Take a stand: Why being neutral hurts profitability and engagement

In the iconic text Built To Last, Jim Collins and Jerry Porras conclude that companies guided by a purpose beyond simply making money returned six times more to shareholders than explicitly profit-driven rivals.

More recently, a Harvard Business Review Analytics report titled “The Business Case for Purpose” found “those companies able to harness the power of purpose to drive performance and profitability enjoy a distinct competitive advantage”. I could list a number of other reports that say the same thing, but I’ll move on. Google it.

In an era where political leadership has become an oxymoron, the importance of business taking a stand on matters that make a difference to the communities in which they operate and having a clear values-driven purpose has become particularly heightened.

Communities worldwide are turning to business leaders for a vision of the future that resonates — for solutions to the problems that matter to them. Consumers are voting with their wallets and their message to business is clear: tell me what you stand for. Beyond products, individuals are demanding businesses articulate a meaningful purpose and execute that purpose faithfully.

Without purpose, banks push insurance policies on people who don’t need them, soft drink manufacturers compound the obesity epidemic, car manufacturers falsify emissions targets and fast fashion made in developing-world sweatshops is fast-tracked to landfill. I could give numerous other examples of where a failure of purpose has undermined consumer trust and ultimately compromised organisational profitability, but I think you get the idea.

Consumers are turning away from companies that stand for nothing in droves, and the mass exodus has been anything but silent. In fact, not only is the revolution being televised, this time every consumer is a content producer, the distribution channels are numerous and free, and the reach of consumer feedback is effortlessly global.

Where corporate messaging might once have been easily controlled irrespective of a company’s values, the maturation of the social media phenomenon has turned the power dynamic between companies and consumers on its head. Consumers have been trained to tell business what they think — rate us for this, like us on that — and business leaders know consumers hold media power once thought unimaginable. As a result, content is now largely controlled by the crowd, not the executives.

As the generation that grew up on their mobile phones begin to assume middle- and senior-management positions — 75% of the workforce will be millennials by 2025 — this trend will only grow. To add further punch to this power, those millennials will also soon control trillions in intergenerational transfer from their baby-boomer parents. So, for corporate relationships managers who are still playing golf with the parents to secure their business … tick, tick, tick.

Businesses need to stand for something, or they will amount to nothing. There’s nothing interesting about playing in the grey. Neutrality stands for nothing and connects with no one.

With a clearly articulated and demonstrable purpose, the values of an organisation and those of its consumers, employees and investors have the opportunity to intersect. Within that intersection, a meaningful emotional connection can be created and the potential for enduring stakeholder loyalty enhanced. Also, people are willing to pay more for brands that align with their personal values and stand for something good.

As a consumer, I expect the companies I buy from to clearly articulate what they stand for and to make a positive contribution to the communities in which they operate. Their mission needs to intersect with mine. I need to know that my patronage contributes to a collective purpose that also benefits a challenged world.

The rise of equity crowdfunding is a particularly powerful example of what can happen when businesses that stand for something connect digitally to a crowd of investors that share their vision. Equity crowdfunding is empowering a new generation of ordinary individuals to back entrepreneurs whose corporate mission resonates with them. Where smaller investors once had very little influence on the private capital markets, equity crowdfunding platforms now enable those investors to contribute to a collective capital base which on mass can make a significant impact.

Companies from Qantas to Nike, Atlassian to Jamie Oliver, are using their brands to sing in harmony with a new generation of powerbroker: the millennial employee, consumer and investor. They know this is a generation who is voting on corporate leadership with every hard-earned dollar they spend. In this environment, there is no room for brand banality. Companies need to stand for something.

You can dismiss all of this as empty rhetoric if you like, but you do it at your own peril.

Article originally published by Smart Company

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