It’s often the way that a business is created by the brilliance of a single person. Edison, Pfizer, Ford, Marconi, Jobs, Gates etc. all created businesses based on a single idea. In this traditional view of affairs, the focus of most managers is on execution and efficiency, muting the need for strategy and creative thinking. Today, however, as products rapidly age and devolve into commodities, businesses need to re-invent themselves at an ever accelerating rate or risk falling into the trash heap with Blockbuster, Circuit City, DEC computer and others.
So how do you change a corporate mindset and revitalize a fading organization? The answer may lie in work done by authors Malnight, Buche and Dhanaraj 1 who set out to study high growth organizations. They discovered something they weren’t expecting, that organizational purpose plays significantly in overall corporate success. They called this phenomenon ‘purpose driven’.
We’ve always talked about a market-driven strategy aligning company resources with the needs of the market. A purpose driven strategy takes this a step further addressing broader social needs. This is important because most strategies ignore the needs of the people who are asked to execute them. In the past, it was assumed a fair salary was motivation enough. However, today, more than ever, employees (especially millennials) want to work for organizations that go beyond generating profits and contribute to a higher cause. Neste corporation is a case in point. Watch how Neste, a very traditional Finnish Oil and Gas company, transformed into a ‘purpose driven’ renewable energy company. With both profit and society in mind they re-defined their purpose, re-built their strategy and tapped into employee passion.
Neste operated in an increasingly commoditized oil and gas market with forever shrinking margins. Seeing the writing on the wall that smaller producers would get squeezed by bigger more efficient operators, Neste decided to re-define themselves investing heavily into renewable biodiesel. Renewable diesel is not a fossil fuel, it’s made of non-petroleum renewables like fats, vegetable oils and natural greases. It reduces emissions, produces 85% less sulfur while still delivering strong performance. However, this shift to biodiesel wasn’t only a shift in technology, it would also require a major shift in corporate mindset.
Peter Drucker once said “culture eats strategy for breakfast”. In order to execute the new purpose driven strategy Neste would need to change the culture and corporate mindset in a myriad of ways. There were the obvious things like learning the new technology but also other important considerations such as moving the focus from selling by volume to selling on value. Some people didn’t agree with the new direction and left the company – that happens. For those motivated employees who stayed, the change wasn’t only to selling sustainable energy but went right to the core of business operations. Everyone in the company was made accountable for sales. It didn’t matter if you were from accounting, tax, supply chain, sales or marketing, you were all part of the implementation team responsible for key account management. At every step in the transformational process people were reminded “why” sustainability and environmental stewardship was so important. This communicated the purpose and created an urgency in the business. With the purpose clearly defined, leadership tasked individual business units with the job of creating the “how” ... that is the strategy, for bringing their new green technologies to market.
So what can we learn from Neste and why is developing a purpose driven strategy so important:
- Purpose driven companies attract purpose seekers: Purpose seekers are extremely motivated individuals bent on achieving higher, purpose driven goals.
- Purpose creates an urgency that is the foundation for innovative strategies: To evolve, businesses need to re-orient themselves to serve new markets. A strong sense of purpose creates an urgency that taps into creative minds and helps business units define how they can better contribute to the common good of the organization and society.
Neste today is a leader in the renewables industry taking on the challenges of global warming and sustainability with a promise of doing more with less. They are listed as the 3rd most sustainable company in the world and major industries around the world look to their expertise to help them reduce their carbon footprint. Employees understand their purpose and get on with developing innovative new products and processes to support the overall strategic direction leading to improved growth, profitability and sustainability. When will you develop a purpose driven strategy?
1. Malnight, Buche and Dhanaraj Put Purpose at the core of your strategy HBR Oct 2019