Purpose Drives Strategy

Purpose Drives Impact Framework.003How do you make a difference in the world? The Purpose Drives Impact Framework is one way to think about the question, and to organize your own work. For an overview, see Purpose Drives Impact. See also: See Purpose Drive People, Purpose Drives Execution

In this article we explore Purpose Drives Strategy.
Purpose Drives StrategyStrategy is one of those words that everyone has a sense of, but very few people are actually clear about what it means in practice. There are many different definitions for strategy that you can find fully explained elsewhere. I like to think of strategy very simply: Strategy allows us to make decisions very quickly. What do we say “yes” to, and just as importantly, what do we say “no” to.

For example, Southwest Airlines, profitable every year of the last 40+ in an industry that routinely loses money (not just one or two airlines, but the industry as a whole), has a very simple strategy: Wheels Up. When we unpack this, we start to see the power of strategy. Airplanes in the air are adding value to their customers and therefore make money. Airplanes on the ground do not. What does this mean? Let’s look at some of their decisions:

  • No reserved seating means their customers push each other down the aisle, loading the plane more quickly than other airlines, meaning less downtime in the turnaround.
  • A fleet with only one kind of airplane (other than planes that came when they acquired AirTran they only fly 737s) means flight crews are interchangeable, as are mechanics, galley service, etc. In fact, when a plane has a mechanical problem, it is easy to swap in another airplane without needing to adjust seating on that plane (plays well with the no reserved seating as well, even if the planes aren’t configured identically).
  • No fees for baggage. This again allows them to turn planes around faster, as passengers aren’t spending so much time cramming their over-large carry-ons in the overhead bins.
  • Labor relations. This point would not have needed a caveat had I written it last year, but 2014 labor troubles notwithstanding, Southwest has historically had incredibly positive labor relations, even to the point of allowing pilots to assist baggage handlers when necessary. This again allows for faster turns and keeps planes in the air more hours per day. This year’s strife might be a sign that Southwest’s strategy has come to the end of it’s remarkable run. Time will tell.

Strategies do need to evolve over time. Who you are, as an individual or a company, is your purpose. How you choose to organize your actions in the marketplace is your strategy.

Southwest’s purpose, announced in 2013, is:

We exist to connect people to what’s important in their lives through friendly, reliable, and low-cost air travel.

If they had asked me, I would have coached them to simplify this to We connect people to what’s important in their lives or perhaps better yet Connecting to What’s Important. Their longer statement actually has some of the strategy baked-in. Friendly, reliable and low-cost air travel could be seen as their brand promise, a key component of strategy. There are two reasons I wouldn’t put that in the purpose.

  1. The shorter and simpler purpose is, the easier it is for people to remember and use to drive action.
  2. An effective purpose doesn’t change over time, no matter what happens in the marketplace. Strategy needs to be updated as the market changes. When we mix the two in our articulation of purpose, we’re likely to outgrow that purpose as market needs change.

Let’s bring this back to Purpose Drives Strategy now. Without purpose, any strategy will do (with variable effectiveness). With a purpose that’s permanent, a north star, strategy can be free to evolve as necessary as conditions change.

Remember the Avis “We Try Harder” campaign? That represented a strategy that embraced the market situation they found themselves in, #2 to Hertz. They narrowed the gap, but never caught Hertz, over 50 years of using the slogan. Eventually they both were overtaken by Enterprise. Another piece of Avis’ strategy in the 60s was to focus on airport locations. Hertz was almost exclusively downtown, and essentially copied Avis’ airport moves for years. How did Enterprise take over? By focusing downtown, for people who’s cars were in the shop, and outstanding customer service. Enterprise’s culture and strategy differentiate them in an undifferentiated car rental world.

Turning to a company that does have clear purpose, here is what Whole Foods says about itself:

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.

For most of it’s 30+ year history, Whole Foods’ strategy has focused on charging premium prices for healthier, more sustainable food (or at least the perception of same). This strategy lines up perfectly with their purpose, as they have been able to generate very impressive free cash flow and thus self-fund tremendous growth. Now that there are many more organic and health-conscious options in the marketplace, they are shifting to smaller stores and more affordability, especially in low-income areas.

As an aside, not only is this purpose driving strategy, it also keeps impact at the forefront of their strategic decisions. Whole Foods has been derisively referred to as “Whole Paycheck,” referring to its higher prices. Imagine what would have happened had they bowed to this kind of criticism and shifted strategy to serving lower-income people at lower prices? They wouldn’t have generated the kinds of free cash flow that they did, and wouldn’t have been able self-fund growth. As it stands, they have created ample room in the marketplace (they enlarged the pie) for lower-cost competitors and extended their impact well-beyond their own direct actions.

In summary, strategy driven by purpose doesn’t guarantee we’ll create the impact we’re committed to (if we make poor strategic decisions, for example), but when the right strategy is driven by purpose, that’s when impact results.

I free up entrepreneurs for greater impact. Day to day demands of your growing business will sap your energy and blunt your effectiveness. Together we can work to reduce demands by up to 80% while moving more quickly in the direction of your purpose.

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