If you know anything about Parisleaf…
You’ll know that we talk a lot about purpose. We’ve long been fascinated by measuring the return on investment for companies that invest in purpose, and even more so, how we measure the value that our clients get from our agency’s work.
I’m often asked by potential clients about the return on investment of purpose-focused branding. You only have to look around at companies like Airbnb, Lyft, Tesla, and Patagonia to know that there is one.
We believe that purpose is what unlocks an organization’s true potential. A well-researched, meaningful, intentional, and purpose-driven brand gives your company a recognizable purpose that customers respond to, which generates healthier revenue and makes a positive impact on the world and the people in it. Do good, make a difference, and make money? Yes, please.
If your brand doesn’t have a purpose, then it won’t resonate as deeply. If it doesn’t resonate as deeply, then it doesn’t have a use. If it doesn’t have a use, then it’s easily discarded and replaced with something more meaningful (e.g. your competitor’s brand).
Most of us have heard of the Triple Bottom Line: People, Planet, Profit.
It was a term coined by management consultant John Elkington back in 1994. The Triple Bottom Line was his framework for measuring the performance and impact of a business.
Today, the same framework is used by B Lab, the nonprofit that certifies B Corporations, for measuring the social responsibility of some of the most forward-thinking companies in the world.
Before The Triple Bottom Line, businesses solely measured their performance by using a traditional profit and loss statement. Of course, companies still use P&Ls – ours included. It’s one of the most important ways to measure a business’s health.
Even the Business Roundtable (an organization founded in 1972, whose current members are CEOs of major American companies including Jeff Bezos of Amazon, Tim Cook of Apple, and Mary Barra of General Motors), stated that the whole purpose of business was the pursuit of profits and stockholder returns.
But the world has changed since the mid-90s, and astute business leaders have learned a few things that have always been true about human nature. The Business Roundtable has reframed the purpose of a business to focus on stakeholder value as well as shareholder value. More to come on that later.
Instead of the singular focus of “profit above all else,” or the next generation “Triple Bottom Line,” I believe we’re now entering the age of the Quadruple Bottom Line: People, Planet, Profit, Purpose.
Some brands have an ugly purpose, and it’s our job to tell them.
Coca-Cola is one of the largest and most recognizable brands in the world. Today, the company is unrecognizable from the one founded in the late 1800s by the chemist John Stith Pemberton. First launched as a health tonic, Coca-Cola was later purchased by a business tycoon and went on to dominate the soft-drink market.
At the end of 2019, Coca-Cola reported $9 billion in revenue. The stock rose 22% throughout that year.
Today their purpose statement could easily read: “We exist to feed people brown sugar water,” as a friend of mine and ex-Coke Executive once put it.
This might sound crazy to say out loud, but the only way for Coca-Cola to continue to thrive is to return to its core purpose as a health-focused brand. For years Coca-Cola has invested heavily in acquisitions over innovations, barreling through the beverage market like a honey (or high-fructose corn syrup) badger. Short-term, the stock looks great. Long-term, my prediction is that they’re in for a rude awakening. As I often say, innovate or obsolete. The choice is yours.
A different thing happened at Microsoft.
When Microsoft launched the company’s first product, BASIC software for the Altair computer, its purpose statement under Bill Gates would have looked something like, “To automate the world in order to help organizations and their people maximize life.”
Then, Steve Ballmer took over for Bill Gates, and things changed. Profit & revenue became Microsoft’s sole purpose. Over time, their purpose statement evolved into, “Make money and be better than Apple.” As a result, employee morale and innovation tanked. Revenue and profitability looked great, but long-term their future was uncertain.
When Ballmer took over, Microsoft’s stock price was $58/share. At the end of Ballmer’s run, Microsoft had been hovering around $38/share… for all 14 years. Turns out a desire to “Be better than Apple” doesn’t incite inspiration in employees or investors.
Then, in 2014 when Satya Nadella came in as CEO, he immediately brought Microsoft back to their roots of innovation, people, efficiency. What happened? Microsoft’s stocks went through the roof. When Satya took the reins for Ballmer in 2014 stocks were at $38/share, and ever since, the stock price has skyrocketed to the all-time high of $154/share (at the time of writing this article).
And they’re not alone.
On the flip side, there’s a new generation of brands that are using their purpose to guide every business decision. In 2016, Patagonia was expected to reach $2 million in sales on Black Friday. So, they pledged to donate every penny to nonprofits that aim to protect the planet. People responded to their effort (a reflection of their purpose) and Patagonia ended up with sales of just over $10 million in one day. And they gave 100% of the profits away to protect the air, water, and soil for future generations.
Likewise, Airbnb built their entire brand on the promise of experiencing what it’s like to live somewhere new. They tapped into a relatable truth that most people have only ever lived in a few places, but have visited hundreds. Instead of positioning themselves as a holiday brand, Airbnb’s idea was to encourage people to live anywhere in the world, even if it’s just for one night. Thanks to their 2015 campaign, “Never a Stranger,” their global awareness across key investment markets increased by 17% (from April to July 2016) against competitors with far deeper pockets.
All of these messages come from a place of purpose. With every decision, these businesses are increasing brand value for stakeholders and shareholders.
A Turning Point with Purpose
Last year, the Business Roundtable changed its stance.
Nearly 200 top CEOs of leading companies around the world, including the likes of Apple and Walmart, signed a new declaration that redefines the purpose of a corporation to promote “An economy that serves all Americans.”
Larry Fink, CEO of Blackrock, a financial planning and investment management company, surprised shareholders with this candid letter in 2018. He argued that profit and purpose are inextricably linked. This is coming from the CEO of a firm that manages nearly $7 trillion in assets. He has consistently argued ever since that purpose is the animating force for profits and that companies with social good in mind will step into a leadership vacuum.
Although shareholders are still valued, delivering a profit at all costs is no longer the primary objective.
Having a clear purpose is just as essential, if not more essential, as having a business plan. The trouble is, profit is much easier to measure than purpose.
The value and return of investing in purpose differ from business to business and organization to organization. There is a return, but it’s up to us – the employees, the consumers, and the markets – to decide for ourselves how to measure the return of an organization’s purpose.