Roland Deiser: Ranjay – your most recent book is called Deep Purpose. What made you write about that topic, given your original background on growth strategy, alliances and M&A?
Ranjay Gulati: If you would have told me five years ago, I’m going to write a book about purpose, I would have said, you’re crazy, no way. I was somebody who studied unlocking growth in businesses in good times and bad. I started out with a focus on organic growth, then moving on to growth through joint ventures, partnerships, and acquisitions – strategy work. I soon realized that strategy alone doesn’t cut it – to succeed you need to focus on implementation. Strategic doing and mobilization of people became important. I found out that for some companies mission and purpose is not just a generic wallpaper statement but something much bigger than that. They use it to unlock the organization, unlock the growth potential of companies. Until then I hadn’t thought much about purpose.
Also, working with start-ups and founders I discovered that their purpose meant intentionality – the ambition to change the world. There was something missing in my own understanding of growth, in what it takes to achieve your fullest potential. It was something fundamental – also on a very personal level, myself included: if we want to live to our fullest potential as human beings we must know our purpose.
RD: That’s a big step – from looking at growth and strategic dynamics to focusing on purpose. What is it, in essence, that fascinates you most?
RG: Let’s think about what the word purpose really means. It is not a new word. It’s been around forever. The ancient Greeks talked about purpose. The ancient Indians talked about purpose, the Chinese talked about purpose, every ancient civilization talked about purpose.
The ancient Greeks talked about purpose. The ancient Indians talked about purpose. The Chinese
talked about purpose. Every ancient civilization talked about purpose.
And every religion talks about purpose – on the individual level. The application of purpose to organization is a relatively new idea. The Stanford psychologist William Denning defines purpose as a stable and generalized intention to accomplish something that is meaningful to the self AND consequential for the world beyond the self. So if we bring intentionality into our life, we become more purposeful, we become more focused, we know how to make choices and trade-offs. Now, if individuals benefit from having a purpose that propels me, motivates me, and energizes me, can we think about this construct for an organization?
Unfortunately the notion of organizational purpose has been hijacked in the business lexicon by the left and the right. People say “Oh, purpose is all non-profit stuff.” Or purpose is all shareholder value only. This is a meaningless debate. Because every business should have intention. When you think- long-term about your business, you have to think about your employees. You have to think about your customers, you have to think about the communities where you operate. You have to think about the shareholders. And you have to possibly think about the planet too. All of this matters. I soon realized that strategy alone doesn’t cut it – to succeed you need to focus on implementation.
If we want to live to our fullest potential as human beings we must know our purpose.
RD: So, there is a social architecture behind purpose? Because if purpose impacts the world, it must reach beyond just the system that has the purpose but also the systems that are impacted by this purpose. This interplay may shape the overall development of purpose.
RG: That’s a great question. When I started my research for the book, I found so many companies practice what I call superficial purpose. They think of it as a PR exercise – everybody has one, so we need to have one. And guess what – it doesn’t do anything, it’s meaningless. The other thing I realized was that purpose is not just in the purpose statement. If you read Microsoft’s purpose that Satya Nadella and his team came up with, it says to empower every person and every organization on the planet to achieve more. That seems very flat, generic, copy and paste. But what I learned from them was that it wasn’t the statement; it’s the nine months they spent debating what it is, and the meaning it gives to them. To the outside, it may look like empty words, full of platitudes, and cliches. But for them, there’s a lot of meaning in these words when they are making decisions about resource allocation, or budgeting, or R&D, or hiring.
That’s why I called the book Deep Purpose, because it’s not just about purpose statements. It’s about what are the problems you want to profitably solve for the world. What value do you want to create? How do you want to create it, and for whom? I exist to create value to benefit our customers, our shareholders, our employees, our communities, and the planet. Every business exists to solve a problem.
RD: Well – GE, for example, has a great purpose statement prominently on their home page: “We rise to the challenge of building a world that works”. Still, they have been in disarray and are still struggling to regain at least some of their past glory.
RG: I guess you’re asking if purpose is a necessary and sufficient condition to succeed – and the answer is no. Purpose is one of the levers available. You still need a strategy; you still need an organization to implement the strategy. You can’t live on purpose alone. In fact, it gives purpose a bad rep when CEOs who are not performing try to hide behind their purpose and say ‘we’re trying to follow our purpose – it takes some time.’
This happened actually in a tragic way at Danone. Emmanuel Faber, an amazing leader, deeply committed to transform the mission of Danone as a food company. But he couldn’t deliver results. And at some point investors lost patience with him.
Purpose includes shareholders – they give you the license to do all these other things. You can’t not deliver for them. The idea that I’m a long-term company, I don’t deliver short-term – that does not work.
You also asked me where does purpose come from? Now, if you’re a start-up company, you may create a purpose that is usually an extension of the founders’ own beliefs. The founders of Johnson & Johnson wrote the credo that persists even today.
Such organizations have a shadow of the past that lingers on. They may have changed it many times, but it’s still there. Sometimes the purpose seems to be lost and you have to detect it through retrospective sense-making. The challenge is not to get hijacked by the past. The idea is to get inspired by the past and leverage this inspiration to shape your future.
RD: I read your recent piece in HBR on that . I think the question is, can you even escape your DNA? I strongly believe there is something like an organizational DNA, which comes very much from the founders, usually. Then it develops over time, founders die, new generations come in. But you still cannot totally escape your identity. Which leads me to the relationship between purpose and identity. How do they relate?
RG: Purpose and identity are very connected constructs. Identity is really about how do I see myself. It’s a construct of how do I present myself to the world. So it can be social identity, which is, how do I see myself in relation to the world? How do I perceive myself, and how do I want to be perceived by others. That’s identity. Purpose, on the other hand answers the question ‘Why do I exist?’
RD: I guess both concepts are very relevant in the context of large organizations or business ecosystems, where the role of purpose is also to mitigate the centrifugal forces that come with empowering the periphery so it can better engage with the external partner universe. Here purpose is one thing that
keeps systems together. How do you see that?
RG: It’s fascinating to apply the concept of purpose to ecosystems. A lot of ecosystems are built around one or two or three companies that create a larger ecosystem around them, and it’s imperative that they share a common purpose. There are classic failures in this context. For example Nokia – they tried to build a whole ecosystem around a software platform that would compete against Microsoft, Apple and others. But it was not driven by a shared purpose; it was really Nokia, pushing their agenda on everybody – and nobody bought in. Creating a purpose together creates a shared objective. It creates clarity in terms of roles and expectations. Crafting a shared purpose for an ecosystem could be a wonderful exercise to build alignment and shared understanding.
RD: It’s really a twofold challenge, I think. To succeed in the complex dynamics of an ecosystem, a company must know who they are and why they are doing this. If they don’t, they are easily replaceable and may get torn apart by strong partners. So, first is your own purpose. But then you need also a purpose for the ecosystem, which can be a delicate process among partners there are no a priori governance mechanisms they can fall back on. I don’t know how you see this.
RG: I think you’re right. And there’s a reason why more than 50% of partnerships fail. And nobody knows how many ecosystems fail – probably more. A huge issue among many is goal alignment. The lack of clarity of individual goals as well as shared goals. It’s easy to write something down that serves as purpose, but how do you operationalize it? Some companies that I’ve seen will turn purpose into a set of guiding principles, actionable principles that are rules translated from their purpose. Others will try to create KPIs from it. EY (Ernst & Young, a major global accounting firm), measures every partner on social value, customer value, employee value, and enterprise value. Their KPIs are tied to these four dimensions, which are directly a result of their purpose. It is a challenge to operationalize purpose, and then cascade it into the core.
And I think this is a huge challenge for many organizations that talk about purpose, but they don’t really know how to make it happen. This has been the bulk of my book, this purpose to action problem, what is also called the knowing-doing gap? And it gets worse. The further down the organization, the understanding of purpose exponentially decays.
Crafting a shared purpose for an ecosystem could be a wonderful exercise to build alignment and shared understanding.
Social identity is ‘how do I see myself in relation to the world?’ Purpose on the other hand answers the question ‘Why do I exist?’
RD: But there is also purpose on lower levels of a system. People come in with a certain purpose into an organization, a department has a certain purpose. I guess translating this into an organizational purpose, or even an ecosystem purpose is not trivial. There’s always a structural conflict between the various system levels of purpose that are there. If they align, great. If they don’t align, people leave, and ecosystems fall apart.
RG: Let’s go back in time and say you and I were talking to the leaders of Nokia, Ericsson, Samsung, and a few others who were trying to build a shared platform. And their idea was that smartphones are going to take off, they’re going to create massive opportunity. We each have our own phones, but if we have a common platform we can do our own hardware on top of that platform. But we build a robust operating system that will be open source. And by doing so we create massive opportunities in the world where everybody, from farmers in poor countries to CEOs – can access their device and have a powerful way to improve, enhance and enrich their lives. Let’s do that.
Would the outcome have been different? If they had thought about that, if they had created a shared understanding where all of us are going to benefit? But they didn’t do it. Google did it with Android. Or the auto industry. What if they would have come together around battery technology – they wouldn’t be dealing with Tesla having 65% of market share of the electric car business. They were unable to imagine collective action.
Purpose maybe is a way to enhance collective action through ecosystems and platforms and partnerships, by creating a- shared understanding. It’s a very interesting idea that I think hasn’t been pursued enough.
RD: Interesting you mention the automotive industry. There were actually efforts to team up between BMW and Daimler to create a car share service and other innovative solutions that they together would host, but it totally fell apart. And it’s not only the lack of willingness – if you have incumbent companies like Nokia and Ericson, or Daimler and BMW, coming together with good intentions but a legacy mindset, chances are they still will be disrupted by somebody fresh who comes in with a different logic – often from outside the industry. Like Google did with Android, like Musk did with Tesla.
RG: This is a really interesting conversation. My colleague and friend Rebecca Henderson, who studies innovation, postulates that having a purpose can actually make you more innovative. I expand on that in my own book. When you think about your purpose, it forces you to think about the value proposition you’re creating, and for whom, and whether it is relevant or not today. Because you are not so focused on products or services, you’re focused on the problem space you want to operate in. So, you say I’m a mobility company, I’m not a combustion engine company. I’m a communication company, I’m not a device company. If you do that thought experiment first, it allows you to potentially constantly be questioning whether you have the right solutions to address problems. Thinking in terms of problem space creates the possibility to think beyond.
When you think about your purpose, it forces you to think about the value proposition you’re creating, and for whom, and whether it is relevant or not today
Sadly, incumbent companies are generally horrible at innovation, and they kill themselves. Netflix did not kill Blockbuster. Blockbuster killed Blockbuster. BlackBerry killed Blackberry, Sears killed Sears, Motorola killed Motorola. Polaroid killed Polaroid. Kodak killed Kodak. Why couldn’t Kodak do what Fuji did? Both of them had 50% market share of the film industry globally.
RD: Yes, the famous disease of the leader. When you think about your purpose, it forces you to think about the value proposition you’re creating, and for whom, and whether it is relevant or not today.
RG: I don’t have a definitive answer on this, but my hypothesis is if Kodak would have been thinking about purpose more broadly, like ‘we are an imaging company, we use images to enable the world to operate in a better way”, perhaps they might have not been so much fixated on film. I’m just speculating here with
you. I don’t have the data.
RD: I think the DNA of successful companies is very difficult to escape from. It’s very hard for Daimler to deal with the fact that in the enlarged mobility space, their hardware may not be the dominant thing anymore. How do you re-shape mindsets – and the related operating models, supply chain architectures, deployed assets, and more? The Mercedes Museum in Stuttgart is a powerful symbol for this conundrum: here you can admire the first combustion engine, the first car, invented by Daimler. Mr. Daimler himself drove that car – actually, during PR events Daimler CEOs once in a while get into this car. This is the myth, the story, the identity – the purpose really – of Daimler. How can you transcend this DNA to innovate beyond?
RG: Well, once in a while you have to revisit, refresh your purpose. The beauty of the Fuji story is that Fuji said, ‘We are not a film company. We are much bigger than that. We’re a diagnostic imaging company. So, how do we reimagine ourselves as an imaging company?’ They also said, we’re a chemical company, we understand chemicals. So how can we leverage our chemical expertise? Companies periodically have to do that and refresh. Another great example is Microsoft, which developed its purpose from Bill Gates credo ‘a computer on every desk and in every home’ to Satya Nadella’s mission to ‘empower every person and organization on the path to achieve more.’ And you can see it builds on the previous purpose statement.
RD: Leveraging the tension between the past and the future is a really powerful way to look at it – I like it. One last thing I am curious about: Your journey brought you from thinking about growth strategies to a very successful book on Deep Purpose. What is next for Ranjay Gulati? Is there a next book?
RG: Yes, there is already a next book in the works. I think it’ll be an extension of my work on purpose, looking at the role of leadership and leaders in our world. For the last 10 years, I’ve been collecting stories of leaders who accomplished extraordinary things. What did it take to achieve what they did? What motivated them and inspired them to move that direction? So that’s my next project – an extension of what I’ve been doing on Purpose.
RD: That’s interesting – you continue to move from the hard facts to the softer facts. If Kodak had thought about purpose more broadly, like ‘we are an imaging company, we use images to enable the world to operate in a better way’, perhaps they might have not been so fixated on film.
RG: Maybe as I’m getting older I have been drawn to the more ambiguous side of business. Because I think that’s where a lot of the value addition happens – and that’s where we have the least understanding. I’m an engineer by training, so I try to bring an engineering sensibility to softer things. That’s what
I’m trying to do.
Ranjay Gulati is the Paul R. Lawrence MBA Class of 1942 Professor of Business Administration at Harvard Business School. He is the author of Deep Purpose: The Heart and Soul of High-Performance Companies. (Harper Business, 2022).