Hands down, there is no one that I enjoy talking to about disruption theory more than David Roberts. I’ve had the benefit of working with him for the last five years and, no matter how many presentations I hear him give, I always walk away feeling inspired and with at least one new insight about two of my areas of passion — purpose and strategy.
Last week I had the pleasure of sitting in on one of his sessions and, amidst the number of his examples of companies that were both disruptors as well as disrupted, one common theme emerged for me. The companies, and industries, that got disrupted were not thinking broadly enough about the service they were providing to their customers. Instead, they were too focused on optimizing for what industry they believed they were in, e.g., being in the insurance industry vs. providing peace of mind and security to their members.
If you believe you are in the auto insurance industry, you are going to look for opportunities to become a better auto insurance company. Even if that is an aspirational goal, it is still very limiting. However, if you believe that you are in the business of providing peace of mind and security for your customers, you are going to seek new ways to fulfill that purpose, which will uncover a myriad of new opportunities, only some of them limited to auto insurance. These new directions can unlock immeasurable value and carry you forward into an era in which the auto insurance industry, as we know it, may cease to exist due to the advent of technology-enabled cars and autonomous vehicles.
It seems like a subtle messaging difference, but it is one that I think is at the heart of why some companies are primed to weather disruptive forces, and some have big targets on their backs. So I decided to do some research into the link between purpose and disruption and came upon this excellent study from the EY Beacon Institute.
The study categorized companies into three groups as it relates to purpose:
- Prioritizers (P), companies that already have a clearly articulated and understood purpose (39% of companies surveyed);
- Developers (D), companies that do not yet have a clearly articulated purpose but are working to develop one (48%); and
- Laggards (L), companies that have not yet begun to develop or even think about purpose (13%).
The results of the study show that there was significant alignment across all three groups on the importance of purpose. The results of these two questions demonstrate this:
- “Clear purpose is important motivational/aligning element of successful strategic transformation.” (% that agree with this statement: P=94%, D=91%, L=93%)
- “Clear purpose is a good guide/inspiration to future innovation of products and services.” (P=92%, D=87%, L=85%)
However, there is a significant gap that exists between the Prioritizers and the Laggards when it comes to executing on innovation and transformation, as demonstrated by the responses to these two questions:
- “My business is focused on innovation and continuous transformation.” (P=62%, D=46%, L=26%)
- “My business is successful with innovation and transformation efforts.” (P=53%, D=31%, L=19%)
While success with transformation and innovation efforts does not necessarily equate to becoming disruption-proof, I think it speaks to the skills, agility, and perspective that an organization needs to succeed in the future and to best shield itself against unforeseen disruption. As I read through this study, there are many questions that I had about the potential bias that respondents may have about their organizations, the relative quality of the purpose statements that different organizations may have, the steps they are taking to integrate them into the day-to-day ways of working, and just how broadly vs. narrowly focused they may be. However, the clear message seems to be that having something is better than nothing, which comes across in the fact that the Developers appear to be accruing benefits just by the fact that they are working on codifying a purpose.
One final takeaway for me was the response to this question about the single biggest barrier to activating purpose in their organization:
- Poor communication from leadership (P=8%, D=10%, L=24%)
This response does not surprise me whatsoever. After all, an organization’s purpose is fundamentally an inspirational communication from leadership about what is essential to focus on and prioritize. Leadership teams that have poor communication skills would seem to naturally miss the importance of purpose in motivating their teams and preparing them for the future.
For many years, my advice to senior executives has been to focus on clarity of purpose before beginning any digital transformation or other significant strategy and innovation work. The research in this EY study just further bolsters that perspective and adds some further ammunition and nuance to the discussion. I’d love to see a follow-up study that focuses on measurable business performance across these same companies — self-reported employee perspectives may not always factor in actual results. However, if your organization is a Laggard, I would not wait for the results of another study before I started taking steps toward establishing a purpose for your organization. While having a clear purpose is likely not sufficient for avoiding disruption, I wholeheartedly believe that it is a necessary condition for long-term success.