To keep achieving success on the market and to conquer the competition in the long term, companies need a clear corporate statement. This serves to steer all the energy in the organization in a common direction, and provides a fundamental compass bearing for corporate performance management. Such guiding principles are more important today than ever.
Since 1933, Illy Caffè has held its own in the espresso market against giants such as Nestlé, Lavazza and Massimo Zanetti, by pursuing one simple measure for success: It is motivated by the dream of making the best coffee in the world. To put it another way, it seeks to delight people, all over the world, who prioritize quality of life with coffee of the best possible quality. This determination drives the company to compete with the major players every single day. Its success impressively exemplifies that a clear understanding of the company’s core direction delivers an internal strength that enables organizations to hold their own even in difficult market environments.
The most significant waymarkers for long-term business success should be embedded in a convincing statement that should ideally encompass five core elements: The company’s contribution to a better world (purpose), its customer-related aim (mission), its future standing (vision), as well as its policies (guiding principles) and expectations for its employees’ behavior (values). Creating a corporate statement is a standard task in strategy building. However, frequently the reality is that statements are trivial and not applied in practice – so it’s no surprise that very few employees can communicate their own company’s corporate statement. And now we have finally reached the point where this is not a weakness that can be overlooked. Quite the contrary, in fact: Today, weak mission statements jeopardize the prospect of long-term market success.
CREATING PURPOSE AND GIVING DIRECTION
One reason for this is in the new demands faced by organizational structures. The traditional model of command and control, characterized by a pyramid of decision-making hierarchy, has become outdated. Instead, the high adaptability, speed of development, and customer focus that companies must demonstrate require that employees and teams play a much greater part in organizing themselves. Ensuring a consistently coordinated approach in an environment of this type requires a few clear and persuasive statements of the company’s purpose and direction; these should be reflected in the overall mission statement.
Companies’ missions are also changing. For a long time, managers have based their approach on the principle of shareholder value, which states that a company’s central purpose is achieving profit. American economist Peter Drucker, however, has concluded that profit may be a result but not the purpose of a company, leading to increased importance being attached to customer value thinking. In this mindset, the most important task for a company is to “create” customers; economically responsible action to prevent negative impacts – such as environmental damage and societal tensions – is a subordinate, secondary condition here.
Sustainable success requires a few
clear and persuasive statements of
the company’s purpose and direction.
FROM SHAREHOLDER VALUE TO EARTH VALUE
The current discussion about purpose now specifically places the outcome of action at the core of the corporate direction. The thrust of this earth value thinking is that it is worthwhile for companies to engage with their own impact on ecology and society. Doing so draws attention to new, long-term development potentials and facilitates greater added value for customers – thereby resulting in high levels of profit over the long term. This approach is not only of interest to strategically oriented investors. Many employees would also like to understand a deeper purpose in their work; for up-and-coming talented employees in particular, it is often more important that the company improves society than that it generates high levels of short-term profit. Purpose defines a company’s motivation, and it not only takes into account profit and customers, but also the contribution of creating a better world. For example, the purpose of contact lens manufacturer Cooper Vision is to improve vision worldwide. Its mission – that is, its customer-related aim – is to supply contact lenses to give customers “the best view” every day.
Many corporate statements are no longer relevant in the context of this new understanding. The pressure for a changed approach is coming not only from employees and socially engaged customers, but increasingly also from strategically oriented investors, driven by the concept of long-term value. In view of these developments, we should critically question existing corporate statements – and make them the guiding star in corporate performance management.