If you, like me, live and work in the small world of branding, creating strong brands and brand leadership (I happen to be a consultant and former academic), you are witnessing not just the pandemic health crisis, the economic crisis (dare I say recession), and ecological crisis, a social crisis (e.g., George Floyd) and a political crisis, BUT also a brand purpose crisis.
Brand purpose is on everyone’s mind and it has been like that for over a decade now. And there are only two sides you can take. You either think and believe it is a lot of baloney or you believe in the purpose of brand purpose. Evidence abounds that make both sides’ positions and argumentation valid and many times laughable. I love to read about the latest news or quibbles on brand purpose because it always is, in some ways or another, rather thoughtful or rather amusing, or both.
Reading about brand purpose sometimes makes me think of reading a few paragraphs from Marcel Proust’s monumental tome In Search of Lost Time, and his description of the childhood experience of tasting an ordinary madeleine. And so it is with brand purpose. Purpose is so obviously important for any business, just like the daily ritual of dipping a madeleine in tea in France. Yet, the writing on purpose takes on different proportions and qualities, weak efforts of being a bit Proustian, with authors waxing on forever, touting its importance and relevance for our times.
Brand purpose is in a crisis of gargantuan proportions.
There is no need for me to dive into my own opinions on brand purpose or which side I come out; it depends on the time of the day. There is so much wonderful writing on it. The latest article that I read by Tom Roach was so beautifully written – I can only urge you to read it – “The Biggest Lie the Ad Industry Ever Told”:
The large Association of National Advertisers (ANA) has even launched a Center of Brand Purpose. The center has an objective and it published already a comprehensive essay on, you guessed it, the power of brand purpose for advertisers, agencies and society.[i]
The ANA research and the Tom Roach article might help solve the dilemma for you, in favor of or against brand purpose. If that does not help, you can just choose a third way to think through brand purpose. You can decide not to take sides, but to just say, “SWWC (So What Who Cares), do we really need a purpose at all?” For that discussion, you can follow Tom Goodwin, who struck that conversation on LinkedIn. See the following link, and don’t forget to review the 130 comments made by others following his post:
In my opinion, all that vivid, elegant writing and opining on the value of brand purpose is highly shaped by our own perspective – the little box we all live and work in. We write either from the brand strategy perspective or the advertising perspective; we write as consultants or as agency staffers, or as staffers anywhere in the hierarchy inside companies. One side will say that agencies should never touch brand purpose because they merely create a pithy slogan, based on a creative brief, and look at brand purpose from a communications perspective and they really don’t understand the strategy of the business – purpose is so much more.
Consultants get called out because they purport to create purposeful brand strategies, and in support of brand purpose, they cite questionable studies or surveys, or cherry-pick cases studies and anecdotes. They fill PowerPoint presentations by trotting out the traditional examples of TOMS Shoes, Unilever, or Patagonia, or a set of case studies that nobody knows about but that sound really, really good.
What I find astounding is that not a single article or opinion in the last 20 years on brand purpose has approached brand purpose from a broader systemic perspective – the perspective of shared value for everyone including consumers, companies, and society at large. No, I don’t mean a business model to sell more shoes like in TOMS one-for-one model: for each pair of shoes sold, the company gives one pair to kids in developing countries. I am also not talking about the profit with a principle business of the Godfather of purpose, Patagonia, or the company’s crusade over the years or how a large multinational company like Unilever became the Champion of the Earth and was able to differentiate based on sustainability. Shareholders rejoice.
In all of these examples, the company decides to “be purposeful,” and they do something about it, for the most part. That’s a good thing, but it makes purpose an afterthought of the business and mostly a communications exercise. The company is healthy, makes profits, delivers value to shareholders, and, well, of course, there is an opportunity of doing more, so let’s fund something that matters to society. Amazon donates 10 million dollars to support social justice and equity.[ii] Yes, we live in days and times of protests and daily demonstrations, and Amazon donates $10 million. How good of a gesture this is. Real action – not just statements of goodness from the CEO. Right? Well, remember the CEO is worth north of $100 billion. That’s what is called the “net worth” of Jeff Bezos that makes him the richest man in the world, even after his recent divorce. The company is worth over $1 trillion, one of the most valuable companies in the world. I love Amazon, but spending merely $10 million on an important cause such as social justice? Is that living a purpose? The rabid media is quick to report on the latest commitment made by the company and the announcement goes viral. The announcement has helped the Amazon brand.
The problem with this way of thinking about brand purpose is that purpose is an afterthought. Business has been good, consumers have been generous, and shareholders are happy, so let’s pour some money back into society. It is good for business and good for society.
Build an Interaction Field Company NOT a Purposeful Company
There is another way to think about brand purpose. That is to build the purpose of the brand or company in the company’s vision, operating model and operating processes – to build a purposeful business, not a business with a purpose. Here is how.
It starts with platform thinking. Platform thinking is a revolutionary new way of thinking about how markets work – how consumers, companies or brands, competitors and others, interact and create value.[iii]
The traditional way of thinking of markets is in terms of producers and consumers. Producers create value by optimizing a range of activities from procurement, design, manufacturing, branding, marketing to sales and service. The differences in the activities of competitors create their competitive advantage. A BMW becomes the ultimate driving machine or ultimate driving experience relative to Mercedes, Audi and others. The producer creates value for which the consumer is willing to pay a price. This is also called a “pipeline model” or “pipeline thinking” because a company competes by controlling and adding value along with the activities or along the pipeline or value chain. Brand purpose in this model is about adding or enhancing the company’s vision, mission, and values through a purpose. It makes brand purpose an afterthought.
The new way of thinking about markets is in terms of participants who interact to create and consume value. Consumers are not just recipients of value but active producers or participants of creating value, as are one or more producers. Value is created through collaboration, engagement, and interaction between participants.
This new way of thinking about markets gives rise to three types of business models. If there is one group of producers and consumers, the business model is typically called a “platform.” Uber is an example. The participants are riders and drivers who create value which, in turn, is orchestrated by Uber through a set of rules of governance. With Airbnb, there are travelers and hosts. A platform, in this case, is an open architecture with rules of governance designed to facilitate interactions.[iv] With more than one producer and consumers, we typically talk about a digital ecosystem.
A digital ecosystem may be defined as interacting organizations that are digitally connected and enabled by modularity, and are not managed by hierarchical authority.[v] It is a way of providing adjacent products or services by collaborating with other companies or business units. One mechanism to create value is to share data generated on the platform. Uber entered food delivery with Uber Eats, which adds restaurants as an additional participant in the Uber ecosystem, and then built out the ecosystem to include Uber Health, Uber Freight, and Jump bike and scooter sharing, for example. The data and analytics applied to the sheer number of transactions help optimize the platform and ecosystem and create value.
Digital ecosystems change the nature of competition from being firm-focused to being ecosystem-focused.[vi] Strategically, the decision is either to create an ecosystem and orchestrate it or to join an existing ecosystem. The Android ecosystem competes against the Apple ecosystem, a typical example of ecosystem competition.
A third business model is the interaction field.[vii] Unlike platforms and digital ecosystems, an interaction field is not transactional but interactional. It feeds on continuous engagement, participation and collaboration between multiple groups, not just discrete transactions such as another ride with an Uber, or another booking on Airbnb. It delivers shared value to everyone, not just the platform owners or ecosystem partners. It creates new value that solves entirely new problems; it does not just solve existing problems better or more efficiently or merely takes out frictions or pain points in commerce or shopping experiences.
These business models are three examples of platform thinking as compared to traditional pipeline thinking. What is common among these three models is that they are built through three mechanisms: interactions, architecture, and governance. If you would like to read more about these three mechanisms of designing a business, I suggest this source:[viii]
These business models build brand purpose into the governance of how the business creates value. The mechanism defines how interactions create value, how the business captures value, and how it shares out value. Sharing out value to the participants of the ecosystem or interaction field is not a single act of goodness, such as spending $10 million on social justice and equity, but it is part of the daily business operations, part of the operating mindset, and part of the operating model and process.
Brand purpose isn’t about doing something good for society; the traditional way of thinking about maximizing shareholder value and recognizing that society is also important in the end, but it is about building an interaction field company that creates value and shares out value for everyone. Everyone, including consumers, are participants of value creation and also beneficiaries of that value creation.
If we start thinking of brand purpose in terms of designing the business and its interactions in a larger interaction field properly in the first place, we can make sure that purpose isn’t only a communications exercise. I have tried to address this issue in my new book.[viiii]
[ii] The first use of the term can be found in: Sangeet Paul Choudary (2014), “A Platform-Thinking Approach to Innovation,” Wired.com, https://www.wired.com/insights/2014/01/platform-thinking-approach-innovation/
[iii] Marshall Van Alstyne, Geoffrey Parker and Sangeet Paul Choudary (2016), “Pipelines, Platforms, and the New Rule of Strategy,” Harvard Business Review, vol. 94, no. 4, pp. 54 – 62. Geoffrey Parker, Marshall Van Alstyne, and Sangeet Paul Choudary (2016), Platform Revolution: How Networked Markets Are Transforming the Economy – and How to Make Them Work for You, W. W. Norton & Company.
[iv] Michael G. Jacobides, Arun Sundararajan, and Marshall Van Alstyne (2019), “Platforms and Ecosystems: Enabling the Digital Economy,” World Economic Forum Briefing Paper, February, p. 14.
[v] Michael G. Jacobides (2019), “In the Ecosystem Economy, What’s Your Strategy?” Harvard Business Review, September-October.
[vi] Erich Joachimsthaler (2020), The Interaction Field: The Revolutionary New Way to Create Shared Value for Companies, Customers and Society, Public Affairs, New York.