The ‘purpose economy’ is here. Right now, it is unevenly distributed and poorly understood, as the future often is. But in the coming year, the purpose economy will redefine how we conduct business and derive meaning in our lives.
We are at a similar moment for the purpose economy as we were with the Internet economy 20 years ago. Most don’t yet realise the impact to come. Those who do are already deriving significant tactical advantages. Soon they will become huge strategic advantages. And then they will emerge into the new business-as-usual.
TOMS’ social initiative
We saw one of the early signs of this shift in 2014 when TOMS Shoes, an eight-year-old company famous for giving a pair of shoes away for every pair it sells, sold 50% of its equity to Bain Capital, a private equity investor, for over $300 Million USD. At the time, some worried that Bain would end footwear donations, but they declared they would do no such thing. So far, they have been true to their word. Private equity investors are not known for their sense of social mission, so what’s going on here? The answer is that Bain understood that TOMS’ mission is not a cost; it is an asset. It is the core reason they had grown to a $650 million company in just eight years.
TOMS is one example of a growing part of the economy in which businesses compete not just to create private wealth but also social outcomes. These are ‘social enterprises’: companies that have reaped huge rewards from being more purposeful than their competitors. They include TOMS Shoes, Ben & Jerry’s Ice-cream, Stone & Wood Brewery and Kickstarter, as well as an emerging wave of startups in every category imaginable, some of which you’ll meet in this article. In Australia we’ve seen the success of TOM Organic (no relation to TOMS Shoes), five:am Muesli, Future Superannuation and thankyou group amongst many others.
The world is changing before our eyes, for those willing to look. Millennials are demanding a new level of meaning – of purpose – in the companies they work for, buy from and invest in. This change is the big challenge for business-as-usual and creates enormous opportunities for those who get ahead of this trend.
Technology and purpose economy
Technology is the enabling environment that is bringing this purpose economy into being. It is the toolset used by smaller social enterprises as they out-innovate and out-compete established businesses. New technologies allow us to transmit and share our values in a new way. And our newfound interconnectedness changes our values. Technology-empowered consumers are pulling back the veil on destructive company practices and supporting businesses that are a force for good. Whereas being an ethical consumer was once a laborious chore, new tools are making it easier and easier.
This is a story of changes wrought by technology, not about changes to technology. The effects of these changes will be more all-encompassing than most realise, and if you want to ride this wave you need to know what’s going on.
How we shift to purchasing with purpose
There has always been a group of ethical consumers. Market researchers have pegged them as about 15% of the market in advanced western economies. The problem wasn’t that more people didn’t care. The problem was that it was too hard, or too expensive, to prioritise ethics while shopping.
But ethical consumption in the future will look different. Increasingly ethical products are competing for – and winning – shelf space in mainstream supermarkets and settings. Once purposeful products are right there on the same shelves, equally convenient and close in price to the less ethical product, they will take over more and more mainstream categories.
The issue becomes not just will – the desire to do the right thing – but information – how do you choose the most ethical option? To support more purposeful companies, we need to know which is which. And, once they empowered with this information, a much higher proportion of consumers will make the pro-social choice.
In a survey conducted by market research company Core Communications, 71% of consumers agreed they “would be more likely to purchase from a company that supports a cause they care about.” This number is growing as the ability to differentiate those doing the right thing becomes easier and easier.
How does our growing awareness occur? Via our friends’ endorsements, and via tools, platforms and labelling systems that make it easier to identify products and companies who are congruent with our values.
This reduction in the barriers to and costs of conscious consumption has increased the number of those who shop with awareness. With social media, many ethical products are just a click away and, as in the case of crowdfunding supporters, most new customers come via personal recommendation from a peer.
But even if we’re out and about without a specific brand in mind, navigating the shelves of mainstream stores to find the more ethical products has never been easier. There are an increasing number of third-party certifiers like Fair Trade and B Labs to help us identify the best products based on their criteria. As these products continue to infiltrate mainstream retail they grab our attention as we are making our purchasing decision.
Better for consumers and employees
A recent survey from the consulting firm, Deloitte, shows that 72% of employed Americans say they would prefer to work for a company that supports charitable causes when choosing between two jobs that offer the same location, pay and other benefits. For millennials, these numbers are even stronger. In a 2013 survey, 93% of millennial workers said that they expected businesses to have a social commitment; a mere 7% agreed that the only job of business is to make a profit.
In this way, millennials are forcing us to re-evaluate how business works. They don’t want to accept the old binary of either shutting up and focusing on earning money in the corporate world or spending your life in poverty trying to make a difference. Instead, they want to do both together, and so they should. We should be able to make a living, and even a healthy living, while also doing work that creates a positive impact. So, companies that provide that sense of meaning, who have a purpose that goes beyond profits, have a real advantage when it comes to recruitment and retention.
Sharing stories of purpose
Social media is the greatest tool for sharing that has ever existed, but that’s not much good if your story isn’t worth sharing. Here social enterprises have a great advantage to business-as-usual. In sharing the fact that you have purchased from a social enterprise, you are sharing something about yourself: your values and beliefs.
As Blake Mycoskie, founder of TOMS Shoes says “people buy stories, not products.” Something Blake discovered was that his customers would sell his product for him, not because it was the most stylish or best value (although it does well on these dimensions) but because it resonated with their values and gave them the opportunity to share those values.
Here’s how Blake describes getting the first boutique to stock TOMS in his book, Start Something That Matters: “I went in and told her [the buyer] the TOMS story. Every month this woman saw, and judged, more shoes than you could imagine. More shoes that American Rag [the shop] could ever possibly stock. But from the beginning, she realised that TOMS was more than just a shoe, it was a story. And the buyer loved the story as much as the shoe, and knew she could sell both of them.” A story about a purpose that goes beyond profit and helps creates the future we want is a different and more engaging story, a more sharable story.
In a world beset by significant challenges, from climate change to increasing xenophobia and inequality; we burn to do something practical to nudge the world in the direction we want it to head, and our consumer choices are a key way we can deliver that nudge. Most social change is created through infinite cumulative nudges like this, punctuated with dramatic moments.
Social enterprise doesn’t happen overnight
Social enterprise is a story both made up of millions of small steps. – choosing the right product over the wrong one – but it also represents a transformational step – the emergence of a new type of capitalism.
Practical small-scale effects from each specific purchasing decision and a pathway towards the big-picture changes we need make every social enterprise product so much more than that product. It turns a product into a story, an individual act into an opportunity to express something fundamental about yourself. It turns the ordinary into the extraordinary, the mundane into the shareable. And being extraordinary, being sharable, is the key to succeeding in the world of social sharing.
Be extraordinary and shareable
As the marketing guru Seth Godin said in his book Purple Cow: Transform Your Business by Being Remarkable, “In a crowded marketplace, fitting in is failing. In a busy marketplace, not standing out is the same as being invisible.” There is no marketplace more active and more crowded than the market for attention today.
TOMS Shoes founder Blake Mycoskie describes the big realisation he and his team had when they started selling their buy-one, give-one shoes: “People who tell the TOMS story are more than just our customers, they’re our supporters. People who buy TOMS like to talk about their support for our mission, rather than telling people they bought a cute shoe from some random shoe company. They support the story – and the product – in a way a casual shoe-buyer never will.”
As Yvon Chouinard, founder of outdoor apparel supplier Patagonia puts it in his autobiography Let My People Go Surfing: The Education of a Reluctant Businessman, “my first principle is that selling ourselves and our philosophy is as important as selling a product. Telling the Patagonia story and educating the Patagonia customer … on environmental issues is as much the mission as selling products.”
Create something that people will market for you. Now more than ever they have the tools to do so effectively, at scale. But tools on their own don’t go very far. They’ve got to have the motivation to share your story as well. That comes down to who you are as a business, what you’re creating, and what that means to them.
Social enterprise Mighty Good Undies put their call to action this way: “How you vote with your money and where you choose to buy is powerful – you are part of a bigger story about making the fashion world more ethical and sustainable.”
The coming social enterprise wave
Social enterprises are emerging in almost every category you can think of, and all of them have this same underlying metastory. They invite you to be part of this bigger story of making business more ethical and sustainable. We’ve seen huge successes in shoes: TOMS; clothes: Patagonia; eyewear: Warby Parker; ice cream: Ben & Jerry’s; cleaning products: Seventh Generation; and eCommerce: Etsy, Kickstarter. The passionate and motivated sharing of the larger story by their customers fuels their success.
As New York University professor, sociologist Clay Shirky has put it, “Now that media is increasingly social and innovation can happen anywhere, people can take for granted the idea that we’re all in this together.”
As the cost of launching businesses is falling more people are stepping into the space between traditional business and philanthropy. It is these individuals who are creating companies that pursue a social purpose.
And if you’re not careful they’re going to out-purpose you, making more shareable stories, more passionate customers, more successful recruitment. In a word, their business will be more competitive than yours.
Crowdfunding is an early-warning system for this trend. It is here that we see the future of commerce first. What sorts of businesses and products are emerging as barriers fall, and which projects do people want to support?
Before crowdfunding, one of the principal barriers to new companies in any product-based industry was the challenge of financing up-front. You needed to make the things before you sold them, putting many entrepreneurs into debt, making others reliant on outside investment and excluding many who couldn’t access either.
Now there’s another, better path. Sell your products first via crowdfunding. Then use these funds to manufacture, so you know people want it, and you avoid financial ruin if they don’t. In this way entrepreneurs reduce their personal exposure to failure and can launch new businesses in a faster, leaner way. All of which is accelerating the rapid growth of social enterprises.
Adaptation and competition
If you’re in business and you don’t yet have a social enterprise competitor, you soon will. Someone will be passionate enough, and the costs are low enough, that they’ll soon give it a go. I bet they already are.
Social enterprises are succeeding in every industry. They are fuelled by their greater adaptation to the world of social media and digital commerce. To thrive in the future, companies won’t be able just to market themselves in the same old way. They will need a story that resonates. A story that their customers are prepared to share with their friends and family. They will need to be the kind of company people are proud to support.
The businesses that fail to adapt will be those stuck in the past: seeing social good as a cost rather than a strategic asset that can be leveraged to create greater business success, as well as the right thing to do for all of our futures.
If you want to be successful in the emerging purpose economy, design a business that matters. One that creates collective, not just private, returns; one that creates meaning and hope.
This is the future of business, and the future is already here.
This is an exclusive excerpt from “How Technology has Shifted the Playing Field Towards Purposeful Companies,” a chapter in the recently-published “Future Makers in Digital Technologies”, edited by Kath Walters.
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