Jayashantha Jayawardhana inducts a holistic approach
An increase in turnover, a growing bottom line, an appreciation in the valuation of assets, an improvement in cash flow etc… They are all important achievements for any business. But is financial success the only goal of a great company? And is it the only reason for its existence?
Going by the general perception, what’s stated in the business press and by academics, this may be the case with hedge funds where numbers are everything.
But leaving aside this particular perception in the world of business, companies that enjoy steady success and last for generations have higher reasons for their existence than simply making money. They have core values and purpose that remain fixed, even while their business strategies and practices adapt to a changing world.
This doesn’t mean that making money isn’t important – because a company can’t survive without generating profits.
Some great companies like Apple Inc. have innovation at the heart of everything they do. As its CEO Tim Cook says, “we believe that we’re on the face of the Earth to make great products and that doesn’t change. We are constantly focussing on innovating.”
Even though Steve Jobs is no more, the spirit of innovation and minimalist design principles he instilled in Apple remains unchanged, despite changes in leadership and business strategy. Similarly Johnson & Johnson continually changes its structure and revamps its processes while preserving the ideals embodied in its credo.
In 1996, 3M divested several of its large mature businesses in a dramatic gesture that took the business press by storm. It wanted to refocus on its core purpose of solving unsolved problems innovatively. Clearly, it’s the dynamic of preserving the core while stimulating progress that enables a company to effectively renew itself in response to the significant changes taking place in the business environment and enjoy enduring success.
To build a great company, it’s essential to understand what should remain unchanged and what should be open to change.
No matter how simple this sounds, not all companies can effectively manage such continuity and transformation. Interestingly, this is closely linked to developing a vision that decides what core ideals must be preserved and the direction in which to stimulate progress. But the word ‘vision’ has been so abused that few pay serious attention to it. However, this doesn’t render it any less important.
A well conceived vision consists of two principal components – viz. core ideology and envisioned future. Core ideology defines what we stand for and why we exist. The envisioned future is what we aspire to become or achieve, or create something that will call for significant change and progress.
In an article titled ‘Building Your Company’s Vision’ published in the Harvard Business Review (HBR), authors James Collins and Jerry Porras define core ideology as the enduring character of an organisation – a consistent identity that transcends product or market life cycles, technological breakthroughs, management fads and individual leaders.
In fact, the most enduring and significant contribution by those who build visionary companies is the organisation’s core ideology. In the case of HP, cofounder David Packard spelt out a code of ethics known as ‘the HP Way,’ which was central to everything the company would do. When Packard died, Bill Hewlett observed that this was the greatest legacy he left behind for the organisation.
Core ideology consists of core values and purpose. Core values are the essential and enduring tenets of a company. They represent a small set of timeless guiding principles that have intrinsic value and importance to employees. The Walt Disney Company’s core values of imagination and wholesomeness spring from its late founder’s inner beliefs rather than market requirements.
The core purpose of an organisation is its foremost reason for existence. It’s something like the guiding star that can never be reached but is potent enough to inspire change and stimulate progress.
In the US, Fannie Mae states its purpose as being “to strengthen the social fabric by continually democratising home ownership.” To discover the core ideology, a founder or leader has to look inward and also understand what really drives the business.
Envisioned future is the second component of vision and it’s all about a 10-30 year audacious goal along with a vivid description of what it’s like to reach it. In the 1960s, Nike set a bold goal to crush Adidas. In 1990, Walmart set an audacious goal to become a US$ 125 billion company by 2000. An envisioned future won’t be complete without a compelling description of what it’s like to achieve this goal in order to motivate employees.
Building a company’s vision requires a holistic framework.