The power of purpose in business - keynote
There's a received, wisdom. For. Over. Something, like a hundred years in, the chef industry, in the cooking industry, and that received, wisdom was, that you seared meat, in. Order to seal in the juices. And. Whatever, you were this was repeated see ever meet because it seals in the juices whether. You were learning your craft at, a culinary, school whether, you're watching Jamie, Oliver on TV, they, would all say the same thing, this receive wisdom was. Everywhere, until a, few years ago when, a, chap, called David Magee ended up writing a book that. Looked at the scientific, evidence for everything, that we fought that we knew and, what. He said in his book was actually searing, meat doesn't seal in juices. So. Wrong there's. No science behind it if you. Study. The weight of a piece of meat before, and after when, you've cooked it lost, a lot, of weight liquid. Had left. He. Said what the searing actually does do is he adds flavor and now. You will find almost nobody talking, about searing, meaning. That you sealing juices they understand, that the purpose of searing is to add flavor. But. How do you get it that a whole industry, come. To accept, a fact and, yet. When it turns out to, be completely, incorrect. Now. We're talking today about the purpose, of business and. We've. Believed, for. Many decades, that we understand, the purpose of business and. Yet. We. Have the first few, large. Businesses, the, first few small businesses, that, are starting to challenge that received wisdom you, know what that received wisdom is you've heard it referred to already today you see Milton Friedman, on the slide who. Started. An ideological. Viewpoint, that says for business of business is business but save it maximizing. Shareholder value. As you've already heard today is. The. Primary, responsibility. Of business. Now, that's not a scientific, statement like the searing of Metis. Nevertheless. It, is a statement that holds, itself to be self-evidently. True and, others, took his words further and said. Things like where, the interests, of society, and. Business. Are aligned. Then. The chief executive, of the business had, permission to do good things. But. If the self-interest, of society, and business were. Not aligned. Then. The chief executive, had no right. To. Pursue, SCI societal. Benefit, because. He. Or she owed, their duty, only. To shareholders, and. That. For me remains. The. Prevailing. View, that. Remains. The. Searing, meat. Equivalent. In the, world of business underpinning. It is an assumption is the assumption that business, stands apart from society. Society, is over here it has is its dress business. Is over here has, its interests.
Only, When were to come together, can it be a meeting point but, this particular, view. Has, consequences, when, you take that business stand alone but it's all about the dollars but, it's all about the shareholder, value and it's, not about the context. Then. We see consequences, we saw the consequences in the Philippines, when, the, logging industry contributed. Year-on-year to. Positive, GDP growth up until the point when. It's unsustainable. Basis, men but it collapsed. Just. Like the fishing industries in a number of places particularly, in Canada the. Fishing industry was, defended, that the money talks, until. The, fish were gone and the industry, collapsed, and we, saw it of course most recently, with. The financial, crash. Where. The money believed. But, it had abolished four laws of gravity, but, it had its own logic and we found of course that. That wasn't true the, fact is that context. Is everything and, the. Drive for businesses, to, rediscover. A new purpose. For business. Other, than simple, maximizing. Shareholder value, is because. Business, does not exist outside of a context, it is an integral. Part of it and what is that context, first. And foremost that context, is a healthy environment because. Valleys be super, system, that we are all a part of if the environment, fails we. Will struggle to make a profit, indeed, we probably won't care. And. Then. Within the natural environment, we have broader society. Because. Of course businesses, do not stand apart from society, we, are a part, of society if your. Business interests. Are not aligned with society, then. You have a problem, now. In the past we responded, to that dilemma, with what we call Co threat social responsibility. Various. Practitioners. Have struggled, to find other names that they were happier with but the key principle, was, that there were things that businesses, did to, seek to mitigate, the negatives, and to, accentuate the positives. From. Their pursuit of maximizing, shareholder value. So. The goal remained, the same that. You try to deal with consequences, you became aware of consequences. If you're. A company that deals with seafood, you understand, that. You have no product, if there are no fish it's, a simple, an equation, as that so. On the one hand businesses, create impact, under. CSR. They seek to mitigate, the negative impacts, and hopefully, accentuate, positives. Businesses. Also have capacity. To solve problems. Wider. Problems, that society faces and, so, where, they. Can afford to do so where. It's, in line with their business interests, they, can bring things to the table they can help solve problems they. Can create innovation.
But. That is much less powerful, if, it's. A sideshow, we. Know that businesses do, best in, a healthy environment as, part of a healthy society it is entirely, enlightened. Self-interest for, businesses. To define their purpose, as making. Money by. Contributing, to the health of that content, but they find themselves in you. Can ask yourself what's the purpose of business rather, you. Should be asking what is the purpose of your, business. Because. It's something that you define, for yourself within, the parameters that you have and even makes a difference to the kind of business you are the, kind of choices you make and the kind of dilemmas, you face let. Me give you an example this is a picture of a London Underground how, many of you been on the London Underground. Now. A few years ago there was a problem on the London Underground which is that people would try to get on to PC trains like the one you see on the slide and the, doors would close on, people before they managed to get on the train why, did that happen it happened because the company, was trying to, manage itself well and it, was being incentivized, to, make sure that trains ran on time because. After always a good thing if trains run on time isn't, it we all hate it when the trains are late, so. The drivers, were incentivized, to run the trains on time they, weren't incentivized. To make sure the passengers were on the train before they left the station. So. They shut the doors at, a time when it would mean that they would be able to stay on time and lots, and lots of people were left on the platform, arguably. That is a company, whose, absence of purpose. Whose following, of processes. That are sort. Of intended, to do the right thing but haven't really been connected, to impact. Means. That they end up doing something that hurts people rather, than helps them contrast. That with the story but. I'm sure you will have heard from from one, company, that does stand out as a, purpose, led business, Southwest, Airlines, whose. Stated purpose, is to connect people with the things that they care about and, also. Has a values, base where. They look after their people, first, and foremost and. There's. A story about the four. Passenger, of a woman. Whose. Plane was pulled back to the gates having, just been about to take off and, she. Was pulled off the plane and she assumed that something had gone wrong that maybe. She hadn't paid for a ticket correctly, or something and she. Was taken into the next room and she was informed, that her son. Was. Lying in a hospital in a coma. And. Without. Being asked to the company, had pulled her off the flight that she was going to they, had booked her on a flight to, Houston where, her son was they'd. Arranged, accommodation. They made a sandwich, for her to to, have with her when she'd left the flight they. Just did, that because. Their. Purpose, as a business, to, connect people to the things they care about it. Was obvious, to them that as soon as they heard that one of their passengers, had, this going on they, needed to go the, extra mile, and this was four people on the ground who.
Made These decisions, because. Where you have a company, that knows its purpose, for, people who work at all levels of the business know. What they're meant to do when, they're faced with that sort of dilemma they don't need to wait for the chief executive to. Tell them, so. We've seen a number of businesses, now, that, have stepped forward to say we are not, just about maximizing. Profit, actually. We, are here to do something novo, nordisk that. Says that its goal is to defeat, diabetes. Will. It put itself out of business even achieve that goal no, probably not it would address a new goal but it knows what it's here for it's, not selling. Drugs to simply ameliorate, symptoms and, to, make a profit it's. Not price, gouging, in the way that we've seen some, of the less responsible. Pharmaceutical. Companies, do particularly. In the u.s., it's. Not about maximizing. The dollars in that way it's about solving, a, universal. Problem that, is facing, humanity. Patagonia. Has a. Free, parte statement, arguably, the last party's for purpose statement, to. Use business to inspire and implement. Solutions to. The environmental, crisis, the. Way they go about their business for, way they market, their business is all in line with, that purpose, because. When we come to what is the purpose of business and when you get people standing, here and saying it's. All about maximizing. Shareholder, returns. You've got to remember this, isn't science. Even. When it's science, we can get it wrong like searing, meat but this is all. Invented. What. Is the purpose of business it's, what we as a society. Decide. That it should be and. I don't know if you're familiar with this this is a puzzle. That you probably got shown as a child where, the, challenge, is to join up all of, the dots using, just four lines where. The pen never leaves for paper and if. You see this puzzle for the first time you sit there and you puzzle out trying, to work out how you can do these and. And it's impossible, of course so long as you do whatever, all, of us instinctively. Try to do which. Is to join up the dots while staying within the. Square. It's. Impossible, to do if you do that of, course the, solution to the problem is you don't stay within the square you, go outside the square there are empty spaces calling. For lines. Some. Reason, we draw a box from, what we see and we imagine that's a constraint. We. Now have a constraint, which is that we have to maximize shareholder profit. It's all, invented. We. Know that, business has to be profitable, to survive we, want sustainable. Successful. Businesses, getting. A fair, return. By. Adding, value to society is, a business, that, many people are deciding that they want to be in and. It's not as though doing. The right thing doesn't. Work in, terms of creating a successful business. Purposeful, brands according, to research. Two. Years ago got. 46%. Higher share of customers, spending, what. Was they referred to as consumer, wallet it. Outperformed. The stock market, by one hundred and thirty three percent and. Purposeful. Brands are known to. Attract and retain staff, better, especially. As we've already heard amongst. The Millennials, but, you know that. Could change for Millennials the, over next generation, that follows Millennials maybe they won't feel the same, ultimately. You, as businesses.
Pragmatic. Entities, four have to look and see the world the, way that it really is, have. To look beyond what's going to appeal merely to the consumers, of today, because. The environment. Is about, science, and the, environment doesn't. Give a damn about our. Consumer. Sentiment. It's. Entirely, possible for. Us. To go over the edge of the abyss pointing. Fingers at each other and blaming each other as we go and that, clearly is something we're trying to, avoid now, it's not to say but all you need is a business, but adopts, a purpose, and then, success, inevitably. Follows. You. Have to be clear sighted, and evidence based on what, your purpose is and whether, it's needed, you, have to be able to have clarity, through, all the levels of your business, by. And large research, that looked at does purpose, make a difference, to the success of business found. That it did but, only if, that purpose, was driven through all levels of a business particularly. The middle management, layer if, a, middle management understand. The clarity, of purpose and are signed up to it really, makes a difference to how well you perform in the stock market, and Beyond and also, generally skill in execution, if you run disastrous, marketing, campaigns, your, purpose, won't help you if, you, treat your people incompetently. And they leave you then, the fact that you have a wonderful purpose won't, stop them. Final. Force is this. We. Have seen Empire's, decline in. The history of our, planet we. Have seen great empires, rise up appear to be completely. Beyond, question, powerful. Unmovable. Unshakable. And then. Gradually, they rot and they, disappear, this one is from Venice. The, great trading. Empire but it was. Declined. Why. Did it decline, it declined, when. It stopped, paying, attention, to. What was changing, in the world around it when it became too comfortable, that. The reality, it knew, was. The only possible. Reality, and, while it did that new, realities, new trade routes new powers, were forming, around them and they, declined and, fell the world. Is, changing. The. World is changing, very quickly for. Businesses, of tomorrow. We'll be the ones that understand, that the business model. Needs. To change in a way but he's fit for purpose with. That new reality and, a. Lot of those who appear right now to be unmovable, unshakeable, unquestionable. Powerful. They, have every opportunity to, go. For way of the empires of yesterday, and, it sees an opportunity when these empires, fall, varies. An opportunity. For others to, succeed in, their wake and, that's the opportunity that you have to consider for yourselves from, this point thank you. We. Have time for a few questions, I'm. Going to ask madam, first. Thank. You very much both of you for a very inspiring, talks. But. Isn't purpose, really another word for. Again. PR. How. Can we distinguish between. Businesses. Having a purpose, that includes, social impact, with. A. Company, having another, way to make. Its. Name shine and the media and. Things. Like that if it isn't at the roots of your purpose, as a business, then it will show if, it's. Simply a marketing, ploy then people will sniff out out relatively, quickly because. As soon as you're faced with any kind of dilemma you will, choose according, to the bottom line as according to your purpose and that's what we see, when we see businesses, that, are seriously. Committed, to their purpose but when they face a dilemma they do the right thing by, that purpose, rather than what seems to be the. Natural. Thing I mentioned Southwest Airlines, I mean, you couldn't get a bigger. Example. In September of 11th when suddenly almost nobody was flying anymore the. Fact that they their. Value, said that they valued. Their people, but, they stood by their people they were the only US airline but didn't lay off large. Numbers, of people, in the immediate aftermath of September 11th, and they, said we can't do this forever but these, are our values our values our values we, will stand by them for as long as we possibly can and. Ironically. It meant that they were the only American. Airline that stay profitable through that period and they recovered quicker than any other because suddenly they had a workforce, that was highly, motivated, to succeed because. Their company it stood by Verma delivered, on its promise and. They wanted to do the same but. Nobody knew that was gonna happen when Southwest, Airlines did it they did it because it's the right thing to do let's, entertain the other argument, that you started with which is really, if if a business does what it does best, you.
Talked About Milton Friedman so if a business concentrates. Only on doing. Business on. The, purpose, of making money legally. Within. The interests of the shareholders, so. They are not did not interfere and, the business of others they not interfere, and what the school does they don't interfere and what a hospital, does they don't interfere what government does a government. Does government job, was properly a school does school stuff most, properly in university does University stuff most, properly so why would any why would a business, interfere. In two areas which, they are not experienced, them they, are not really the. The, most. Legitimized. Party, to to be important, so. I. Think, we s'more the question about corporate social responsibility. Generally veneers about purpose, in business because where. You get a purpose lay business, they're going to focus on something that they can do excellently, well that. Will have a social. Impact as well but, let's just take a question on on the way that you framed it. Businesses. Only have. A, role. To play where, they bring something to the table above, and beyond what the other actors have well, they don't have these democratic, legitimacy what, they don't have is. Overall. Experience. On the ground of that social workers might have and so on what, we do have is they, do understand, how to manage change. Better probably than most other institutions, they do understand, innovation. They, do bring resources to the table there. Are places. Where those, things have something to offer they, make a contribution. It isn't about them taking over it isn't about them thinking they have all the answers and all, of these other agencies know, nothing, it's. Been about businesses, bringing to the table what they can bring in, order to do what they can do better and make a contribution but. Generally, in the sort of examples, you're talking about that's in partnership, with others so, it isn't about interfering. It's about becoming a partner.