On Purpose Read online

  Praise for ON PURPOSE

  ‘To define a purpose that will galvanize the entire organization is a leap of faith and requires strong leadership, but it also requires the clear and compelling process outlined in this book if you are to embark on this incredible journey.’

  Patrick Dempsey OBE, Managing Director, Whitbread Hotels and Restaurants

  ‘Shaun and Andy have created another great book in On Purpose, describing simply how great businesses use purpose and focus to fulfil customer needs and create value.’

  Vernon W Hill II, Founder and Chairman, Metro Bank

  ‘Every now and then a truly cutting-edge book comes along which changes everything we know about the secrets of organizational greatness. On Purpose is a profound and practical book no leader should miss reading. Full of powerful examples and pragmatic practices, it reveals the mysteries of long-term enterprise success.’

  Chip R Bell, author of The 9½ Principles of Innovative Service

  ‘Shaun Smith and Andy Milligan have added another strong chapter to their purpose. This is a must-read for any leader who is looking at differentiating their business by asking the important “why?” and “why us?” questions. It will provide excellent guidance in how to create your own journey and, most importantly, how to stick to it once your purpose has been found.’

  Frans-Willem de Kloet, Managing Director and CEO, UPC Czech Republic

  ‘Since the publication of Uncommon Practice in 2002, Shaun Smith and Andy Milligan have published a series of books rigorously examining the DNA of brands that deliver outstanding customer experiences.

  In On Purpose, they delve even further into the fabric of customer-focused companies, exploring the very purpose of these brands, and making a convincing correlation between customer advocacy and a strong sense of company purpose. Often books on the topic of customer experience are fairly passive affairs, celebrating the achievements of successful brands. But On Purpose isn’t just thought-provoking – it is also action-provoking. It will surely generate an urgent sense of soul-searching amongst those whose brands are built as money-making machines. But it will also encourage those brands built on more purposeful foundations to revisit their philosophies and ensure that these are being clearly communicated both to employees and customers.

  The key message of this terrific book is that brands need to be engaging and inspiring to stand out from the crowd. And without a clear sense of purpose – within the company, its leaders, its staff and its communications – brands will struggle to be distinctive.’

  Neil Davey, Editor, MyCustomer.com, Group Editor, SIFT MEDIA

  ‘No successful business leader of the future can feel exempt from reading this remarkable book. It is by two global experts, extremely readable and compelling in its key message to place customer experience at the very core of every business.’

  Roger Harrop, The CEO Expert, author and international speaker

  ‘Great book – highly recommended!’

  Joe Pine, co-author of The Experience Economy

  ON PURPOSE

  Delivering a branded customer experience people love

  Shaun Smith

  Andy Milligan

  For online resources to accompany this book go to: www.koganpage.com/onpurpose or to: www.smithcoconsultancy.com/cem-toolkit

  Contents

  Cover

  Praise for On Purpose

  Title Page

  Contents

  Introduction

  PART ONE Stand up

  01 Purpose driven The wrong kind of purpose

  The right kind of purpose

  Insight helps to keep purpose relevant

  How purpose informs building your brand and your business

  giffgaff – a purpose-driven company

  02 Purposeful leadership It takes conviction

  It is more about behaving in a purposeful way than ‘doing good’

  Stay true to your purpose as you grow

  Purposeful leaders show the way

  Purposeful leadership is about behaving, not saying

  PART TWO Stand out

  03 Infectious communication Marketing should be a verb, not a noun

  Tell a story that people care about

  Bigger is not better

  When infectious communication goes wrong

  How do you engage in infectious communication?

  How to use infectious communication

  04 Distinctive customer experience Fix it or feature it

  Create a multi-sensory experience

  Involve your customers in improving the experience

  Reinventing your industry

  Don’t ‘flat line’ the customer experience

  Best Western – ‘Hotels with personality’

  05 Continuous innovation Constantly innovate in both large and small ways

  Drive innovation from a deep understanding of what target customers value

  Use your purpose to drive growth

  Focus innovation on the things that make you different

  Stand out – a summary

  PART THREE Stand firm

  06 Cult-like culture Creating the purposeful organization

  07 Distinctive employee experience Turn your employees into fans

  Hire for DNA not MBA

  Engage and inspire your people to deliver your customer experience ‘on purpose’ through branded experience training

  Motivation is a poorly understood concept

  Motivating the greatest team on earth

  08 Experience measurement The service profit chain: reloaded

  Putting it together

  09 Never stand still That Berber moment…

  Get started and keep going

  IKEA

  Nissan

  Altro

  10 On Purpose profile The On Purpose research findings

  Eight practices common to all purpose-led brands

  11 How to implement – successfully The seven deadly sins of customer experience (CX)

  The CX Seven Step Guide: ENGAGE

  The CX Seven Step Guide: INSIGHT

  The CX Seven Step Guide: DEFINE

  The CX Seven Step Guide: DESIGN

  The CX Seven Step Guide: ALIGN

  The CX Seven Step Guide: MEASURE

  The CX Seven Step Guide: INNOVATE

  12 Putting the principles into practice Liberty Global Business Services – case study

  Advice for other leaders

  Premier Inn – case study

  Advice for other leaders

  On purpose – multichannel

  The authors

  Acknowledgements

  Index

  Copyright

  Introduction

  ‘Every business must serve a social purpose.’ These are not the words of a social campaigner or a politician; they are the words of a banker, Ashok Vaswani, the chief executive officer (CEO) of Retail and Business Banking at Barclays, one of the world’s largest banks. Barclays has been involved in at least one major trading scandal and holds the dubious honour of the most fined bank in Britain. There will be some people who will treat his words with understandable cynicism but that would be to miss the point. The point is not that the words are sincere or not – it is that they should have been said at all. Banks are concerned with the control of money – why should they concern themselves with any purpose beyond that? The reason is that society is demanding they do. When banks first started they fulfilled a social need in the community, to enable ordinary people to fund their ambitions. Over the years banks forgot that purpose and focused most of their efforts on funding their own ambitions through obscene profits, often at the consumer’s expense. The bubble burst in spect
acular fashion with the downfall of Lehman Brothers in the United States and RBS in the UK. The rot seemed widespread across the sector. HSBC, one of the world’s largest banks, became involved in a range of banking scandals, including foreign exchange manipulation and rigging of international interest rate benchmarks. Stuart Gulliver, group chief executive for HSBC, said it had caused ‘damage to trust and confidence’ in the company.1 So much so that HSBC are considering bringing back their old brand, ‘Midland’, because the HSBC name is so tarnished.

  But it isn’t just the banks that have lost their way; it is now critical for any business to demonstrate it has a purpose before, and beyond, profit; that it seeks to improve the lives of its customers as a primary goal. Failure to have such a purpose, to be clear about it and to ensure it directs everything you do, will lose customers, employees and ultimately business value. Purpose drives profits.

  The power of purpose to answer the question ‘Why?’ has also become a powerful concept in its own right. Simon Sinek’s TedX talk ‘Start with why’ has become one of the most viewed online videos ever, with its central message of ‘People don’t buy what you do; they buy why you do it’. It has inspired millions of people, including Sir Richard Branson who wrote a blog called ‘Why all businesses should ask themselves why’. However, neither Sinek’s video and book nor Branson’s blog tell you ‘how’. That is why we have written this book.

  The purpose of On Purpose

  Since the publication of our book Uncommon Practice in 2002 we have been championing those businesses that have made delivery of outstanding customer experiences their focus. We have shared the stories of companies around the world who have been bold, who have sought to differentiate dramatically what they offered to customers. We believe that the most effective marketing and the best business development are achieved through customer advocacy, and you only get advocacy from people who love what you do, not what you say you’ll do.

  More and more companies have taken seriously the customer experience and as a result have become better at delivering what customers want. Customer experience was once seen as only one of a number of important things that CEOs wanted to address. However, by 2011, Forrester’s report into the state of customer experience showed it had become their top priority and, in 2014, a lack of strategy for customer experience was cited as the number one reason for preventing profitable business performance.

  Overall, customers’ experience of businesses has reflected this shift in corporate priorities. According to the National Customer Satisfaction Index in the United States, satisfaction with companies across all sectors has risen from a low index score in 1998 of 70 to a high of almost 77 by 2013.

  Take the banking sector, for example. At the turn of the 21st century, First Direct in the UK and Umpqua in the United States were rare examples of entirely customer-focused brands. Now, in an attempt to mend the relationship with consumers, almost all the high street or retail banks have published customer charters and many are measuring the net promoter score (NPS) as an indication of customer satisfaction or otherwise.

  But though more companies have become better at what they do, few have articulated well ‘why’ they do it and translated that meaningfully into ‘how’ they do it. So the second use of our title On Purpose is to explore the intentionality of customer experience. How can brands be much more deliberate and focused in serving their customer and go beyond the vague (and usually uneconomic) desire to ‘delight’ customers? Following the publication of our book Bold: How to be brave in business and win (2011) many executives and organizations asked us to give speeches or advice on ‘how’ they might apply the principles. We came to realize that the book was inspiring because it talked a great deal about what these great brands did to transform their markets, but less about the ‘why’ and the ‘how’. This book aims to address both of these needs and we shall share examples of companies that have done so.

  As we have worked and talked over the years with all kinds of different companies and their customers, consumers and employees, it has become clear to us that the ‘why’ and the ‘how’ have become the most important sources of meaningful differentiation for businesses – ‘meaningful’ in terms of our ability, as consumers, to understand what the business is offering and its relevance and appeal to us.

  Why purpose is important

  Quite simply, showing you have an authentic and credible sense of purpose – a reason ‘why’ you exist beyond the desire to make profit – drives commercial value in an increasingly competitive world.

  Purpose matters to consumers

  The attitudes and motivations of people in many countries towards what they buy and why they buy it – whether it is a consumer product, a business service or even a political party – has changed.

  The phrases ‘conscious consumption’ and even ‘conscientious consumption’ have entered the language of economists. People are looking not simply for a product that fulfils their practical need combined with an image that reflects their personal identity. They want to buy brands that have an authentic sense of purpose, run by people who are passionate about or at the very least genuinely interested in what they are selling. And they want those brands to be contributing in some way to solving, or at least addressing, the wider societal challenges we all face.

  Michael Porter, widely regarded as one of the world’s leading authorities on business strategy, identified this change in consumer or customer motivation. It led him to establish the ‘Shared Value Initiative’. He argues that the businesses that will succeed will be characterized by a common sense of identity and motivation between owners, employees and customers. This goes beyond ‘we’re people who make the chocolate bars you like’ to a more fundamental sense of what you ‘believe in’, your ‘values’ and ultimately to a recognition of the social impact that businesses have. ‘The purpose of the corporation,’ he writes, ‘must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy.’2

  In one sense, we are going back to the future. The businesses of the early 19th century were often founded on strong principles, often social or religious beliefs. WK Kellogg, Joseph Rowntree and John Stuart of Quaker Oats, for example, founded commercial organizations inspired by a strong sense of a higher purpose. The difference now is that this sense of purpose is so shared that customers feel they have an affinity, a sense of loyalty and a sense of identity wrapped up in that business.

  The global public relations business Edelman conducts an annual survey called the Global Trust Barometer. They look at the importance that people say they ascribe to factors such as ‘trust’ and ‘the values of an organization’. From 2011 onwards they have recorded a rise in the importance of those factors among consumers. The 2015 Global Trust Barometer found that four in five respondents wanted to see companies pursue a higher purpose, not just profit.3 However, only 24 per cent of the consumers surveyed globally believed that business was driven by the desire to make the world a better place.

  People are looking to buy from and work for organizations that share their values and stay true to them. They will reward with their loyalty, or punish with their defection, businesses that do or don’t put their customer at the heart of how they operate. A recent example of this in the UK is the retail giant Tesco.

  When we wrote about Tesco in our book Uncommon Practice in 2002, it was riding high. Its CEO, Sir Terry Leahy, was adamant that its success was due to its clarity of purpose: ‘to earn our customers’ lifetime loyalty’. The words ‘earn’ and ‘loyalty’ are key – indicating a direct link between the focus of effort towards customers and the reward from their behaviour. Few people doubt that Tesco’s strength was due to its unrelenting focus on its customers’ needs and wants, even if some people felt that this strength was strong-arming suppliers and local authority planners into giving Tesco what they wanted. Tesco grew from a busine
ss that turned over £16 billion in 1998 to £65 billion by 2012 when Sir Terry Leahy stepped away.

  However, between 2012 and 2014, Tesco’s results and reputation tumbled, culminating in a false accounting scandal. Regardless of the alleged actions of a few individual executives, the consensus from analysts was that Tesco’s poorer performance has been due to its failure to focus on its core customer. Business observers generally agreed with Sir Terry Leahy’s own assessment that Tesco ‘focused too much on what it isn’t, rather than remembering what it is’. How could a company with a core purpose ‘to earn our customers’ lifetime loyalty’ end up selling those customers horsemeat labelled as beef? Failure to control the supply chain suggested to some that profit, not purpose, had become Tesco’s primary concern.

  Authentic concern for delivering to customers is key to business success because it drives customer, employee and ultimately all stakeholder satisfaction. People are increasingly testing how ‘authentic’ organizations are, judging them by the actions and words of the average customer and the average customer-facing employee, not the CEO’s shareholder-directed statements. Customers are judging, to put it simply, on what they hear from the people to whom they can most easily relate – ‘ordinary’ people just like them. Edelman revealed in its 2013 Global Trust Barometer that two sources of credibility for a company had seen dramatic rises: ‘other customers’ and ‘ordinary employees’. These had risen by 22 per cent and 16 per cent respectively to 65 per cent and 50 per cent, compared with only 38 per cent for the CEO, a drop of 12 per cent.

  Purpose matters to employees

  Employees are, similarly, looking to work for companies with whom they can share a common sense of purpose and derive dignity from their daily work, not just a pay cheque. Southwest Airlines, the largest low-cost carrier and the most consistently profitable airline in the world (42 years and counting!), placed the recruitment of people who shared its culture at the heart of its business philosophy. As Herb Kelleher, its CEO and chairman for most of those 42 years, memorably said: ‘the business of business is people’. True differentiation, he argued, could only come from culture, from behaviour, because everything else was replicable; as he pointed out in a speech in 2008, ‘All airlines have planes.’ The management guru Peter Drucker agrees, saying: ‘Culture eats strategy for lunch.’