Technology is rapidly changing how the world economy is functioning, and this change brings winners and losers for investors to consider. It’s no secret that innovation and transformation have always been important. But steep advances in technology have accelerated the need for change and altered how consumers shop, view brands, and make repeat-purchase decisions.
Facebook, Twitter, and other social media sites have radically changed how we view and interact with brands, and some companies have taken notice. I recently had the opportunity to meet with EY’s strategy executive director and EY Beacon Institute global leader Valerie Keller, to discuss this topic and how it can lead to better growth opportunities for companies large and small. As EY points out, “purpose-led brands are more successful in acquiring and retaining customers. This may make intuitive sense, but it is also backed up by behavioral science: people buy things that make them feel good about themselves. And people do business with those they trust.”
But what is a purpose-led brand? Is it a marketing tool? Is it about “giving back,” or is it more than that? To some, it’s a marketing tool; to others, it is a way forward and at the core of their identity. According to Keller, companies that successfully transform themselves into a “‘purpose-driven organization” will uncover more growth opportunities and develop stronger sales channels than those that don’t. And in a world where growth is increasingly difficult to achieve, leveraging all available tools is more important than ever.
SAP’s Bill McDermott and Virgin Airways’ Sir Richard Branson are highly regarded business leaders who incorporated a sense of purpose into their business from Day One. Their entire business model is based on the core belief that by focusing on purpose they will increase long-term profitability, gain more customers, and retain better employees—and they are right.
- Think about the next customer—how fast can you reach them, and how big an impact can you have on them?
- Focus on a specific problem and develop a solution for it (think Uber and the taxi industry)
- Put a number on it–don’t just talk about it, make it part of your strategy
Research by EY, done in conjunction with Harvard Business Review Analytic Services and Oxford Said Business School, shows that purpose-driven companies outperform their peers. Over the long term, they benefit from greater client retention, better margins, stronger brand loyalty, and from an investor’s perspective, higher valuations.
Companies like Tesla (TSLA), Netflix (NFLX), and Johnson & Johnson (JNJ) are other examples of companies that are benefiting from their purpose-driven DNA.