively connect people to the sea. That’s not to say there have been no issues along the way the brand has had to make difficult decisions with regards to fabrics, and make practical concessions for the sake of profit, without which the business wouldn’t survive. These are counterbalanced, though, with micro-actions within the business that contribute to overall purpose. For example, the company runs an initiative called Sea Tuesdays, where every Tuesday, employees start at 10am, and must spend the morning in or by the sea. It’s this underlying purpose that has helped to drive belief in difficult business moments.

For companies that don’t have a commercial goal, but rather provide a public service, purpose means something entirely different. Take the NHS and the Army – both are purposedriven organisations at their core. Since the NHS’ foundation in the 1950s, it has operated according to a rights-based constitution that sets out its commitment to providing free at point of access healthcare every person living in the UK. Profit is at the very end of its list of priorities – no-one ever goes into the NHS to get rich quick, and the government certainly doesn’t view it as a cash cow. The same is true of the army – it exists to protect the UK from the threat of war, not to bring

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in revenue for the country. What’s more, no soldier signs up expecting to earn a six-figure salary; that is categorically not the motivation for joining an organisation like the army.

For both of these organisations, profit and purpose are inextricable. The NHS exists to serve the health needs of the UK population; if those needs are met, that is its profit. Similarly, the army exists to ensure that the country is safe and secure – so long as that is the state of affairs, it has delivered a profit.

As society has changed, however, these two age-old organisations have had to adapt their method of producing this profit, while staying true to their original purpose. The NHS’ care burden is growing, as a result of our growing and ageing population, many of whom have complex health needs and require a different sort of care than has been provided previously by the organisation. In order to meet this need, it has turned to technology, launching internal services such as NHS X, niche social media networks and more. It has also turned to the private sector, and to companies such as DoctorLink, which provides a triaging service.

Senior officers have also taken on new responsibilities bridging the gap between organisational and personal profit, by ensuring that the army meets its strategic goals, while empowering soldiers with vital skills for both military and civilian life.

But how do you align the purpose-driven, public service business model of the NHS with the profit-centric goals of a private business like DoctorLink? Through the understanding that both are fundamentally healthcare providers, and both have a responsibility to take care of people’s lives first. By finding this common ground, the NHS has been able to remain true to its purpose, while delivering the profit the country expects.

Similarly, the army has become increasingly aware in recent years of the mental health burden that soldiers are grappling with. In order to continue delivering on its purpose, while ensuring profit for soldiers in the form of a fulfilling life postservice for its soldiers, it has introduced awareness campaigns, counselling services and ‘decompression’ periods after operations.

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“Consumers smell bullshit from a mile away. When Google says they are going to change the world, no-one believes them anymore – it’s just not compelling.”

Sarada Peri

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Case study: Bloomberg...

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Case study:

Bloomberg Bloomberg is testament to the fact that a multinational profit-making corporation can keep purpose at its heart. Its employees are encouraged not to view the two as mutually exclusive, but rather to do good, while doing well. Diversity is one example of where purpose and profit collide; ensuring that everyone within Bloomberg has the opportunity to grow and thrive means that the organisation is healthier, people are happier, do better work, and profits soar.

Outside of these two broad categories sit sectors such as politics, media and to some degree, music. Discussion of purpose within these industries necessitates first a total redefinition of what the terms ‘purpose’ and ‘profit’ mean. A politician must balance their individual purpose, meaning their motivation for seeking the highest office, with the purpose of their party, which incorporates not only the desire to take power, but also to utilise that power to make fundamental changes to the society we live in.

A politician’s manifesto is intended to bridge the gap between individual and party ambitions, while also convincing voters that this purpose is authentic. As former speechwriter for Obama Sarada Peri said, “consumers smell bullshit from a mile away. When Google says they are going to change the world, no-one believes them anymore – it’s just not compelling.” The same goes for political purpose - voters have got to trust that candidates will deliver on their promises.

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If the public are convinced, they will reward candidates with political profit, in the form of votes. In modern politics, our understanding of profit is starkly different to any other industry, as money barely figures in the picture (certainly in the UK anyway – the US is a different story.) Nevertheless, the only type of revenue a politician really seeks is a pencil cross at the ballot box.

“People vote on feelings, not policies, now.”

Joe Twyman, founder of Deltapoll

In a bygone era, a shared economic purpose was enough to persuade the public: a commitment to cutting taxes, perhaps, or boosting spending on education. But we live in an era of identity politics. This shift means that connecting on an emotional level is crucial to driving votes. We’ve seen this recently in the race for the Democratic nomination with Elizabeth Warren - the Massachusetts senator has a policy for every problem, but it’s not helping her gain in popularity.

In terms of deeper connection, politics and music have something in common, as in music, emotional connection is also a huge profit-driver, albeit in a different way. “Music is tribalistic, it’s belonging, it’s identity,” said Rinse FM’s Sarah Lockart. Unlike driving profit through purpose in say, marketing, in the music industry, profit depends on forming a deep and true emotional connection between artist and listener.

For musicians, personal purpose is indistinguishable from their passion for what they do. In that regard, profit doesn’t even

As Lockart said: “Purpose is your input signal, and profit is your output signal, but it’s not a line - it’s a loop.”

figure into the equation, particularly for up-and-coming artists – it’s a much greater consideration for the management teams and labels of established artists. Nevertheless, the two sides of the industry must operate in tandem with one another, with the recognition that one cannot exist without the other. Without purpose, there is nothing to sell, but without profit, there’s no scope to grow.

In the media, purpose is more challenging to define, not least because, as journalist Georgie Frost said, some outlets are yet to define exactly what their purpose is. According to the BBC’s

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“Connecting with people on an emotional level, that’s what really drives profit” Joe Twyman

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charter, the media purportedly exists to inform, to educate and to entertain. However, the information and education aspects of this purpose are highly specific to the westernised notion of media – in fact, just 13% of the world’s population has access to free news. For the other, larger proportion that does not benefit from a free press, the media takes on a different purpose: to spread propaganda, to denounce those that take a different line, or even to convince readers of the ‘facts’ of the world as that publication sees them. These types of outlets are so far from our understanding in the western world of what the media’s purpose is, yet, they form a significant part of the global media landscape.

According to the Sutton Trust, 51% of the UK’s leading journalists were privately educated, and 80% of top editors went to either private or grammar schools.

In the UK, for better or for worse, the media also functions as an arbiter of public interest. As Frost noted, this becomes problematic when the media does not accurately reflect the population that it is supposed to represent. “It’s all the same voices because the industry is governed by the rich,” said Frost.

Profit, meanwhile, for the media is two-pronged. The second aspect, which is simpler to comprehend, is monetary profit.

This has come under threat in recent years as businesses in the sector have haemorrhaged print and display advertising revenues to platforms such as Facebook, which has in turn led to redundancies at outlets like HuffPost, Buzzfeed and The Pool.

A 2016 report by City University, meanwhile, found that the British journalism industry is 94% white.

In order to drive this financial profit, however, outlets must deliver on the first aspect of profit, which is the delivery of a fair society in which the powerful are held to account for their actions. This is both the media’s purpose and its profit, in that it exists to safeguard a just society, but the existence of a just society is profit, too, in that it signifies that the media is delivering on its purpose. In the age of misinformation, ‘fake news’ and outright lies by top officials, this has never been more important. Get it right, and the cash will flow. This has certainly been the case for the New York Times - it gained 276,000 subscribers in Q4 2016 when Trump took office, a result of the so-called ‘Trump bump’.

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Conclusion Evidently, purpose and profit manifest in different ways according to what sort of sector someone works in and what sort of society they live in, too. This means, at an industry level, there is no single answer to whether profit really does drive purpose, but rather a variety of informed perspectives.

It’s clear that in some instances, purpose does drive profit, but only where that purpose is authentic. Any organisation that superficially applies a purpose in the hope it will be a cash cow is going to be sorely disappointed.

What’s more, in other cases, it’s actually profit that drives purpose, not the other way round. Grand ambitions to change the world are all very well, but they won’t have a significant impact if there’s no clout behind them. For brands, that power very often comes from money, whether that’s profit reinvested in activist initiatives, or a percentage set aside for charity partnerships.

Overall, profit and purpose are not mutually exclusive entities - they are interwoven within the fabric of a business.

This can make it challenging to truly ascertain whether purpose drives profit, whether profit drives purpose, or whether it’s a combination of the two. What we can say for certain, though, is that firms that set their purpose to work for their profit margins in an genuine manner are always going to come out on top.

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Fascinating insights are one thing, but they’re most valuable when integrated into a long-term strategy. Here are our top five actionable takeaways, to help you translate the lessons of the conference into a plan for your business.

·· Focus on engaging with those on the ground that are working to enact systems change – it’s the most fruitful way to go about achieving results and ensure funds or volunteering work is best directed. ·· Don’t treat purpose as atonement for the so-called ‘sins’ of your industry. If it’s real for your brand, bring it in. If not, leave it out. ·· Anyone can be an activist within a business – it’s better to do something small than do nothing at all. ·· Define your purpose first and foremost. Embroidering purpose onto an existing business model is lazy, and people will see through it the second you can’t deliver on it. ·· The purpose movement needs scale and it needs participants. The only way to make a change is to get up, show up, and believe you’re part of the solution.

“The cure for depression is action.”

Alex Weller 23

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