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(originally published by Booz & Company)


Purpose and Innovation

Purpose itself is not, strictly speaking, necessary for this kind of innovation. I do not think that Michael O’Leary, for example, who has changed the rules in the European airline market, would insist that Purpose drove his decisions at Ryanair. What is necessary is an ability to see beyond the existing market dynamics. Entrepreneurs have no problem with this, but large successful organizations often find it more difficult—this is why companies dominated by brand marketing departments often fail to innovate effectively. Purpose’s contribution is to help avoid this kind of constraint, to help innovators see beyond existing dynamics and industry conventions.

Purpose also provides a degree of emotional certainty that makes the prolonged openness of mind required for innovation easier. Sometimes innovating means not doing something and instead waiting for the right opportunity. Warren Buffett is a good example; his commitment to excellence gave him the patience to refrain from investing when there were no real opportunities, even though the rest of the investment industry thought there were. Masaru Ibuka, the founder of Sony, had clear ideas about the reasons for its incorporation—“to establish a place of work where engineers can feel the joy of technological innovation, be aware of their mission to society and work to their heart’s content.” Such clear ideas, driven by the Purpose of discovery, made it tolerable that he and his colleagues “sat in conference . . . and for weeks [after the company was founded] tried to figure out what kind of business this company could enter, in order to make money to operate.”5

A clear Purpose helps anchor this kind of open-mindedness as well. Buffett’s investment decisions were highly calculated. Companies like Motorola and Microsoft have a very clear idea of what they are trying to achieve. The goals driving particular research and development programs are not necessarily moral, but where there is a Purpose underpinning the business of the firm, then there is an unavoidable moral discipline that engages individuals.

Having a Purpose does not guarantee greater sensitivity to market signals. It can make people more bigoted and isolated, as we saw with Henry Ford. The “right” Purpose—one in tune with the times—is more likely when developed collectively, reflecting more than one person’s response to the environment. It is also more likely when it is aligned with the company’s commercial strategy. An innovator’s Purpose also strengthens his or her will, an important factor because the outcome of innovation is always highly uncertain. Even to embark upon the process of innovation requires an act of will, including the will to persevere no matter what may lie ahead. When Henry Ford first started tinkering with the prototype that turned into the Model T, he may have thought he knew what would happen, but it was hardly the same kind of knowledge as that produced by a cost accountant who prices all the inputs for a given output. Similarly, any successful result from a research and development lab depends on a decision to pursue a line of enquiry, the end product of which is unpredictable, to some discernable result.

Daniel Vasella, CEO of Novartis, has been explicit about using Purpose in this way: “One way we try to foster innovation . . . is to align our business objectives with our ideals. . . . I believe that people do a better job when they believe in what they do.”6

Purpose and Radical Decisions
It has long been observed that most fields of activity have ingrained ways of doing things that all involved take for granted. Because each player takes into account the expected behavior of the other players, these habits often become unconsciously established as limits in the minds of participants. In a market of competing innovators, such habits tend to limit the scope for competition. Players tend to mistrust any innovation from outside; they become like boxers in a ring, anxiously watching each other, landing punches and going round in circles. One company may win a battle, but no company ever wins the war—and, with it, the peace.

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PURPOSE: The Starting Point of Great Companies
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