As the problems of 2007-2008 financial crashed the economy and evidence of climate change impacts accumulated, western capitalism was increasingly questioned and CEOs, company directors, and investors gradually came to realize that the shareholders' centered approach of the past 50 years was no longer working.  

To the surprise of many the Roundtable statement of 2019 declared that companies could no longer focus on creating value for the shareholders only, but should take into consideration the interests of the various stakeholders involved, employees, suppliers, customers and the society where the company is inserted, environmental concerns included.

Realizing that in the real world different stakeholders have quite often conflicting interests it became evident that a capstone was missing. This harmonizing force is Purpose. CATÓLICA-LISBON's Center for Responsible Business & Leadership (CRB) defines Purpose as “a concept capable of aligning all stakeholders on common ground and a shared ambition that they can strive for. One that allows them to leverage their organizations to their full potential to fulfill their mission and contribute to sustained value creation”, a definition the Davos Manifesto would reinforce.

As companies started to discuss their purpose, they realize it is easier said than done and struggle to write it down. Often, they are tempted to write grand world-changing purposes, which on a closer look are simply unattainable, no matter how nicely stated they are (most probably by a consultant). To pin down purpose it is easier to go back to solid rock foundation. Peter Drucker, back in 1955 had it right: put your customer at the center of your purpose. 

To do it, you start by having great products (like BMW or Apple) or wonder services (like Ritz or Amazon). However, that is no longer enough.  Remember we are in 2021. 4 billion of the 7.6 billion people on earth are connected to the internet 24x7. Customers are now used to be known individually. Everything they do is personalized and feels like going to the local baker that knows the kind of bread they like. Customers became used to access services anytime they need, no matter where they are (and it is not the laptop they carry). Customers now feel that not having a reply in 30 seconds is slow. Often customers know more of your product than many of your teammates. Customers like to be autonomous and have the ability to select their preferred seat on the plane at the time that best suits them. 

So, to meet your customers’ expectations this is how high the bar is. How can you get there? 

Digital is the answer. You need to promote a culture of innovation, capable of finding new value propositions, taking needs. And your organization needs to learn how to execute those projects, relying on a systematic prototyping and testing approach. Of course, you need technology, but that’s not the tough part of the game.

Moving from where many companies and organizations are today to this new reality is called Digital Transformation. It is hard, but it is possible, and the reward is worth the effort. Just look at the likes of Starbucks, Walmart, EDP…

Have a great and impactful week!

João Ribeiro da Costa
Invited Professor, Head of Digital Transformation
Católica Lisbon School of Business & Economics

This article refers to edition #82 of the "Have a Great and Impactful Week" Newsletter.
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