Evaluating the Purpose-Driven Business
November 7, 2019
The essence of capitalism in today’s world can be summarized in the purpose-driven business as defined by the 180 CEOs of the Business Roundtable, which recently updated the “Statement on the Purpose of a Corporation.” The statement’s conclusion reads “Each of our stakeholders is essential. We commit to deliver value to all of them for the future success of our companies, our communities, and our country.”
The purpose-driven business was one of the recurring topics at the ANA’s 2019 Global CMO Growth Summit, gathering of 200 of the world's most connected chief marketing officers in Orlando earlier this fall. Accelerating growth was the other recurring theme. Accelerating the growth of the purpose-driven company raises the question: how do brands establish the baseline and evaluate the progress being made to reach new heights?
It was evident at the ANA Summit that most businesses are already committed to the purpose-driven business model. For example, delighting your customers is a prerequisite for success in today's economy. Hiring well means hiring fairly and training your employees on how to be brand ambassadors. Today's corporation needs to be a good corporate citizen and support the local communities in which the business operates. The company also needs to treat suppliers ethically and fairly or risk damage to their reputation. How does management evaluate the success of such an ambitious corporate initiative with so many intangibles to evaluate?
The purpose-driven business, with its multiple stakeholders, I believe, is akin to a corporate brand business strategy, and the measurement models should apply. Corporate brands serve numerous stakeholders through the lens of business processes, culture, and behavior, as well as communications. When a well-branded company is optimally managing its process, culture, and communications, the ultimate result will hopefully be happier and better-informed constituencies as well as a higher premium, as defined by the cash-flow multiple, for its stock.
Unlike traditional product branding, which targets a specific consumer demographic with one primary marketing message designed to move that consumer to purchase a product or service, corporate branding addresses many different stakeholders with a multitude of demographics. Evaluating the emotional responses of various constituencies to a purpose-driven campaign is distinct from product campaigns. The processes of measuring the effectiveness of purpose-driven business strategies need to be different, as well. The method of valuing and managing a product brand is singularly specific to that particular brand. The process of measuring, valuing, and managing the purpose-driven company involves understanding the impact of the purpose on the company as a whole and on the audiences it serves.
A purpose-driven corporate brand strategy is one that attempts to craft and manage important messages to multiple key constituencies simultaneously. To be effective in promoting a purpose-driven company requires the CEO to understand that communications to the various audiences need a holistic message that can be interpreted by each audience from that particular audience’s self-interest. Therefore, it is essential to identify those constituencies and to measure them consistently through benchmark tracking research if the plan ultimately is to manage them for improved performance.
A corporate brand strategy acts like a radio beacon sending a signal directly from the company to each specific constituency. Each audience will identify with that portion of the message that relates to them. The most effective and efficient message is one that is clear, concise, and consistent over time. Through a long-term quantitative research study called the CoreBrand Index, I have learned that an audience of impartial observers serves as a surrogate for these varied audiences that may be otherwise difficult to track efficiently and consistently.
Common sense dictates that every company has critical audiences that are vital for survival. Typically, these audiences include customers, owners (shareholders), employees, prospects, community, media, partners, and the financial community, but they can consist of any audience that is appropriate to the corporation.
Purpose-Driven Brand-Building
When companies launch a purpose-driven campaign, most are designed to help position a company for a new initiative such as sustainability, green, or other initiatives. These campaigns are, in essence, corporate campaigns and help to clarify a company's position and will consequently also generate employee support and customer loyalty.
From an investor's perspective, a company communicating a purpose-driven strategy will need a clear message from management about the business benefits and implications of the expense. Companies that are already actively managing their corporate brands might have a better chance of stock appreciation due to expected improvements in future cash flow if the connection between purpose and business strategy seems logical and uncomplicated.
Tying purpose to valuation is possible with the quantitative market research data and a regression model to identify the drivers of the company's cash flow multiple. In previous studies conducted, it was possible to determine the impact of corporate social responsibility on the company's cash flow multiple. Identified as the percent of the explainable market value above what would be expected for a company of equal size in the same industry.
The ANA’s CMO Growth Summit was a success by any standard. It exceeded my expectations by challenging the attendees to take action on brand innovation, to drive value, leveraging technologies, data, and measurement for driving growth, energizing talent, and making a positive impact on society! My purpose is to encourage companies to measure, value, and manage the intangible assets associated with the purpose-driven business model to capitalize on their achievements.
Dr. James R. Gregory is chairman emeritus of Tenet Partners, a global brand strategy and innovation firm based in New York City, and is currently working on a new book entitled The Theory of Intangible Capital.
The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.