“ Roy Spence is a brilliant, sparkling gem. Dedicated to the idea that true great- ness comes in direct proportion to passionate pursuit of a purpose beyond money, he has inspired and changed leaders in every sector.” —JIM CollInS, author of Good to Great, co-author, Built to Last I t ’ s N o t W h at Yo u s e l l , I t ’ s W h at Yo u sta N d F o r Why Every Extraordinary Business Is Driven By Purpose Roy M. Spence, Jr. with Haley Rushing pnwy_5p_all.qxp 11/19/08 4:47 PM Page 9 1 WHAT IS A PURPOSE AND WHY SHOULD YOU WANT ONE? From the beginning, instinct told us that what a company stands for is as important as what it sells—I guess that’s why we were naturally drawn to organizations that were known as much for their values as they were for the products and services they sold in the market. I got my first official introduction to the idea of purpose when I picked up the book Built to Last, by Jim Collins and Jerry Porras, in an airport bookstore. I was interested in the book because two of the visionary companies that they covered were Southwest Airlines and Wal-Mart—two longstanding clients of ours (GSD&M’s). I’m always curious to see how other people explain their success. I was immediately struck by the description of core ideologies that separated the visionary companies from the mediocre companies. The visionary companies had a set of core values that were unchanging and a core purpose that fueled everything the organization did. As the authors put it: CORE PURPOSE is the organization’s fundamental reason for being. An effective purpose reflects the importance peo- ple attach to the company’s work—it taps their idealistic pnwy_5p_all.qxp 11/19/08 4:47 PM Page 10 10 IT’S NOT WHAT YOU SELL, IT’S WHAT YOU STAND FOR motivations—and gets at the deeper reasons for an organiza- tion’s existence beyond just making money. The book listed the powerful purpose statements that had pro- pelled some of the most visionary companies of our day to great suc- cess. For example: Merck: To gain victory against disease and help mankind Disney: To use our imaginations to bring happiness to millions Johnson & Johnson: To alleviate pain and suffering These are big ideas—ideas that can make a meaningful difference in the world, ideas that separate the great from the ordinary. My heart was racing. I couldn’t wait for the plane to land. The second the wheels hit the tarmac, I was on the phone. I called Jim Collins be- cause, to be honest, I couldn’t pronounce his coauthor’s last name. We had a good conversation, and by the time we got off the phone we both agreed on the secret ingredient of extraordinary companies— purpose. Purpose isn’t everything, but it trumps everything else. Sure, every organization must also have strong leadership, management, succes- sion planning, execution, strategy and tactics, innovation, and more, but in more than thirty-five years of working with a vast range of companies and organizations, my belief is that it all has to start with a purpose. That is the hinge that everything else hangs upon. In my experience, the simplest way to explain purpose is: Purpose is a definitive statement about the difference you are trying to make in the world. Having clarity about the ultimate purpose of the time and energy you spend doing what you do is the cornerstone of a culture of pur- pose. It’s what drives everything you do. It’s your reason for being pnwy_5p_all.qxp 11/19/08 4:47 PM Page 11 What Is a Purpose and Why Should You Want One? 11 that goes beyond making money, and it almost always results in mak- ing more money than you ever thought possible. If you have a purpose and can articulate it with clarity and pas- sion, then everything makes sense and everything flows. You feel good about what you’re doing and clear about how to get there. You’re excited to get up in the morning and you sleep easier at night. If you don’t have a clear and easy-to-articulate purpose, everything feels a bit chaotic, harried, and maybe even meaningless. Meetings may go on for hours with endless and arbitrary decision-making crite- ria being thrown out by anyone with an opinion. You may launch to- tally new business plans year after year. Without a core purpose in place, the way forward is often a real challenge. The textbook definition of purpose is: n. The object toward which one strives or for which something exists. Without a purpose, what are you striving for? What are you resolved to accomplish? If you have no answer to these fundamental questions, your business (and your life) may be a real struggle. The power of purpose is not a marketing idea or a sales idea. It’s a com- pany idea. Purpose drives an entire organization and it answers why the brand exists. —Jim Stengel, former global marketing officer of Procter & Gamble (P&G) SOUTHWEST AIRLINES: AN EXAMPLE OF GREAT PURPOSE Before I go any further, let me give you one clear example of what I mean by purpose in the corporate world. For over twenty-seven years, I have worked side by side with the founder and other leaders of Southwest Airlines. Tons of stuff has been written about Herb Kelle- her and the Southwest business model, and I will not rehash what’s well known. I will, however, offer insight into the fundamental under- pinning of purpose that fuels their famous culture and unrivaled success. pnwy_5p_all.qxp 11/19/08 4:47 PM Page 12 12 IT’S NOT WHAT YOU SELL, IT’S WHAT YOU STAND FOR Herb conceived of the idea of Southwest Airlines with Rollin King one night in San Antonio. As the legend goes, it started as a simple tri- angle scribbled on a napkin: from Dallas to Houston to San Antonio and back to Dallas. At that time, it was a highly regulated industry, and Braniff and other airlines had a monopoly on routes and fare structures. Their incredibly high cost structures resulted in expensive fares that were only accessible to the elite, and as a result, only 15 percent of the American public had ever flown. Herb and Rollin decided to single-handedly deregulate the indus- try and create a low-cost, efficient airline that would make flying af- fordable for people from all walks of life. Their clear purpose (although they hadn’t yet articulated it as such) was to give people the freedom to fly—in essence, to democratize the skies. They may be in the airline business, but their true purpose is to give people the free- dom to fly. The result: Southwest Airlines has posted a profit every quarter for over thirty-six years now, a record unmatched by any other airline in the history of aviation. No one else even comes close. And while that is a rewarding difference in the pocketbook, the most rewarding difference is the one that they’ve made in the lives of people across the country. As a direct result of Southwest Airlines, to- day over 85 percent of Americans have traveled by airplane. That’s purpose in action. That’s a real difference that the leaders and em- ployees of Southwest Airlines can take pride in and that customers re- ward with their loyalty. WHY SHOULD YOU WANT A PURPOSE? So, you may be saying to yourself, that’s great for Southwest Airlines, but I’m not really sure that I need a purpose. Why does purpose matter? Why not just work on sound strategy and positioning year after year and have a good, viable business in the marketplace? You can certainly do that, and you may even have rea- sonable success doing it. But in our experience, purpose offers up a host of benefits, including easier decision making, deeper employee and customer engagement, and ultimately, more personal fulfillment pnwy_5p_all.qxp 11/19/08 4:47 PM Page 13 What Is a Purpose and Why Should You Want One? 13 and happiness. And in the end, a clear and compelling purpose is a huge tie breaker in the marketplace that will make not only your peo- ple and your customers happier but also your shareholders. Here is a full list of the reasons we believe that having a purpose is so critical to succeeding in today’s marketplace. PURPOSE DRIVES EVERYTHING With a purpose in place, decision making becomes easier. You can look at an opportunity or a challenge and ask yourself, “Is this the right thing to do given our purpose? Does this further our cause?” If it does, you do it. If it doesn’t, you don’t. If it’s proof to your purpose, embrace it. If it violates your purpose, kick it out on its ass. In Jim Collins’s follow-up bestseller Good to Great, he describes how companies with average performance ascended to greatness after, among other things, they discovered their “hedgehog.” Hedgehogs, as the economist Isaiah Berlin describes in his essay “The Hedgehog and the Fox,” simplify complex environments into a simple view or princi- ple that unifies and guides every move they make. All challenges, op- portunities, and threats are examined through one unifying worldview. As Jim points out in Good to Great, “For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance.” So it is with companies with a purpose. They look at the world through the lens of their purpose. If a move is relevant to their pur- pose, they make it. If not, they don’t. For example, if a decision comes to the table and it violates the core purpose of Southwest Airlines’ ability to keep costs down and fares low, it’s thrown out. If a piece of automotive technology is pre- sented to BMW that does not support the core purpose of enabling people to experience the joy of driving, they discard it. If some idea is put forward at John Deere that might compromise their quality, com- mitment, innovation, or integrity, it will be passed over. If any com- promise on design is put on the table at Kohler, it is ignored. If a new pnwy_5p_all.qxp 11/19/08 4:47 PM Page 14 14 IT’S NOT WHAT YOU SELL, IT’S WHAT YOU STAND FOR policy at Norwegian Cruise Lines that would inhibit their passengers’ right to go their own way is run up the flagpole, it is tossed out. If any new practice would cast doubt on the integrity of the game of golf, the PGA Tour would immediately nix it. In short, leaders driven to fulfill a purpose will make decisions to ensure that the purpose is never violated. Purpose should drive what’s on your personal to-do list, what’s on the R&D list, and what’s on your mind as you assess the overall per- formance of the organization. Hiring and firing should be based on alliance with the purpose. Purpose should drive everything from the philosophical foundations of the company to that hot fourth-quarter promotion developed in the advertising department. PURPOSE IS A PATH TO HIGH PERFORMANCE A purpose is not developed in a vacuum. While the core of a purpose must be born out of the genuine strengths and passions of the organi- zation, those strengths and passions must ultimately intersect with the needs of your audience. As Aristotle said: “Where your talents and the needs of the world cross, there lies your calling.” Your purpose, as it were. In my experience, most purpose-based leaders and organizations understand the needs of the world instinctively. Answering those needs is the path to high performance. Sam Walton knew that people in rural areas were sick of paying high prices for average goods. They needed a retailer they could trust to deliver low prices every day on quality goods that help make life a little better. Herb Kelleher knew the 85 percent of the market that hadn’t flown probably wanted to—they just needed someone to make it affordable for them. Charles Schwab knew that individual investors were sick of get- ting ripped off by traditional Wall Street brokerage firms. Peo- ple needed a brokerage firm that was on their side. pnwy_5p_all.qxp 11/19/08 4:47 PM Page 15 What Is a Purpose and Why Should You Want One? 15 John Deere knew that the farmers who were having a hard time plowing through the tough prairie soil of the Midwest would appreciate a better performing plow that they could trust to get the job done. Phil Knight and Bill Bowerman (Nike) believed that “if you have a body, you’re an athlete.” They knew that if they outfitted indi- viduals with innovative gear and inspired them with a battle cry, a new generation of athletes would emerge around the world. Howard Schultz (Starbucks) knew that people would probably appreciate a third place to spend time and enjoy a really good cup of coffee if they had it. A purpose is informed by the needs of the world. Ergo, if you build your organization with a concrete purpose in mind—a purpose that fills a real need in the marketplace—it stands to reason that perfor- mance will follow. Jim Stengel, former global marketing officer of Procter & Gamble, oversaw the world’s largest ad budget of roughly $6.7 billion. Through his experience building and managing some of the world’s most successful brands, he has come to believe in the power of pur- pose to drive incredible performance. Here’s what he shared with us: Over the course of my career, I’ve developed a deep sense that the companies—the brands—that really stood out above the rest in every way had something else going on that was much deeper than the functional benefit they provide to their customers or con- sumers. Whenever I saw something that motivated me, inspired me, or gave me goose bumps, it was something to do with purpose. —Jim Stengel Jim’s observation led him to commission a proprietary study de- signed to identify brands from around the world that were growing disproportionately to their categories. This massive study began with over thirty thousand brands and focused on twenty-five top perform- ers. When the group conducted an in-depth study on those top per- formers, they found that all the top performers were fulfilling a pnwy_5p_all.qxp 11/19/08 4:47 PM Page 16 16 IT’S NOT WHAT YOU SELL, IT’S WHAT YOU STAND FOR higher-order purpose. P&G believes so deeply in the idea of purpose and its ability to drive performance that it has recently codified every- thing the company has learned about purpose in an internal manual. There have been many other studies that have proven the bottom- line power of purpose. Jim Collins and Jerry Porras demonstrated in Built to Last that organizations driven by purpose and values outperformed the general market 15:1 and outperformed comparison companies 6:1. Harvard Business School faculty members John Kotter and James Heskett studied blue-chip firms across twenty different industries and found that firms with strong adaptive cultures based on shared values significantly outperformed firms with weak, values-neutral cultures. Over the four-year period they observed these companies, revenue grew more than four times faster, rate of job creation was seven times higher, stock price grew twelve times faster, and profit performance was sig- nificantly higher than comparison companies in similar industries.1 In a book entitled Firms of Endearment,the authors identify thirty companies (three of whom include our past or current clients: BMW, Southwest Airlines, and Whole Foods Market) driven by a sense of purpose and humanistic principles. These companies put the needs of their stakeholders ahead of the needs of shareholders and are bringing about a profound change in the existing capitalist paradigm. The au- thors found that companies that choose to put their employees and their customers first are outperforming conventional competitors (who have an eye almost exclusively on profit and shareholders) in stock market performance on the order of 8-to-1. Not only is overall stock performance significantly better, employee turnover is lower, productivity is higher, and pricing strategy is not subject to the same low-pricing pressure experienced by pure profit-driven, shareholder- focused competitors.2 Far from being some touchy-feely concept, purpose and values have been identified by the best business gurus of our time as key in- gredients of high-performing organizations. Just to be clear, having a strong purpose in place does not make an organization immune to setbacks that may inhibit financial per- formance from time to time. We’ve all seen strategic decisions or pnwy_5p_all.qxp 11/19/08 4:47 PM Page 17 What Is a Purpose and Why Should You Want One? 17 marketplace forces derail even the most beloved purpose-driven orga- nizations. But organizations with a strong purpose are much more likely to get back on track and create a legacy of high performance over time. PURPOSE FOSTERS VISIONARY IDEAS AND MEANINGFUL INNOVATION Let me share another story from Jim Stengel, which demonstrates how purpose can unleash innovative thinking in an organization. Jim believed that Pampers was more than just a diaper that pre- vents wetness. As he expresses it, “We’re talking about babies and mothers and birth and life. Shouldn’t we as a company have a higher aspiration other than to just keep the bottom dry?” He describes the powerful transformation that happened when Pampers began to earnestly explore how they could do more than “just keep the bottom dry”: We asked ourselves: What’s the one thing that every mother cares about? And what she cares about is her baby’s development in every way. So we began to seize that idea. And we switched from being a brand about functional dryness to a brand that helps moth- ers around the world with their baby’s physical, social, and emo- tional development. And in the beginning, that idea sounded crazy. But it started to get people inspired. It got the imagination going. The agenda for innovation started to change. The way we ap- proached consumers began to change. We began having daily inter- actions with mothers and babies onsite. We began thinking about our product experience differently. We identified “sound sleep” as a key to healthy baby development. We began asking questions like what can Pampers’ role be in helping babies have deep, healthy sleep so they can wake up with energy, with rejuvenation and better brain development? We did clinical studies in that area. We learned that mothers around the world care about one another. One thing led to another and now we have a partnership with UNICEF in over 40 countries; when a mom buys a bag of Pampers, we donate one vaccination delivered through UNICEF. And now, ten years later, the brand has doubled in size. It’s one of the leading brands in the world and has become P&G’s first $8 billion brand.