A company’s purpose should give it the freedom to think big
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A huge amount has been written about the importance of a company’s purpose, its vision or its mission statement. In fact, so much has been written that it all starts to get a bit confusing.
You meet entrepreneurs who spend days agonising over which turn of phrase best encapsulates what they’re up, to rather than pounding the streets in search of their first customer.
I think we may be in danger of over-complicating things. A company’s purpose (or vision, or mission statement) is, in its simplest form, a reason for employees or customers to want to engage with you.
You want both these sets of stakeholders to feel excited that they are choosing an organisation that is changing things for the better.
But it wasn’t always this way.
Learning lessons from the past
A generation ago, there were lots of companies that thought that simply employing people and paying them wages was enough evidence that they cared.
Their purpose was simple – to maximise shareholder returns. It took a real maverick – someone like Henry Ford – to try and change the way people thought.
When Ford set up, he took funding from two brothers – the Dodge brothers. Five years into the journey, it became pretty clear that Ford was onto something so the Dodge brothers decided to set up their own car company, funding it through the dividends they received from their original investment in Ford.
But Henry Ford wanted to stop paying dividends so that he could reinvest the money back into the business. He was trying to make the cars affordable to as many Americans as possible.
Ford’s purpose was simple – democratise transport, by building cheaper, better cars and paying his workers higher wages. The Dodge purpose was also simple – make as much money as possible.
The case ended up at the Michigan Supreme Court, where the judge ruled in favour of the Dodge brothers and ordered Henry Ford to pay its shareholders a special dividend.
The court did so on the basis that the primary motivation for any company (as set out in its Articles) was to maximise the value to its shareholders.
“There should be no confusion... A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.”
Dodge v. Ford Motor Company, 1919 Michigan Supreme Court decision
While this remains legally true today, I don’t think it’s the reality of the world we live in. Employees (and customers) now want to associate with companies that aren’t afraid to stand up, to look around and to commit to making the world a better place.
The Octopus purpose
At Octopus, we’ve tinkered a fair amount with our purpose over the years. And I’ll come clean and admit that for the first few years we didn’t really have one (beyond survival). It was only when the business started to scale (and the paranoia typical of most entrepreneurs had waned) that we started to think about purpose.
We have two versions – the short one, and the even shorter one. The short one, which is more descriptive, is that “Octopus invests in the people, the industries and the ideas that will help to change the world”.
The second one, which is more of an internal rallying call, is “Octopus In Every Home”. This one appeals on a few levels.
First, it provides a numerical target against which we can track our progress. There are 24 million homes in the UK and we are in almost 500,000 of them today.
Working out how to get into the other 23.5 million will require us to think big and to think differently. It will also take a long time (great purposes won’t change for at least a decade, in my view).
The second aspect which appeals to me is the personal aspect of being in someone’s home. I’d love Octopus to be the kind of company which is so loved and trusted by its customers that they proactively recommend us to the people they are closest to.
This will be as much about how we do things (our values and behaviours), as what we do.
You’ll notice that there is nothing in here about profit, or market share, or value. We absolutely want to build a valuable, sustainable business but we believe the best way to achieve that is to look after our people, who in turn will look after our customers.
If we get these two bits right, and we’re not afraid to take risks and to try new things, we believe we have every chance of building an organisation we’ll be proud to talk to our grandchildren about.
That, for me, is the ultimate purpose and reason to get out of bed in the morning.