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Purpose is the reason for being of an entity - an organization, a person, or other purposeful system. Purpose, in the context of the strategic management framework, focuses on the specific purpose of the business organization, while recognizing that this specific purpose fits within the generic business purpose. Also, while recognizing that the organization is made up of purposeful agents, these agent's specific purposes are not explored.

Purpose elaborated --
The purpose of the business organization is the dominant factor in business definition and design. Purpose is the anchor point for the organization's values, reason for being, identity, vision, and meaningful achievements. Strategy revisions will change the behavior of the organization as conditions change while the values, reason for being, and identity are stable.

BAi's Purpose and Collin's Vision --
The 'purpose' as defined in the BAi business design construct largely comes from Jim Collins' definition of 'vision' - complimented with Nikos Mourkogiannis' idea of moral purpose, and identity. The reason for using the term 'purpose' vs. 'vision' is for the sake of consistency in the application of systems terminology to the fundamental aspects of the business organization - purpose, function, process, and structure.

Constructing a purpose --
A purpose is made up of the following elements (the same structure and content of Collin's vision) --

  • Ideology
    • Values
    • Reason for being
  • Envisioned Future
    • Ambitious goals -- Long-term mind stretching goals
    • Vision -- A vivid description of the future as a better place as the business fulfills its purpose. An ideal.

Purpose, authenticity, unity, and identity --
The business, including all of the stakeholders, is in fact a community. The values and reason for being provide identity to and bind the community together in pursuit of a worthy vision and goals. This ideology and envisioned future --

  • Provides a touchstone for every individual and for the community as a whole,
  • Provides the basis for community identity in action,
  • Is an authentic purpose that is never exhausted, even as participants' understanding and practice evolves,
  • Creates community and forges shared meaning, and,
  • Assures an abiding and important activity within a healthy society.

Strategic Focus -- a passionate purpose fuels success --
The purpose is both the foundation and a key catalyst for strategic focus development, strategy, and business model design. It should reflect what is most valuable to this business. A vision that is clearly defined and lived out in the business is what fires the passion necessary to inspire the organization to achieve great things, overcome tremendous obstacles. It is this passion which is the first of the three key strategy and business model elements making up the strategic focus of the business.

Mourkogiannis on Purpose Based on Mourkogiannis, 2005, pp 6, 46 --
Purpose is the most critical element of the business organization. It is bigger than tactics and strategy. It defines a moral purpose for a business organization beyond making money, taking it beyond ambition and greed. Purpose is at the core of a business organization's identity. ""Purpose is your moral DNA."" It is not mission, vision, value, identity, strategy, constraint, or tool - but a call to action.

Purpose as a moral idea -- (Mourkogiannis, 2005, pp 113 - 126)
Moral ideas underpin purpose. Purpose and morality become inextricably linked together. Moral ideas are the beliefs about the ultimate moral basis for action. Four moral purposes identified by Mourkogiannis --

  • Discovery -- Type of morality: ""The New"". Moral basis for action: I have freely chosen it. Philosopher: Søren Kierkegaard. Companies: IBM, Sony, Intel, Virgin
  • Excellence -- Type of morality: ""The Good"". Moral basis for action: It constitutes fulfillment. Philosopher: Aristotle. Companies: Berkshire Hathaway, The Economist, Apple, BMW
  • Altruism -- Type of morality: ""The Helpful"". Moral basis for action: it increases happiness. Philosopher: David Hume. Companies: Wal-Mart, Hewlett-Packard, Nordstrom
  • Heroism -- Type of morality: ""The Effective"". Moral basis for action: it demonstrates achievement. Philosopher: Friedrich Nietzsche. Companies: S.G. Warburg, Microsoft, Ford, Exxon/Mobil

Other moral purposes include patriotism, universalism, religion, and the authority of the law - these purposes are less useful for defining modern business purposes.

Describing purpose -- Mourkogiannis, 2005, pp 16 - 18
Purpose is preparation for doing what is right and what is worthwhile. As such, it creates a sense of obligation.

  • Purpose is based on well-established moral ideas. To build a business that lasts, one does well to draw on ideas that have lasted.
  • Purpose advances both competitiveness and morality: purpose is in an area of overlap between the two.
  • Purpose relates people to plans and it relates leaders to their colleagues.
  • Purpose cannot be chosen quickly or on an ad hoc basis; it has to be discovered, and this may take time and trial and error.
  • Purpose is a matter of the firm's life or death. Its presence can transform a firm and its loss can destroy an institution.
  • Finally, purpose is a paradox. It will boost profits - but will only do so if it is pursued for its own sake. It will boost morale, build the brand, help in assessing the strategy - but it can never be just a tool. It is this duality that makes purpose difficult to harness - hence so valuable.

Purpose versus profits, governance, long-term thinking, principles, codes, reputation, philanthropy, brand, vision, mission, and values -- Mourkogiannis, 2005, pp 45 - 56
This is Mourkogiannis' construct designed to get at the heart of he motivating energy of an organization. I could argue that Mourkogiannis' moral idea based purpose should be in the blending of values, raison d'etre, and vision. But for the sake of understanding Mourkogiannis, I will temporarily accept the more trivial meanings he gives some terms. The value in what Mourkogiannis says is his thoroughness of getting at the heart of what purpose is and how it relates to competitive advantage.

  • Profits -- Profits are like oxygen to organizations - absolutely necessary for survival, but they are not a moral purpose. There is also no moral duty to maximize profits.
  • Governance -- Some believe that purpose should come down to balancing the demands of stakeholders or constituencies. This is already the way companies are run, at least in the short-run.
  • Long-term thinking -- Long-term thinking may reflect a purpose but it is not a purpose.
  • Ethical principles -- Ethical principles, in practice, are often not sufficiently robust to influence the most difficult decisions - the ones that really matter. If the principles follow from a moral purpose, they will be central to what the business is about and therefore be most evident when the difficult decisions are made. If not, the ethical principles will serve more as constraints to be questioned and patronized rather than willingly followed.
  • Codes -- Whether codes of ethics, practice, governance, or approved behaviors - these codes serve to prevent or restrain vs. inspire.
  • Reputation -- Saying you are social responsible for the sake of trying to have a positive reputation is different than a moral purpose. Again, the reputation should come about from the actions taken in pursuit of the moral purpose.
  • Philanthropy -- Philanthropy maybe is and should be peripheral to the main purpose of the organization. It can be used for strategic purposes in some cases, like a PC manufacturer providing free or subsidized PCs to certain markets.
  • Brand -- Mourkogiannis equates brand and identity - how people view the firm. In great companies both the brand and moral purpose stem from the same moral roots.
  • Vision -- A vision by itself may have no moral content - ""Be number one or two in every market we participate in."" This type of vision of course does not provide ""a vivid description of the future as a better place as the business fulfills its purpose.""
  • Mission -- If a mission does not inspire a moral vision or is not derived from moral values, it of course does not serve as a moral purpose.
  • Values -- In practice, values are often not moral nor concerned with the destination of the organization. I would contend that the values are so fundamental to what the leadership community considers morally right, that the leaders would abandon their purpose if it came to conflict with their values.

The bottom line is that a moral purpose is the foundation of the business organization. This is the case whether this purpose is seen as being embedded in the values, mission, and vision or whether it is seen as a separate element in and of itself.

Discover of purpose -- Mourkogiannis, 2005, pp ?
Purpose is decided upon. This decision comes from a process of discovery. There are two constraints to what is discovered - 1) the purpose must fit the moral ideas of those the team hopes will join the community of purpose, and 2)support an achievable strategic position that will generate wealth.

Intelligent decisions about purpose are based on analysis of the environment, as well as on the firm's capabilities. The goal is to align purpose with strategy - where the same actions that create the firm's wealth will also work towards achieving its purpose.

Management of purpose -- Mourkogiannis, 2005, pp ?
Company leaders have to manage purpose and strategy so that they are aligned. If they drift apart, then the organization starts to follow two masters - and it is unlikely to satisfy either fully. When strategy is not aligned with purpose, economic power and legitimacy are no longer reinforcing one another. Without legitimacy, more and more management power is required while legitimacy oozes away.

Questions to discover purpose -- Mourkogiannis, 2005, pp ?

  1. What strategic positions fit the firm's assets and other strengths?
  2. What community of purpose does this imply?
  3. What can we learn from heritage and heroes of the firm? (See path dependency).
  4. What other constituents do we need to satisfy?
  5. What are the ethical ideas of these groups, including the leadership team?
  6. What are the implications for the purpose of possible strategic positions?
  7. What changes to assets or people are needed to create a fit?

Discovery of purpose and development of strategy -- Mourkogiannis, 2005, pp 160 - 161, 180 -190
Mourkogiannis makes the case that strategy without purpose, and purpose without strategy, lead to mediocrity or failure. Advantage requires both and inspiring purpose and a strategic position of advantage which produces wealth. The steps below define the process --

  1. Review your strategy -- Create a series of options that make use of existing strengths and draw out implications for assets and coordination. Note: This relates to path dependency - the experiences of the past, actions of the present, and the possibilities these two have created for the future.
  2. Draw out the implications -- Identify implications for who is in the community of purpose and for the purpose itself. Note: This is an assessment of stakeholder values and needs.
  3. ""Know thyself"" -- Understand your own moral ideas. These are the beliefs about the ultimate moral basis for action that underpin purpose. Note: This is the integration of values and purpose. See values, Values, morality, and purpose.
  4. Understand the company traditions -- Understand what has seemed important to employees in the past - and what will be potentially important in the future. Note: This relates to path dependency and culture.
  5. Take a purpose inventory of the top team -- Understand the moral ideas of those you work with. Engage in discussion of ethics. Listen to the moral language used. Note: This relates to values.
  6. Take a moral inventory of the community -- Understand the moral ideas of employees who are in the community of purpose and those of any relevant external groups whose moral ideas should be considered. Note: This is an assessment of stakeholder value and sense of purpose.
  7. Identify purpose -- Identify implications for purpose of the outputs of stages 2, 3, 4, 5, and 6 and what has to be done to eliminate compatibilities. Note: This requires both creativity and courage to deal with an strong incompatibilities.
  8. Create metrics and models -- Create tools for predicting and measuring progress towards purpose. Note: This creates a link between decision making, purpose, and values.
  9. Test strategy and purpose -- Test if strategic position will deliver both purpose and profit, and refine strategy or purpose as necessary. Note: Flush out any major incongruities. Minor ones can be noted but ignored for the time being.
  10. Decide -- Endorse purpose and decide what activities and resources to cut away and which need to be added. Note: This is done in stages starting at the top of the organization -- and with the closest customers, suppliers, and partners.

Success and purpose -- Mourkogiannis, 2005, pp 6 - 7, 40
Competition between companies is at least in part a competition between different moral ideas. Successful ideas generate successful companies; unsuccessful ideas result in failure. Understanding the success and failures of companies require an examination of their fundamental ideas - going beyond the examination of strategy and tactics. The firm with a more effective purpose has an advantage over a firm with a less effective purpose.

  • Purpose is the primary source of achievement.
  • Purpose reveals the underlying dynamics of any human activity, the most fundamental issues involving motivation and behavior, in either a community or an organization. It is the core energy, the element that fuels everything else, big and small.
  • Purpose is all that successful leaders want to talk about - although they do not usually use the word itself.

Purpose and innovation -- Mourkogiannis, 2005, pp 127 - 135
Purpose adds a dimension to innovators' thought process that goes beyond the technology, the market, and the competition - a moral purpose of discovery, excellence, altruism, or heroism purpose (see values). Purpose can serve to open the thoughts of possibilities, generate more ideas by engaging people's desire to achieve a purpose, and generate bolder ideas make bolder decisions with the purpose weighing in as a counter to the natural risk aversion in established businesses.

Purpose and advantage -- Mourkogiannis, 2005, pp 137 - 147
Advantage comes from having a unique position of some sort that creates unique value. Sustainable advantage requires sustaining uniqueness. Given that advantage erodes over time due to the creative destructive forces in the economy, there is something more than strategy, or a strategy, that is needed to sustain advantage. This something is a purpose ""built on moral ideas that have stood the test of time."" This consistency of an inspiring purpose stimulates successful innovation and the successful formation of new relationships to build new capabilities used to develop new advantages, and gives the organization the confidence to transform the organization - putting the new advantages to work.

Because purpose is an ideal, never being fully achieved, it remains a constant in a dynamic world that demands everything else change to remain viable.

Purpose and identity --
Purpose is at the core of identity. Identity goes beyond purpose to include the path of the organization, the past experiences, present actions, and sense of the future. Clear identity is the key to inspired and dedicated members moving the organization to adapt and confidently transform the business in pursuit of new opportunities.

Purpose as a system variable --
Purpose also refers one of the variables of a social system. The purpose of a system is its reason for existence within its environment. The purpose for a business organization is described further by the purpose aspect and the purpose architecture.