The importance of finding a business’s purpose

The importance of finding a business’s purpose

Over the last few years and with the slowing of the economy prior to COVID-19, RMB Ventures have been looking for ways to become more deliberate around value creation in the investments we make in order to continuously outperform the market. As a start, we acknowledged that, while we did have impact on companies, we didn’t do this consistently and that there was (or is) significant latitude given to deal makers adding value.

We embarked on a journey of asking the typical strategy questions such as: “what our business model is, what are our core capabilities, where do we play and what differentiates us from our competitors?” In doing so, we incrementally continued using the same format and thought process from previous leaders which resulted in a similar output. So, we accepted previous choices around business model, where to play, how to play and how we organise ourselves.

Similarly, we reflected on how the management teams of our portfolio investments approached strategy and our process (as board members and shareholders) on opining over strategy and the decision making that happens at this level. Other than a few exceptions, the approach was similar to ours or represented a fairly narrow mindset. (we will talk to this in another article)

There was so much wrong with this process and so much that any classic strategist would argue could be better so we slowed down and challenged ourselves to solve this internally before trying to influence others. The three key steps that followed were: increasing our knowledge (as a team) on classic strategy teachings, which informs how to approach strategy questions, learning about de-biasing or how to setup for effective decision making and this led to the nagging question of “Why do we exist?” or what Simon Sinek would say is “Starting with the Why”.

We engaged with a South African expert in the field of purpose, to help us define our own purpose.

For him, defining the business’s purpose is simple – it begins with one word at the heart of the business. Implementation is crucial though. “There is intention and then there’s action,” says our expert. “Once a team starts living their Purpose daily, there is usually a massive shift.”

The process was a tough one with the team starting off sceptical around what seemed to be spending time working out the “soft stuff”. The purpose expert used techniques such as Thinking Circles and Theory U from Otto Scharmer to encourage the team to be more vulnerable and honest around each of our personal purposes and how this aligns (or does not) to why Ventures exists. There was a lot of emotion in the room and some of the transactors who have been here the longest were able to share deep insights into the history and legacy of Ventures which assisted in working out our “why”.

After an intense one and a half days with the entire team, the expert helped us reach consensus around two powerful concepts; to Empower and achieving Full Potential that the team felt strongly about. In a phrase;

Empowering people, teams and businesses to achieve full potential

Simply explained, if we spent our time in the pursuit of empowering the people that work for us, the management teams and their businesses to reach their full potential, we would be successful. We cannot guarantee success (this would be arrogant around the degree to which we control the world) but if we chose the right management teams to partner with and business models and then spend time in this pursuit, the outcome will have to be success.

What the purpose started to do was create a focus on the recipients of our purpose (People and Companies) and to work out how best to serve them in order to meet our purpose. We started to shift our way of considering the strategic content; what does full potential actually mean? What are the constraints or unlocks in the business? Are we conducting ourselves (as investors) to deliver the best outcome? How do we shift our mindset (as a team) and as management teams. What limitations have we put on ourselves that can be shifted?

Secondly, a focus on increasing our learning and leaning into the content of what has been our focus. A lean into the future using research and facts creating alternatives rather than a single version of the future. (more about this later)

Then a shift in how we enable ourselves to better serve our companies fully utilising our competencies and capabilities and being able to better understand and see the opportunities within our portfolio companies. It also informs how we set ourselves up to enable or augment management teams to deliver and shift our conversation. One of the key shifts for us was acknowledging that we may not know all of the answers and hence we should ask for help. In each instance we perform a diagnostic, create better questions and solicit the help of experts in the field to deliver answers.

To summarise, the three main key takeaways from our Ventures’ Purpose journey are as follows:

• Start with the Why: A business needs to define its Purpose before designing its Strategy
• Purpose needs to be a living concept: Once a business has defined its Purpose, it needs to be communicated throughout the organisation. The Purpose needs to become part of the DNA of a business and part of its everyday language.
• Congruency between personal and business Purpose: By going through the process to uncover a business’ Purpose there is the most impact when this Purpose overlaps with an employee’s individual Purpose. This is where the magic happens.

Globally this trend and clear thinking has become more prevalent where companies find a single-minded pursuit, some with a larger social bent, and in the process making profits as an outcome. Fortune recently released the “Fortune’s change the world list” that is dedicated to the idea that the creative tools of capitalism makes business uniquely suited to addressing society’s biggest challenges. These are the companies from around the world that are pursuing purpose and profit. At the top of the list was PayPal, followed by Alibaba and Walmart. South Africa’s Discovery came in at number four with their shared value approach.

Evidence in favour of purpose as a business driver is overwhelming. Purpose-driven companies today are thriving and can change the world. Business founders and leaders like Sam Walton of Wallmart and Bill Gates of Microsoft, both started their businesses based on a passion for the core focus of their businesses, and to make money. However, in a fast changing world a third ingredient beyond money and passion is needed, namely purpose. Adding purpose to the traditional recipe for business success is not only the right thing to do, but also gives companies a significant advantage in an increasingly competitive global market. This third reason will soon become an imperative to why people should start businesses. Part of this new movement of entrepreneurs includes Patagonia, who strives to use their outdoor business to find solutions for society’s greatest environmental problems. Similarly, Ben and Jerry’s sees themselves as a social justice company rather than sellers of ice cream. Founders of these businesses believe that purpose is not an accessory to running an organization, but rather a fundamental necessity.  Since 2000, 50% of the Fortune 500 companies have disappeared, with another 40% predicted to fail over the next decade. The only answer to curb this trend is said to be purpose (Hillier, 2020).

Research by Raj Sisodia, author of the bestselling book Firms of Endearment, found that companies operating on a clearly defined purpose beyond the making of profit, outperformed the S&P 500 by a factor of fourteen between 1998 and 2013. Sisodia’s study showed that companies with a strong sense of purpose enables success through a higher level of strategic clarity. Such clarity in turn enables companies to innovate better and transform at greater speed due to purpose providing an antidote to fear. Purpose also enables companies to tap into the basic human need of individuals to be part of something great, generating higher engagement and output within businesses (Weinberger, 2020). Profits with Purpose, a report by McKinsey, supports this by confirming that companies with purpose at its core outperform the stock market by 42% in terms of bottom line delivery (MEED, 2021). In fact, 79% of business leaders interviewed by PwC believed that purpose is central to business success (Bulgarella, 2018).

In terms of portfolio companies, only 30% of our portfolio companies have started this work and we are starting to see the shifts. The shift is that instead of tackling problem statements in each function, the entire system or organism shifts to align to their purpose provided there is sufficient buy in. In a later article we will discuss Professor Kosheek Sewchurran’s work around integrative thinking that explores more about this.  At the end of this article we have included two examples of where our portfolio companies have gone through this Purpose journey and their unique experiences.

Has anything changed?

We are seeing positive shifts both in our business as well as our portfolio companies where they have taken the time to understand their core “why” or purpose. Having a purpose brings about a single-minded focus on the customer. It helps leadership understand what sits at the core of a company’s organisational capability. In addition, having a well-defined purpose that is way beyond profits, enables a business to focus more on the wider shared value impact it can have across society and the environment. Whilst we acknowledge there is still a lot of work to be done, we continue to make great strides in empowering people, teams and businesses to achieve full potential.

Examples of some of our portfolio companies and their purpose:

Afrikelp … growing in the flow

In an era when food security and the desire for more organic produce is now driving consumer and farmer behaviours, Afrikelp offers a solution that is homegrown. The company manufactures liquid seaweed bio stimulants to supply to the agriculture industry.

Afrikelp chose “nurturing growth” as its purpose, a phrase that is its “North Star” says Nicole Hart, Afrikelp Managing Director. The word “growth” resonated with the team for multiple reasons, she says, and guides our planning and decision making. Hart explains: Our purpose is to nurture growth that enables the sustainability of our people, our partners, our products, our performance and our planet.

The company’s products offer a sustainable and organic option to improving the yield from crops. “Our range of fertilisers offer organic solutions. Not only do they enhance the yield, but they add to the quality of the produce,” says Hart.

Having a clear purpose has been a key success factor for Afrikelp. Sustainability is “top of mind” when it comes to looking at opportunities for expansion and Afrikelp is guided by the United Nations Sustainable Development Goals.

“The health and sustainability of our kelp beds and concession has been our most immediate focus area. We have leveraged Geographic Information Systems technology to map our concession, track our boat activity and integrate harvesting tonnage data,” Hart says.

With a focus on recycling, reducing its carbon footprint and careful management of natural resources, Afrikelp may already be in a position where it is Carbon Neutral.

Watch Afrikelp’s video here that brings its Purpose to life: https://afrikelp.com/

Cargo Compass…driven by passion https://www.cargocompasssa.co.za/#

Cargo Compass Managing Director, Sebastiano Iorio, is an entrepreneur at heart. As a founder, together with his sister Angela, Iorio has displayed the kind of courage and tenacity typical of entrepreneurs when he found himself in the freight forwarding and logistics industry with two trucks. From humble beginnings in Johannesburg, Cargo Compass now has a network of operations spanning Cape Town, Durban and Gqeberha and offers an operation capable of competing with multinationals.

Although the Cargo Compass trucks and containers are distinctive and easily recognisable on the roads, the company’s most crucial work is done away from the limelight in ports elsewhere in the world where it offers clearing and forwarding services.

“Our passion shines through in our in-depth understanding of freight and logistics, our commitment to organic growth and re-investment in the business, and the fact that we do not say no to any request from a client,” says Iorio. “Having assembled a tight-knit team, we are confident that we can arrive at an appropriate solution, no matter what the challenge. Everything is a team effort and with the passion and commitment of our team, we know that we have the grit and determination to tackle anything.”

It comes as no surprise then that Iorio says the Cargo Compass staff is the key factor in living the company’s purpose of ‘passion delivered. “They work like a well-oiled machine. They always know what to do. That’s how we will deliver, no matter what it takes.”