Tuesday, May 19, 2009

Purpose Driven Profits

Nice article in the Statesman titled, "Is a purpose-driven company more likely to profit?" "There's one ingredient this company must have to be successful: a purpose."

For those of you who skipped Jim Collins' book, Good to Great, it was a research paper on common traits that 11 companies had. "Making the transition from good to great doesn't require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner." In other words, a purpose driven company.

You know how I say "Stick to Your Knitting"? Well, in Good to Great, it was defined as the Hedgehog Concept - one product or service that leads your company to outshine all competitors, but it has to be a something you are passionate about. Seth Godin describes it in The Dip as being Best of Breed in a self-defined category, kind of like all those JD Power awards. If you look carefully, the categories are very tiny.

Jim Collins in the Inc. magazine last month said something eye opening: "There are thousands of start-ups, far fewer successful start-ups, fewer still that become successful companies, even fewer that go from successful company to enduring company, and a tiny handful that become great, enduring companies." The odds of having a sustaining business is small. And if you look around today, so many companies are collapsing or merging (but merging 2 declining entities is dumb, except to the bankers, shareholders, and bonused execs). What do you need to be doing to sustain your business?

According to Jim Collins, look to "the leading entrepreneurs of the past three decades: Steve Jobs, Ken Iverson, Herb Kelleher, Anita Roddick, Yvon Chouinard, Howard Schultz, Jeff Bezos. What jumps out at you as being consistent across all those people?"

"The larger purpose of what they were doing."

"Right. They defined success on a very big scale. For Steve Jobs, it was about much more than selling computers. For Yvon Chouinard, more than clothing. For Anita Roddick, more than cosmetics. For Howard Schultz, more than coffee. For Jeff Bezos, more than online retailing." [inc mag, page 3]

The steps you need to take starts with examining your company.

"Do you have a culture of people who A. share a set of values, B. have very clear responsibilities, and C. perform? Those who build a culture around those ideas are building upon something that is largely unchangeable." [inc mag, page 3]

I know what you are thinking: stay small then. Hunker down. Possibly. It's a challenge to hire employees, manage them, stay the course, and run the business. And sustaining the corporate culture is difficult. Zappos does it - and describes how in detail in this INC magazine article. But the truth is: "If you're doing something you care deeply about and if you believe in it, it's impossible to imagine not trying to make it great."

"In a downturn, Spence says, it's the companies that are grounded in a purpose that will survive, while the businesses built only for profit will fail." [Statesman]

You have to wonder if what Collins wrote is true since - of his 11 company picks: Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, and Wells Fargo - Circuit City and Fannie Mae exploded. Gillette is now a part of P&G. So 3 of 11 are in trouble. Could it be that they exploded because they lost sight of their purpose? That they chased profits quarterly instead of sticking to their purpose. Jim Collins talks about Wells Fargo here and how its people and culture are saving it.

This is heady stuff that most people don't think about. Who schedules time to think about their company, its purpose, future, employees, meaning? Not too many. How many small businesses have a Board of Advisors? Not many. (FYI, I was just chosen for one for a local network security company).

Look, if your business isn't fun to run anymore, you need to read Howard Mann's Your Business Brickyard. (http://www.howardmann.com/book).

If you are having fun, here are Jim Collins 10 Things to To Do list to move from good to great.

Should we be covering this stuff on a tele-seminar or at a FISPA Meeting or at ISPCamp?

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