29 min read
Nov 2021

5 Steps to Put Purpose into Practice

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The Economics of Mutuality offers a practical five-step iterative process to unlock impact, innovation, and value creation benefits

By Yassine El Ouarzazi and Alastair Colin-Jones
Published September 2021 by WARCandEconomics of Mutuality

The previous article in this series addressed some of the confusion around the meaning and role of “Purpose” for business organisations. It proposed a distinction on the one hand, between the imposed duties of “Responsibility” on business to mitigate harms; and on the other hand, the opportunity to deliver economic performance through addressing a meaningful challenge of an external stakeholder. This is the impact-led innovation opportunity presented by “Purpose”. To be clear, both are good things to do but they are not synonyms.

We also laboured to highlight the basic, yet significant fact of recognising the inherent difficulty in embarking on a purpose journey. Firstly, because a purpose journey is a whole-company endeavour involving a range of functions and individuals from all levels of seniority. Secondly, because a meaningful challenge purpose will involve multiple external (to the company) stakeholders embedded in dynamic networks of cause and effect.

This chapter will argue that despite the high levels of complexity and challenge inherent to any significant transformation like a purpose journey, these are not good reasons to stick to only talking about it. The language of journey is helpful here: who wants to only ever talk about an epic journey and never embark on one, even when it sounds daunting?

It helps a lot to have some awareness of what lies ahead and to be equipped with the tools to deal with the terrain. So we will focus here on some practical tools and steps that can be taken to embrace the complexity and make sense of it. And argue that as companies set up teams and processes able to embrace and respond to that complexity, the impact, innovation and value creation benefits can be unlocked through business model solutions.

Introducing the Economics of Mutuality approach

Our practical approach relies on a five-step iterative process. While it is structured in a simple linear way, it is not intended to be implemented or deployed rigidly step-by-step. Each of the steps can and should be enriched by one another. We will go over each one of them and lay out objectives, tools and tips.

  1. Choose a “meaningful challenge” as a purpose
  2. Map the ecosystem around the purpose
  3. Select a small number of strategic pain points in the ecosystem (those most relevant to the purpose and the capabilities of the organisation)
  4. Design the right interventions (or prioritise existing ones) to address them
  5. Use the right metrics to track performance

Step 1: Choose a “meaningful challenge” as your purpose

We introduced the key concept of a “meaningful challenge” previously, highlighting the fact that selecting this type of purpose statement is an important and useful first step in setting up a purpose that can drive company strategy and value creation. However, we also made the point that this meaningful challenge did not need to be inspirational; it did not need to be about removing all ocean plastics, ending child labour in supply chains or similar types of laudable goals. These are of course legitimate meaningful challenges, but purpose can also be about addressing less inspiring goals like making travel or home improvement stressless experiences. What kind of meaningful challenge purpose a company or business unit adopts will depend on its industry, its leaderships, employees and values. The key is that it remains externally focused and be specific enough to be measured and actioned.

Source: Putting Purpose Into Practice, Chapter 8, Oxford University Press
Source: Putting Purpose Into Practice, Chapter 8, Oxford University Press

Step 2: Map the ecosystem around the purpose

Once an organisation has a meaningful challenge, it quickly realises there are many different stakeholders who either have an impact on or are impacted by the change they want to bring about. This network of inter-related stakeholders is what we call the “ecosystem” around the purpose.

In other words, purpose defines the boundaries or the ecosystem to be understood and ultimately orchestrated to achieve the desired systemic change.

In our pet food manufacturer example, where the meaningful challenge is to improve the healthy lifespan of cats and dogs, there are many different stakeholders that can have a direct or indirect impact on pet health – from the obvious pet owners, veterinarians and healthcare providers, to the less obvious universities who train them, the suppliers who provide the pharmaceuticals, nutrition, diagnostics, surgical tools, etc, to caregivers (walkers, sitters, groomers, day-care, trainers, etc) and other pet professionals like shelters or breeders.

Lawmakers and non-profit organisations may also have a significant impact on animal health, as do potentially insurance companies or technology startups. All such stakeholders are part of the ecosystem defined by the purpose of improving the healthy lifespan of cats and dogs but wouldn’t be for a business with the goal of selling more pet food.

Building a working knowledge of each one of these stakeholders and an understanding of their roles, aspirations, relationships and challenges – in other words, understanding the system around pet health – is a critical step in designing interventions that have a fighting chance of having a measurable impact.

In our example, the organisation quickly realised that barriers to animal health were not only physiological (ie, the kind you address with new molecules, new products, innovative nutrition, medicine, etc) but also socioeconomic (pet owners avoid the vet because it is expensive) and cultural (a surprising proportion of owners think cats do not need to ever see a veterinarian).

The mapping of the ecosystem helped uncover many factors of vulnerability and areas of fragility (eg, about 20% of puppies die before they are two weeks old). It became apparent that any significant change to pet health outcomes would require involving, partnering with, serving and influencing various other ecosystem stakeholders, some of which may be unfamiliar or even totally unrelated with the historical business model of the company.

Step 3: Select a small number of strategic challenges to solve

Understandably, we can hardly expect a single organisation to take on all the challenges in the ecosystem. The organisation must select a small number of systemic breakdowns to tackle to be able to focus its efforts into a meaningful impact.

This step also illustrates the key difference between responsibility concerns and purpose-driven strategy: the factor of choice. If the organisation’s existing business model has a substantial deleterious effect on people or the environment, they have the duty to address these issues; when they choose the systemic breakdown to tackle in the ecosystem, it is an opportunity for purpose-driven growth.

In the case of our fictive pet food manufacturer, it can choose to orchestrate better funding for pet healthcare, reduce litter mortality, improve the relationship between owners and healthcare professionals, etc. Each one of these desired outcomes can have a substantial impact on the healthy lifespan of pets and each one also requires the mobilisation of both internal and external resources and capabilities. Selecting the right challenge(s) to tackle is a strategic choice. Placing them on an Impact x Agency matrix can help make the decision but there is an unavoidable entrepreneurial and leadership dimension to this choice.

Other examples of successful and impactful ecosystem orchestrations can be found in the case studies of Mahindra First Choice and of Novo Nordisk’s Cities Changing Diabetes in the freely available book Putting Purpose into Practice.

____

Impact: How likely solving any of the challenges above would help deliver the purpose (improving pet health)

Agency: Ability of the organisation to tackle the challenge with its current resources and capabilities

  1. High-impact, high-agency pain points are opportunities for direct intervention by the organisation. These are important pain points (high impact) and the organisation can do something about them (high agency).
  2. High-impact, low-agency pain points should not be ignored or deprioritised (high impact) but since the organisation cannot act alone on them (low agency), they constitute important partnership opportunities. The organisation should then look within the ecosystem map for stakeholders with relevant capabilities.
  3. Low-impact, high-agency pain points are best described as distractions. It is tempting for the organisation to try to address them as they can do something about them (high agency) but it is where discipline should be applied in focusing on the high-impact pain points in order to allocate resources to solving the problems most relevant to the purpose.
  4. Low-impact, low-agency pain points can naturally be de-prioritised.
Source: Putting Purpose Into Practice, Chapter 8, Oxford University Press
Source: Putting Purpose Into Practice, Chapter 8, Oxford University Press

Step 4: Design the right interventions (or prioritise existing ones) to address the selected ecosystem breakdown(s)

By “intervention”, we mean anything the organisation starts doing, stops doing or does differently with the express purpose of addressing the prioritised pain points. Since these breakdowns have been prioritised in the previous step according to their impact on the purpose, addressing them should naturally contribute to delivering said purpose.

Designing an intervention means answering the following questions:

  1. How does it address the selected pain point(s) or breakdown(s)?
  2. Does it have the potential of improving it at scale?
  3. What capabilities and partnerships does it require?
  4. How would it contribute to the economic sustainability of the ecosystem?
  5. How would it contribute to the economic performance of the organisation?

The actual design process will differ from one organisation to the other, from one culture to another. We are sharing some our team’s best practices below:

  • Include both internal and external stakeholders in designing and testing potential interventions.
  • Use design thinking facilitation methods.
  • Use the ecosystem map as the key source of inspiration and include the research agency that built it in the ideation workshops.
  • Expect your initial intervention designs to fail. Identify quick, cheap in-market experiments that can be conducted to verify/falsify the key hypotheses behind each intervention as fast as possible so you can improve them iteratively and quickly.
  • Treat this process as a “culture shift” inside your organisation requiring solid change management.

We will use the Mahindra First Choice (MFC) case study to illustrate some key characteristics of successful ecosystem interventions.

  • It can be a simple product of service: Having identified the trust deficit between the buyer and the seller, specifically around the condition of the car, they have created a car inspection service that acts as a trusted third party and creates transparency for the buyer on the condition and quality of the car.
  • It can be a more indirect value creation: Through their car dealer franchise, MFC has been able to collect a large enough sample of transactions to be able to create a used car price benchmarking service, which then addresses the trust deficit between buyers and sellers, leading to a larger number of transactions.
  • It improves one or more relationships: The transparency created by the car inspection service and the car price benchmarking have improved both the buyer-seller interaction but also the buyer-banker relationship. The banker, having a more reliable estimate of the value of the collateral, can lower its risk and grant loans more easily to the buyer.
  • Each intervention does not have to be monetised but the combination of interventions needs to be economically sustainable: The car price benchmarking service was offered for free but it also removed a significant barrier to the growth of the whole ecosystem (trust deficit), leading to a positive economic outcome for many stakeholders: the dealers (more transactions), the banks (more loans) and MFC (more franchise royalties).
  • It is critical to identify and engage with partners to address the high-impact, low-agency pain points. MFC did not have the dealership management system it needed to support its franchisees and collect the necessary data to create the price benchmarking system. It engaged with a small, agile IT company that was looking to improve and sell their own point-of-sales system, and entered a mutually beneficial partnership where MFC was able to access an effective cloud-based point-of-sales system while being an extremely valuable stepping stone for its IT partner who could, through the relationship with MFC, improve the quality and relevance of its features and fund its growth. When the orchestrator identifies high-impact, low-agency breakdowns, it can look for potential partners who have higher agency on these pain points and find a mutually beneficial way to engage them, as MFC did with its IT partners. This emphasises the value of including external stakeholders in the design and testing of interventions.

The key message from this section is that addressing the right pain points in the ecosystem is the way to deliver both the organisation’s purpose and sustainable economic value simultaneously.

Step 5: Use the right metrics to track performance

Having crystallised a purpose that is an externally focused systemic change (a “meaningful challenge”), then choosing the key barrier(s) the organisation wants to address (ecosystem mapping, intervention design), it is crucial to be able to measure the business model’s performance as defined by its ability to “solve the meaningful challenge profitably”. That means being able to measure the organisation’s value creation (what improves outside of the company) as well as its value capture (growth, economic performance).

A useful framework to setup the right performance metrics is the OECD’s Inputs/Activities/Outputs/Outcomes/Impact framework (OECD, 2010 – The Practical Guide to Measuring and Managing Impact, EVPA 2019, proposes a detailed exploration of this framework). It proposes to track each key intervention or business model through different set of metrics:

  1. Inputs: The money investment, people, relationships and natural resources needed for the intervention.
  2. Outputs: The tangible immediate products from the intervention. This is where most traditional business metrics sit (reach, a product’s units sold, a service’s monthly active users, a value chain’s CO2 emissions, etc). These metrics are typically short-term and firm-centric.
  3. Outcomes: The change(s) resulting from the activities, measured from the perspective of external stakeholders. These metrics are typically medium-term and external stakeholder-centric. For our fictive pet food manufacturer aiming at improving the health of cats and dogs, for instance, outcome metrics could be:
    1. Puppy and kitten mortality rates
    2. The percentage of pets that visit a veterinarian at least once a year (preventive health)
    3. The economic sustainability of key actors of pet health (veterinarians, breeders, etc)
    4. The level of trust between pet owners and pet care professionals
  4. Impact: This is a metric for the meaningful challenge. In the case of the pet food manufacturer, this could be the healthy life expectancy at birth (HALE) or the prevalence of a chosen set of diseases. These metrics are medium to long- term and external stakeholder-centric. Impact metrics should also strive to capture knock-on effects (intended or unintended).
Source: Putting Purpose Into Practice, Chapter 8, Oxford University Press
Source: Putting Purpose Into Practice, Chapter 8, Oxford University Press

While it is very useful to track inputs and necessary to track outputs (to ensure the collective profitability of the interventions), an organisation cannot be purpose-driven if it does not track outcome and impact. An organisation that purports to improve pet health should measure pet health, one that purports to end homelessness should measure homelessness and one which purposes to improve diabetes outcomes should measure diabetes outcomes in its respectively relevant populations.

The key message from this section is to measure outcomes and impact, not only the usual inputs and outputs. Most organisations struggle to do that because it is not about them, it is about one or more external stakeholders and the measurement tools we typically use in business organisations are geared towards firm-centric performance. In the case of purpose-driven businesses, those seeking to “solve meaningful challenges profitably”, they cannot limit themselves to measuring the “profitably” part – they need to track the “solve meaningful challenge” part too, and those metrics are outcomes and impact.

Note that outcomes and impact are not intrinsically hard to measure, they are just unfamiliar. A properly designed and calibrated survey can measure intangible dimensions like trust and wellbeing, as many economists do on a regular basis. Partnerships with platforms, ERPs or specialised operational systems (eg veterinarian practice management systems) can provide very powerful proxies to many outcome metrics. The same way purposeful organisations often need to build partnerships to make significant change to the system. These same organisations will likely need to build partnerships to collect the right data and track their progress against their meaningful challenge.

Marketers orchestrating for behaviour change at scale

What does all of this mean for marketers? We think that ultimately it represents an exciting path for evolution and influence for the marketing function and profession. Broadly, we see two clear implications – the first is a contextual point that reflects on the positioning of marketing functions in large corporations and the second is more epistemological: how does the emergence of purpose change the purpose of marketing itself?

We mentioned previously the importance of being clear on what the company motivation for embarking on a purpose journey is and said that marketing teams are ideally placed in stewarding and ensuring that the cries of purpose-washing are justifiably silenced. But why are marketing teams so well-placed for this role? Simply, it is because they sit at the confluence of many internal and external players. There is a certain level of dexterity and agility required by the role in communicating between so many stakeholders, understanding internal cultures, values and ways of working while also engaging with partners and agencies of all kinds to run market research, campaigns and events. Key to this complex stakeholder management is being able to listen to and understand external voices, identify what resonates and translate that knowledge and understanding into actions. All of these skills are hugely important in addressing meaningful challenges and are pre-requisites, for example, for running the type of ecosystem mapping process outlined above.

It should not be surprising that a purpose transformation for a corporation would also have implications for marketing itself. If the purpose of the business is the extent to which it solves meaningful challenges and profit is its sustainability metric, then it follows that the success metrics for marketing ought to also be adjusted.

What is successful marketing? Our view is that successful marketing, regardless of purpose, is about affecting behaviour change at scale. Currently that might be expressed through driving sales of a product or service, having consumers switch from one brand to another. The implications of putting purpose into practice, however, would argue that this puts outputs before outcomes. Purpose changes the goal of marketing by expanding the definition of success terms of both type and content.

In light of purpose, success for marketers must be about driving behaviour change that helps to address the meaningful challenge of the business. If we continue with our example of the pet food manufacturer, a marketer from this company might discover (through ecosystem mapping) that a key part of improving the healthy lifespan of cats and dogs is increasing the number of times cat owners take their pet to the vet, indeed that cat owners are far less likely than a dog owner to bring their pet to a vet. There are many dimensions to the problem, from misinformation and misconceptions about good cat health, to very practical considerations that cats don’t like to travel much, especially when an overexcited dog will also be waiting at the veterinary practice. Successful marketing in this scenario would not be narrowly focused on increasing pet food sales or market share because the purpose has dictated the need for a totally different type of metric (eg the percentage of cat owners who visit the vet at least once a year). This effort also needs to be sustainable and scalable, ie, profitable. In this case, the role veterinarians play in recommending the right nutrition can lead to a natural increase in therapeutic pet food sales for the organisation.

In the context of purposeful companies striving to solve meaningful challenges profitably, the skills of good marketing in driving awareness, engagement, distinctiveness and ultimately behaviour change at scale, remain hugely relevant and valued, but to much more compelling and impactful ends.


Summary

  • Despite the high levels of complexity and challenge inherent to any significant transformation like a purpose journey, these are not good reasons to stick to only talking about it.
  • In light of purpose, success for marketers must be about driving behaviour change that helps to address the meaningful challenge of the business.
  • In the context of purposeful companies striving to solve meaningful challenges profitably, the skills of good marketing in driving awareness, engagement, distinctiveness and ultimately behaviour change at scale, remain hugely relevant and valued.

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