If purpose drives profit, what drives Amazon?

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“Purpose-driven companies make more money, have more engaged employees and more loyal customers, and are even better at innovation and transformational change.”

So said the Harvard Business Review in an article titled, 'The Business Case for Purpose.'

The Financial Times shares this perspective, arguing that companies with a purpose beyond profit tend to make more money.

In a survey titled “The Business Case for Purpose”, a team from Harvard Business Review Analytics and professional services firm EY’s Beacon institute declares “a new leading edge: those companies able to harness the power of purpose to drive performance and profitability enjoy a distinct competitive advantage”. This is a reprise of the findings of Jim Collins and Jerry Porras, who in 1994’s Built to Lastfound that between 1926 and 1990 a group of “visionary” companies — those guided by a purpose beyond making money — returned six times more to shareholders than explicitly profit-driven rivals….

…While noting the impact on the bottom line, commentators tend to assume the performance jolt comes from hard-to-pin-down qualities such as inspiration, leadership or the motivational effect of working for a good cause.

This thought is not new to the HBR, and despite the fact that the quarterly driven, short-term-profit-results world that drives so many of us is filled with Harvard graduates, the HBR further states in the article 'How Great Companies Think Differently' (from Nov. 2011):

Traditionally, economists and financiers have argued that the sole purpose of business is to make money—the more the better. That conveniently narrow image, deeply embedded in the American capitalist system, molds the actions of most corporations, constraining them to focus on maximizing short-term profits and delivering returns to shareholders. Their decisions are expressed in financial terms….

Institutional logic holds that companies are more than instruments for generating money; they are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them….

Rather than viewing organizational processes as ways of extracting more economic value, great companies create frameworks that use societal value and human values as decision-making criteria. They believe that corporations have a purpose.

Clearly, the notion of purposeful companies being more successful than those that are not is way more than philosophical, academic posting.

Here’s Fast Company’s position on it — 'Why Purpose-Driven Companies Are Often More Successful':

Starting and surviving in today’s economy is hard, but the companies that figure it out have something in common: the pursuit of purpose, alongside the pursuit of profit. A purpose mobilizes people in a way that pursuing profits alone never will. For a company to thrive, it needs to infuse its purpose in all that it does.

An organization without purpose manages people and resources, while an organization with purpose mobilizes people and resources. Purpose is a key ingredient for a strong, sustainable, scalable organizational culture. It’s an unseen-yet-ever-present element that drives an organization. It can be a strategic starting point, a product differentiator, and an organic attractor of users and customers….

…In the book Corporate Culture And Performance, John Kotter and James Heskett show that over a decade-long period, purposeful, value-driven companies outperform their counterparts in stock price by a factor of 12. In the absence of purpose, a company’s leadership is likely to have greater difficulty in motivating employees and putting the company on the course to success. Customers are likely to have difficulty connecting with the company. With purpose, a company can create positive value that is far greater than the sum of its parts.

Nor was this a new POV for Fast Company, which argued back in 2013:

When 87% of global consumers believe business should place equal weight on societal issues and business issues, the better a brand brings its societal purpose to life in everyday operations, the more successful both business and social impact will be….

A look at the Meaningful Brands Index, a new metric of global brand strength that analyzes human well-being with brands at a business level, shows that brands that positively affect humanity outperform the stock market by 120%. So whether it’s CSR, sustainability, community giving, employee volunteering, cause marketing, or foundation alignment, the more good works your values support, the more favorable the brand.

If your brand story does not authentically and meaningfully contribute to the well-being of society or the environment, your brand will not be viewed as important. In fact, the Meaningful Brand Index report found that 73% of all brands could disappear and consumers wouldn’t care.

And, in pursuit of that elusive so sought after Millennial audience conventional wisdom, analyst findings survey after survey “prove”:

Giving back fits into the Purposeful pillar in the Millennial Mindset. This means that millennials are looking to brands to help them add good to the world. By focusing on impacting the world as a primary offering, and selling a product or service as secondary offering, a company can win big with Millennial Mindset consumers.

Nota bene for another time…most Millennial studies now caveat their findings with the notation that these trends are not limited to a demographic segment…HUH? See Generation World…

Back to purpose…

One last citation…a compendium of quotes from a variety of CEOs of major corporations from which I will quote just one and leave it to you to read the others, to be impressed or cynical, as the case may be:

“An organization’s culture of purpose answers the critical questions of who it is and why it exists. They have a culture of purpose beyond making a profit.” – Punit Renjen, Deloitte

All of which leads me to the company run by Jeff Bezos, who, briefly last week, held the title of the world’s richest person, having passed Bill Gates as the stock price of Amazon surged and then fell leaving Gates on top by a mere billion dollars…a day’s sales…

Amazon, from whom multiple boxes arrive at my home every week, is possibly the world’s most successful company, potentially becoming the world’s first trillion-dollar-valued company, according to one analyst’s prediction, as its stock price could reach $2,000 a share. Barclays analyst Ross Sandler wrote in a note to clients:

“AMZN is on the winning side of the biggest TAMs [total addressable markets] & lowest penetration shifts in consumer internet & enterprise (e-commerce, cloud & new areas like video, IoT [internet of things], AI), and has more runway than just about any other company. AMZN is likely to be one of the first trillion-dollar market cap companies; it’s just a question of when, not if, in our view.”

And Amazon’s value soared despite 'disappointing earnings' and attacks by US President Donald Trump against “non-tax paying Amazon,” or in his words:

“The #AmazonWashingtonPost, sometimes referred to as the guardian of Amazon not paying internet taxes (which they should) is FAKE NEWS!”

Back to purpose and purposeful.

With all this success, obviously, Amazon must be the most purposeful, purpose-driven company in the world.

HMMMMM.

Take a look at Amazon’s Mission…as I have written before, not unlike the mission of Sears two centuries ago:

Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.

It is a focused and clear mission, and the focus and dedication to making it true is truly awe-inspiring.

But where is the purpose? How could it have been so successful? How does it stay so successful without inspiring us beyond the convenience it brings us and the money (not profit) it makes?

Contrast the Amazon Mission with some of these also successful companies, but by no means even close to the juggernaut that is Amazon, and again be as cynical or not as you choose and clearly there is room for it.

Facebook: “To give people the power to share and make the world more open and connected.”

LinkedIn: “To connect the world’s professionals to make them more productive and successful.”

Uber: “Uber is evolving the way the world moves. By seamlessly connecting riders to drivers through our apps, we make cities more accessible, opening up more possibilities for riders and more business for drivers.”

So much for purpose…

Tesla: “Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.”

Kickstarter: “To help bring creative projects to life.”

Microsoft: “To enable people and businesses throughout the world to realize their full potential.”

Google: “To organize the world’s information and make it universally accessible and useful.”

Starbucks: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”

Whole Foods: “Our deepest purpose as an organization is helping support the health, well-being, and healing of both people — customers, Team Members, and business organizations in general — and the planet.”

Patagonia: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”

Warby Parker: “To offer designer eyewear at a revolutionary price, while leading the way for socially-conscious businesses.”

IKEA: “To create a better everyday life for the many people.”

JetBlue: ” …to inspire humanity – both in the air and on the ground.”

Nike: “To bring inspiration and innovation to every athlete in the world.”… “If you have a body, you are an athlete.”

I particularly like Nike…the insight is brilliant and has lasted.

Amazon’s Prime Day is what got me thinking about this notion, and a piece in The New York Times helped crystalize what is really a question more than anything:

As far as holidays go, Prime Day is contrived, crass and extremely effective (the company’s ‘‘biggest day ever,’’ it says).… It’s about clicking a button that initiates a mysterious process carried out by teams of invisible laborers and automated processes and results in a package at your door within two days. That package will contain one or more products that were probably built in a special economic zone in a faraway country; transported by ship, truck or perhaps one of Amazon’s newly leased ‘‘Prime Air’’ planes; warehoused and waiting in one of the company’s gargantuan and strategically placed fulfillment centers; sorted by subcontracted laborers, robots or both; and left at your door by whatever means necessary, be it U.P.S., FedEx, the United States Postal Service or a gig worker driving around in the family Accord. Prime Day is the opposite of precious; it is an awe-inspiring project dedicated to moving product and making money.

Amazon’s yearly bonanza is a production that feels almost provocatively distant from the image cultivated by Whole Foods, which Amazon recently announced it would buy for a reported $13.4bn. In 1996, years before Amazon turned a profit, the Whole Foods chief executive, John Mackey, was articulating a vision of his own. ‘‘Whole Foods is a mission-driven business,’’ he told The New York Times in August of that year, as yearly sales were on track for $850m. ‘‘We have other goals besides making money. If you are going to tap into deeper motivational energies, you need more than money.”…

Amazon’s grand proclamations, on the other hand, tend to focus on domination, not on providing any sort of abstract benefit to society outside the lowering of prices and the delivery of goods. The company has never put forth a rosy vision of the future of service labor. Amazon warehouse work is hard, often subcontracted and kept out of sight of consumers. According to a 2015 investigation by The Times, even at the corporate office, the work culture is unapologetically ruthless.

And there you have it.

Will it make a difference? Or are Brands of purpose great so long as they don’t impede us in any way…cost or convenience, in particular, despite the belief that Millennials will pay more and go out of their way for “Purposeful Brands.”

Knee-Jerk Alert…

I am not suggesting that Amazon isn’t successful. Not by any means. Nor am I ranting on about it…I am a committed and good customer.

If anything, I am curious and wondering about its staying power…are the two Cs – cost and convenience – enough to give it staying power? And do we really, really care about purpose or is that just convenience too?

With that in mind, check out United Airlines’ recent earnings in the aftermath of its debacle of kicking a passenger off a plane: revenue rose over 6% and profits shot up 49%.

A columnist at The New York Times explained why he wasn’t at all surprised: “People almost always opt for convenience and price, even while complaining loudly about crowded planes and a dearth of amenities.”

The same HBR quoted earlier arguing that purpose drives profits had this to say about the surprising results: “They’ll be studying this in business schools for years.”

They will no doubt study this in juxtaposition with their other studies on purpose and meaning.

Clearly good news for Amazon.

And while the following might be considered sour grapes by some, I share it as simply another interesting data point:

Bezos would be nowhere close to being the world’s wealthiest person had Gates not given so much of his fortune to philanthropy. Gates, who created the Giving Pledge with Buffett to encourage billionaires to give at least half of their wealth to charitable causes, had given away $31.1 billion over the course of his lifetime through [the] end of 2016. Forbes estimates that Bezos, who has not signed the pledge, had given approximately $100 million to charity through the end of 2015. In June, Bezos tweeted out a request for ideas for his philanthropy, garnering thousands of responses.

And no doubt you remember that Bezos pledged funds to fight the US travel ban.

Still I wonder.

And my questioning led me to look at companies that are struggling today but had managed to evolve and last for over a century and which I could imagine in an evolved state a century from now.

One of those companies is Ford…listen:

“A business that makes nothing but money is a poor business.” Henry Ford

We all know that Henry was problematic and that the company wasn’t always at the leading edge of positive social change, to say the least…so please spare me the comments. But the Ford Foundation is about changing the world for good and Ford is still selling cars.

I end as I always do….

What do you think?

About purpose?

Purposeful companies?

And will it affect Amazon or not?

Over to you…

David Sable is the global chief executive of Y&R

DS

David Sable

All by David