How does your organization define winning? What is that challenging shared goal that gets your people out of bed each day, excited to play their part? If your organization is like most I’ve worked with, you may struggle to answer that question. Despite all the time and resources poured into strategy work each year, few organizations have a widely understood definition of winning that goes beyond making money for shareholders.
Fifty years ago, in “The Social Responsibility of Business is to Increase its Profits”, economist Milton Friedman argued that the purpose of a business is to serve its owners. The leader’s role, he wrote, is “to conduct the business in accordance with their [owners’] desires, which generally will be to make as much money as possible while conforming to their basic rules of the society.” This notion, which is the foundation of the doctrine of shareholder value maximization, is now pervasive. But it is showing considerable signs of wear and tear as we become more aware of the negative consequences of putting profits ahead of people.
Solely prioritizing short-run outcomes for shareholders does little to bring meaning to our work; it stymies innovation; it reduces our business fitness; and it makes much, much harder the real work of strategy. Meaning comes from creating real value in the world, which means we need to think broadly in terms of who we’re winning with (and for). Innovation requires a long-term perspective, so we need to think about winning beyond this quarter or even this year. Business fitness (the financial and strategic resilience of a company over time) depends on being attuned to things that shareholders may not see. To ensure our viability, we need to seek out signals as to what customers, employees, and societies care about. Strategy is about building a firm that can win both now and in the future, so we need to be more holistic in our approach to making choices.
If it is time to move past shareholder value. How might we define winning in a more useful way, that spurs rather than stops innovation? How might we set aspirations that don’t suggest a win-lose frame? How might we seek instead to create value for customers, for employees, and for investors?
Find the right language. In the process of developing a strategy for kyu, the collective of organizations that includes IDEO and SYPartners, some leaders rejected the notion of ‘winning’ entirely, recoiling at a word that felt tied to a scarcity mindset. If we’re winning, they asked, who is losing?
Tim Brown and Susan Schuman, the kyu vice chairs who co-led the strategy discussions, thought hard about how to navigate that challenge. As Brown notes, they came to see that “we’re really creating a community at kyu—a collective that aims to unleash creativity and to help people flourish.” He goes on: “What we realized is that communities don’t win or lose, they thrive or falter.” The kyu strategy focuses on what it would mean to create a community that can truly thrive over time. Thriving may not be the term that resonates with your organization, but language matters. To redefine winning to be more inclusive, work with your team to find a mental model for winning that works for you, then build shared definitions of the models you choose.
Shift the timeline. Another way to push on current, unsustainable definitions of winning is to publicly shift the time horizon so that sustainability, both economical and ecological, can be integrated into our aspirations. Unless we look further out, we will continue to plunder the future to fund the present and to degrade the planet to drive profit. For inspiration on what is possible, look to Paul Polman, former CEO of Unilever.
In an interview for my book Creating Great Choices, Polman explained how he set out to change the time horizon at Unilever: “One of the things I had to do was to move the business to a longer-term plan,” he said. “We had become victims of chasing our own tail, cutting our internal spending in capital, R&D, or IT to reach the market expectations. We were developing our brand spends on a quarterly basis and not doing the right things…We were catering to the shorter-term shareholders.”
Polman decreed that the company would stop quarterly reporting and stop giving guidance. He embarked on a far-reaching environmental sustainability effort, and he reinvested in R&D, talent development, and brand building.
Polman believed that shareholders whose interests were aligned with Unilever (i.e. long-run profitability and environmental sustainability) would eventually buy into his plan. Taking a long-term perspective on winning not only let Unilever invest in innovation for customers and in development for its people, it let leadership focus on the fundamentals of the business rather than managing short-run expectations. As a result, it created lots of shareholder value, too. In the decade Polman headed Unilever, its stock price increased 170 per cent, creating more value for shareholders than most companies in the FTSE 100. This is a win-win-win solution, and it was powered by a willingness to show up differently in the world.
Define your purpose. A third way to redefine winning productively is to connect our aspirations to a larger purpose. Think of purpose as the human ‘why’ that explains the reason a company exists. The best purpose statements are very human: they connect the work of the organization to real people, to real needs, and to real problems to be solved. By defining a meaningful purpose, companies can demonstrate to employees and customers what they stand for and why. The purpose can then set the context for the strategy; we can define what winning means in service of our overall purpose.
One company that demonstrates the power of connecting purpose to strategy is Orbia. Until 2019, Orbia was called Mexichem and it was mainly known as a chemical company. Last year, along with a new brand, Orbia unveiled a new purpose: To advance life around the world, tackling some of humanity’s biggest shared challenges, like food security, water scarcity, and livable cities.
Had it continued to define itself as a chemical company, Mexichem could have followed a path to near-inevitable commoditization. Instead, CEO Daniel Martinez-Valle and Orbia’s leadership team worked with IDEO to define a higher bar with a bold new purpose. Now the team is working to connect its strategic choices, its resource allocations and its employee incentives to that larger purpose. Doing that means reorganizing the structure of the company into five business groups, each aimed at addressing a unique global challenge, defining meaningful sustainability targets for each business, and investing in innovation in significant new ways.
That’s really the power of purpose: it can align the organization, motivate employees, and promise customers something they can believe in. No wonder purpose-led companies tend to have higher employee engagement, happier customers, and better overall performance. They win on multiple dimensions.
Winning isn’t easy. It’s tempting to define winning narrowly, to make the task seem easier: winning means increasing the stock price this quarter. But as the last few months have demonstrated, a shareholder-led definition of winning is not only hollow, it can leave organizations with nothing to fall back on in a time of crisis. We need a far richer, more aspirational understanding of what it can really mean to win.
To get there, ask how we could define a winning aspiration, using language that fits our organization, push out on the time horizon, connect strategic goals to a larger sense of purpose and give ourselves room to dream big.
Social Responsibility of Business
Jennifer Riel (Rotman MBA ‘06) is IDEO’s Global Director of Strategy and the co-author with former Rotman School Dean Roger Martin of Creating Great Choices: A Leader’s Guide to Integrative Thinking (Harvard Business Review Publishing, 2017). Prior to joining IDEO, she spent 13 years at the Rotman School of Management, teaching undergrads, MBAs, and executives how to think creatively about their toughest challenges. This article originally appeared in a recent issue of Rotman Management, the magazine of the University of Toronto’s Rotman School of Management. www.rotman.utoronto.ca/connect/rotman-mag.
[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto’s Rotman School of Management]