Embrace tough decisions
With the growth in popularity of purpose, it is often seen as a synonym for altruism, but this isn’t what “purpose” means – if I do something “on purpose”, I do it deliberately. Purpose brings coherence to strategy and investment decisions.
A purposeful business cannot be all things to all people, it is discerning about outcomes it aims to achieve and the intentionality of its actions. Truly being purpose-led is about facing tough decisions.
Example: Signify (Philips)
Decisive decision to opt for LED production over other inefficient lighting products, taking on risks in the process:
Philips Lighting in 2006 decided to move away from incandescent light bulbs in favour of scaled up LED production at a point when nearly two-thirds of their sales volume came from incandescent light bulbs; such a radical shift faced huge opposition within the company and among shareholders. The move, of course, paid off and the firm – now called Signify – sits comfortably in the top five LED manufacturers in the world today, with an annual revenue of around £6 billion.
See The lightbulb moment: the rapid shift to LEDs and ultra efficient lighting | Rapid Transition Alliance for more information
Example: Ørsted
Ørsted was once one of the most coal-intensive energy companies in Europe. Today, they are the world’s most sustainable energy company, and a global leader in the transition to green energy.
Their business transformation is a story of technological innovation, steep learning curves and difficult strategic choices that have led to long-term gains. It captures what they have learnt – from their decision to move away from an unsustainable business model based on fossil fuels, to the action they took to build a truly green business – and the benefits and opportunities it created for them.
Thus the strategy of such a purpose-led business must also be clear about what the business will not do — otherwise, it is not a strategy. e.g. will it forsake a damaging business line even if that line is profitable, in order to pursue new opportunities which are consistent with a purpose that benefits people and the planet?
The acid test of a purpose-led strategy must therefore be:
- What did you stop doing?
- What did that sacrifice enable you to do instead?
- Why was that more purposeful?
There is no frictionless ‘win-win’ in becoming purpose-led, and usually, some existing profitable activities will need to stop, while other opportunities to innovate will arise. Obviously, the pace of the change and its implications needs to be managed and understood, in particular by the Board and by investors.