The evolution of business purpose

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As we discussed last week, businesses benefit from having a clear purpose and sense of responsibility to the world around them. Today, we will dive deeper into how purpose helps business by looking at the original arguments for purpose in business and how they have evolved.

Rosabeth Moss Kanter, professor at Harvard Business School, has proposed that a new type of company is emerging in the 21st century that is transforming how business is conducted. Businesses that are driven by values and rely on them when making strategic decisions are coming to the forefront. As a result of this value-driven strategy, employees are more engaged, more productive and more innovative. Moreover, companies gain a competitive advantage as they are able to attract customers who share their values and build their brand credibility.

Kanter also posits that “more important than philanthropy is operating a business that brings value to the world.” She quotes Daniel Vasella, CEO of the company Novartis, who says that businesses can best serve society by continuously bringing innovative and profitable products to market, instead of making philanthropic donations that no other entities can make.

We’ve taken a look at how scholars and case studies view the relationship between corporate purpose and profits and provide insight into how purpose can drive profit. Like Kevin says in his whitepaper, “Companies should embrace a higher purpose by serving and creating distinct value for key constituents. Only when they do this authentically, operationally and comprehensively, will their long-term financial objectives be realized.”

A colleague of Kanter’s, Michael Porter, expanded this argument in his paper “Creating Shared Value.” In this paper, he argues that the shift in business thinking towards value-based strategy creates new opportunities for competitive advantage, profitability, and social impact, all in line with what Kanter was saying. However, he does further suggest that all corporations and capitalism itself must be reorganized to serve rather than compete against societal impacts, like reducing obesity or lowering carbon emissions, and argues that profits should not be the primary corporate goal, but rather the byproduct of an effective implementation of a purpose-based system.

Since then, scholars and experts have continued to discuss this issue. Should companies focus on direct social impact, or is the best way for a business to impact the world around them to attain market and financial success first? Is philanthropy a successful method of giving back to the community, or have these efforts been ultimately harmful to the economic and social interests of the company?

Reviewing the evolution of business purpose gives us clues into its future. At the moment, the evolution of business purpose is full of question. It will take many years of research and tracking to see how current practices affect the greater good, and what kind of effects they have. Let us know: what are your predictions for the future of business purpose?

Photo credit: photogeek133 via Flickr Creative Commons

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