Attractive Thinking. Chris Radford
that prevails. As recent as 2017 the Economist3 said that the goal of maximising shareholder value is ‘the biggest idea in business’. Today ‘shareholder value rules business’. The idea of maximising the value and the returns for the owners and investors in the business has an appealing logic. After all, the purpose of investment is to generate a return on the investment. This return arises either from an increased valuation of an asset such as share price, or the health of the balance sheet or the sales, revenue and profit. The original proponents of maximising shareholder value argued that this should be the goal of CEOs and the board. This ensures the aims of the CEO and board are aligned with the objectives and expectations of the shareholders.
But in the past 20 years the idea of maximising shareholder value as a goal of business has been increasingly attacked. This includes several high-profile CEOs:
• John Mackey, CEO of Whole Foods, condemned businesses that view their purpose as profit maximisation and treat all participants in the system as means to that end.4
• Marc Benioff, Chairman and CEO of Salesforce, declared that this still-pervasive business theory is ‘wrong. The business of business isn’t just about creating profits for shareholders – it’s also about improving the state of the world and driving stakeholder value.’5
• Alibaba CEO Jack Ma declared that customers are number one; employees are number two and shareholders are number three.6
• Paul Polman, CEO of Unilever, denounced ‘the cult of shareholder value’.7
• Larry Fink, the CEO of BlackRock, the world’s largest institutional investor, has written to all the CEOs of the S&P 500 and called on them to present long-term strategies. Companies are under-investing in innovation, skilled work-forces or essential capital expenditures.8
If we want to understand the arguments that these CEOs put forward, it is helpful to distinguish between means and ends. For Larry Fink, having a business purpose that goes beyond profit is the means to achieve long-term profitable growth and increase shareholder value. The argument runs that if a business focuses on maximising short-term shareholder value it will be less successful at doing this than a business that has a purpose and recognises it must invest in and reward all stakeholders (staff, suppliers, customers, shareholders). In other words, maximising shareholder value is held up as the primary aim of the business, but that the means to achieve that is to focus on a wider set of aims and ensure the business has a purpose that people can get behind.
For John Mackey of Whole Foods, the business purpose beyond profit is the means and the end. His business is all about bringing better food at fair prices and treating suppliers well. The profit and shareholder value are a by-product of that work.9
But whether they make purpose the means or the end, more CEOs now agree that having a purpose beyond profit is necessary to create competitive advantage and deliver long-term profitable growth and value to shareholders. This idea works because a business thrives by engaging with all its stakeholders including staff, suppliers, customers, shareholders and its relationship with the public at large.
In the Harvard Business Review Analytics and EY Beacon Institute study in 2016 over 80% of the executives interviewed agreed with the following statements:10
An organisation with shared purpose will have employee satisfaction.
I’m more likely to recommend a company with strong purpose to others.
Our business transformation efforts will have greater success if integrated with purpose.
An organisation that has shared purpose will be more successful in transformation efforts.
Purpose-driven firms deliver higher-quality products/services.
An organisation with shared purpose will have greater customer loyalty.
Marketers and CEOs have been swept up in the discussion of purpose and have tried to ‘borrow’ a purpose and attach it to their business. This can easily backfire if the purpose does not seem to have much to do with the company (Figure 0.1).
Figure 0.1 Source: Marketoonist.com
In 2018 Lush Cosmetic stores attached themselves to an emerging story about undercover police officers in the Metropolitan Police engaging in deceitful romantic liaisons. There was a public backlash as to why a store selling bath bombs was getting involved. Lush got profile and awareness by doing this, but it did seem unconnected to their brand.
Gillette launched a purpose campaign that was about men having respect for women. This came under criticism for the observation that Gillette did not entirely live up to this themselves, particularly for charging women higher prices for the same razors as used by men.
In 2017 Omar Rodríguez Vilá and Sundar Bharadwaj wrote in the Harvard Business Review about brands trying to adopt a social purpose that is only slightly related to their core business:11
Managers often have the best intentions when trying to link their brands with a social need but choosing the right one can be difficult and risky and has long-term implications. Competing on social purpose requires managers to create value for all stakeholders—customers, the company, shareholders, and society at large—merging strategic acts of generosity with the diligent pursuit of brand goals.
So, some business leaders recognise that expressing a purpose that goes beyond profit and embraces customers, staff, suppliers and shareholders can also maximise long-term financial returns. More recently, creating and communicating a purpose beyond profit has almost become a fashionable pursuit amongst business leaders and marketers. Some businesses have come unstuck when they adopted a purpose that is not the core of what they do. Some businesses have also been criticised for focusing too much on social purpose and that this has been at the expense of short-term profits. Where does this leave us as business owners and leaders who want to attract more customers and create a sustainable long-term business? We like having a purpose in our business; we kind of know that business is about more than profit. But we also know that businesses are about profitable growth and creating shareholder value.
In this book you will get to discover an approach to brand building and business growth that I call Attractive Thinking. Attractive Thinking is a method to attract more customers, motivate more staff, collaborate with more suppliers and reward more shareholders. This approach resolves the questions about how business purpose, shareholder value, growth and profit are connected. It delivers a platform to create, build and grow our brands. It is built on the belief that our business will only really prosper if we embrace all the stakeholders. In particular, we must attract and embrace customers, shareholders, staff and suppliers. If we can attract and motivate more of each of these critical groups of people, then we will be more successful.
Creating a business purpose that works
The idea of business purpose has been around for a long time. Back in 1954, Peter Drucker chose to keep it simple and offered a simpler yet profound definition of business purpose: ‘to create a customer’. Drucker wrote:12
It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance – especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers ‘value’, is decisive.
This powerful thought seems to have been lost in the current debate around purpose, profit and shareholder value. Yet this simple definition underpins Attractive Thinking. For me, this simple idea resolves the issues raised in the debate around purpose and profit.