The 10 Principles of Open Business

Building Success in Today's Open Economy

D. Cushman

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137347039
• eBook ISBN: 9781137347046
• Topic: Negocios y empresa
• Subtopic: Estrategia empresarial

The 10 Principles of Open Business is a practical guide to organizational design for the Twenty-First Century. Using case studies, the authors define the 10 principles of open business that organisations mustadopt to both survive and thrive, and provide a practicalmethod to assess the reader's own organization.

Chapter 1

Purpose

Definition

Purpose is the why. It is the belief which all your stakeholders share and to which all your organization’s actions are aligned. Your products/services are proof of that shared purpose.

As you might expect from our definition of Open Business (“one which uses its available resources to discover people who care about the same Purpose it does, brings those people together and joins with them to achieve that Purpose”), Purpose is mission critical.

Most organizations are good at “What” they do and “How” they do it. But ask them “Why?” and things get trickier. How does yours score? See our Goal State/Worst Case at the end of the chapter.

Most, when asked about Purpose, will point to Mission Statements. Unfortunately in the majority of cases a Mission Statement begs a further question: Why?

Many are written along the lines of intended outputs, “To be No. 1 in our chosen markets and sectors returning maximum value to shareholders.” Or, “To be the most admired.”

Why?

That “Why?” is important. It is what brings people together, motivates them, and inspires them to support your cause. In our connected world, in which an organization’s role is to act as a platform to help others achieve a collective shared Purpose, it is essential. It is how you succeed.

It can’t be just any old “thing.” It has to be something that matters. Something about the world you want to put right. Something that matters to you and to others. Something to believe in.

Who will give you their time to help you shape your products, services, or business if they don’t believe in the same things you do? There are plenty of other brands out there they can be giving their attention, knowledge, skills, time, and money.

As Mark Earls (and we’ll hear more from Mark shortly) puts it in his book Herd (Wiley 2007): “Find Your Purpose Idea and Live it.”

It should be what gets you out of bed in the morning, it should be what inspires staff and partners to join you, it should be what attracts people to support you on your journey because it is their journey, too.

Get it right, truly believe in it, and express that belief through everything you do and you’ll find, as artist and marketer Hugh MacLeod draws it: “The market for something to believe in is infinite.”

Businesses which live and breathe their Purpose need to spend less resource on telling people what they believe. Customers can see it for themselves, not through what the company says, but by what it does.

Google is a great example. Now with $94bn in assets and annual revenues of over $50bn (2012 figures), it lives the same Purpose as it did when it was founded in 1998: “To organize the world’s information and make it universally useful.”

express that belief through everything you do

That informs what they do and what they don’t do, their approach to data and openness (universally useful), it guides their acquisition strategy (is it going to help us achieve our Purpose?), and it acts as a motivator to those who may want to support Google or work for it.

That Purpose is supported by a set of principles which act as guidance on how Googlers (as staff are known) should behave in seeking to achieve that Purpose. These have proved essential as the business scales – and does so in a distributed rather than hierarchical model. They frame the Google culture.

These principles famously include Don’t Be Evil (more accurately You Can Make Money Without Doing Evil). Others are You Don’t Have to Wear A Suit to Be Serious, Focus On The User And All Else Will Follow, It’s Best To Do One Thing, Really, Really Well, and Democracy On The Web Works.

In line with their belief in the principles of Open, Google publishes all 10 of its own principles on its corporate website – and calls on the world to hold them to account.

Ask any Googler. They’ll know all about their Purpose.

Compare that to Yahoo. Once Google’s greatest global rival, now a pale, distant shadow of a competitor.

According to an article by Adam Lashinsky in Fortune published in February 2007, Yahoo’s Terry Semel was interviewed about Purpose in summer 2006. He had been CEO for five years at that time.

After an uncomfortably long pause, Semel replied: “I don’t know that we have a motto. Well, the mission of the company is; Deliver great value to our consumers and, basically, value them.”

Actually, at the time, Yahoo did have a mission at least. It was (the clearly little known):

To be the most essential global Internet service for consumers and businesses.

No wonder it was little known. You have to Do in line with your Purpose – not just write it down. And even by 2006 it was clear Yahoo was far from essential for either consumers or businesses. If anyone could claim that position it was their great rival Google.

Yahoo – which was incorporated in 1995 – had been overtaken by a faster growing, Purpose-led business.

Yahoo wasn’t founded to be the most essential Internet service for consumers and businesses but for something far simpler – and closer in spirit to Google’s own Purpose: “A way to keep track of personal interests on the Internet.”

There is a kernel of that in the “Mission” Yahoo rolled out in 2007: “To connect people to their passions, their communities, and the world’s knowledge.”

Yahoo’s difference was in connecting people to their interests. It was a people-focused philosophy. If they had been living it then perhaps when Facebook and Twitter first emerged Yahoo would have been first in the queue of suitors.

While Google’s Purpose has remained rock solid, Yahoo’s has been fluid. The latest on its corporate website in 2013 stated: “Yahoo! is focused on making the world’s daily habits inspiring and entertaining.”

What does that mean they should and shouldn’t do today?

Purpose is hugely important – way more than most senior teams realize (witness Mr Semel). If you don’t know where you are going, how are you going to get there?

In 2012, Yahoo’s revenues were less than 10% of Google’s, their assets around 15%.

That’s 10 times the revenue. That’s how important Purpose is.

* * *

Mark Earls has worked with some of the world’s biggest brands and organizations, helping them find and deliver change and value through Purpose. He is a former executive planning director EMEA and chair of the Global Planning Council at Ogilvy & Mather (London and Frankfurt) and author of not only Herd (previously referenced) but also (with Professors Alex Bentley and Mike O’Brien) I’ll Have What She’s Having – Mapping Social Behavior (MIT Press 2011).

Toward the end of the last century Mark Earls was “with a bunch of other crazies” running an independent London-based creative agency called St Luke’s. It was there that his thinking around Purpose first emerged.

“I was thinking very hard about the businesses that we all admired. They didn’t seem to fit into the cookie-cutter, mechanistic model of business school education or marketing ‘how-to’s’. They were somehow more interesting.”

At the time it was companies like IKEA and Virgin that attracted his attention.

“It struck me that what differentiated these organizations was they believed something,” says Mark. IKEA for example has a series of principles its founder set out, best summarized in the IKEA vision which is “To create a better everyday life for the many people.”

Note the distinct lack of reference to either furnishings or shareholders in that line.

Most organizations don’t believe in something. Instead, as Mark notes, they “nod” to the corporate value statement, they nod to the mission/vision/purpose, they nod to the importance of the brand, and of caring for their customers.

According to Mark, you can spot the organizations for which this is true, because they are the ones that illustrate their nodding in a very corporate, glossy way, through slick video – or through missions articulated without emotion.

“They do it in with no real feeling for the people involved,” Mark says.

Many logistics businesses let themselves down in this way, he continues, having worked with many. They talk about how much easier life would be without customers. Passengers get in the way. They spoil and confuse.

“What becomes really clear is how annoying the customer is to them.”

The old British Railways, Mark says, would claim it could run a brilliant rail network “if it wasn’t for those bloody customers.”

“Most boardrooms in the 1990s – and for the early part of this century – really seemed to dislike customers and didn’t want to get anywhere near them. Most would rather not be exposed to the messiness of people’s lives.”

One Twitter account set up by a frustrated rail employee in the UK says it all. It was called @PaxHater (Pax being industry shorthand for passengers).

Real customers and their actual behaviors are difficult to fit on spreadsheets, Mark contends. The culture of business is often about mechanical processes – a poor fit with the more organic reality of their customers’ lives.

“In Herd … I talk about how management science is rooted in the late 19th-century obsession with machinery, and the view of humans as like machines but lazier and less precise, and less efficient, and less reliable … just less machine-like.”

Even now, the idea of really listening to your customers remains a rarity, Mark continues:

“Instead we set up fancy things which are machine-like, systems for listening rather than actually listening. That’s why the market research industry is such a huge phenomenon. It’s an excuse to intermediate between a business and its customers,” says Mark.

“It makes what customers say easy to package, and safe – with none of the anger.”

Customers are often grumpy. Corporate HQ would rather not know.

The organizations that we “like” says Mark, or which cause a stir in the culture, are those which are more humane. They make sense in a way which isn’t only about pounds and dollars.

The second indicator of businesses lacking this higher purpose, and through this a connection to their humanity, were the KPIs, Mark recalls.

“There was a moment when – so the story goes – the magic circle of Fortune 500 CEOs got together in the very early 90s and said: ‘This balancing of shareholder, and stakeholder, and employee, and social … all those interests … it’s really hard! So … let’s not do it anymore. We’re just going to focus on shareholders’.”

Whether the moment actually happened or not, the reality was that managers and employees became tools of the shareholder – driven to more and more short-term thinking to deliver next quarter results.

Against this backdrop, the Purpose-driven businesses began to stand out.

Jim Collins and Jerry Porras in their book Built To Last (HarperBusiness 1994) drew on a six-year Stanford University Business School study of 18 truly exceptional and long-lasting companies against their like-for-like competitors.

“Their basic observation is that businesses that organize themselves around a purpose, some higher calling, something other than the financial performance of the business, outperform businesses which organize around financial performance. They say it’s a 7:1 ratio.”

They happen to deliver above-average shareholder return over the medium- and long-term as a consequence.

Purpose can’t stop at the boardroom door. The experience...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures and Tables
• Foreword
• Acknowledgments
• Introduction: Starting from a Different Place
• Introduction: Defining Open Business – and Its Benefits
• Introduction: Tesco Plc – an Open Business
• Chapter 1 Purpose
• Chapter 2 Open Capital
• Chapter 3 Networked Organization
• Chapter 4 Shareability
• Chapter 5 Connectedness
• Chapter 6 Open Innovation
• Chapter 7 Open Data
• Chapter 8 Transparency
• Chapter 9 Member Led/Customer Led
• Chapter 10 Trust
• Summary
• Index