This article first appeared in the Financial Mail on 8 July 2016.

 

The chicken and the egg of business and brand.

Professor Cynthia Montgomery, past head of the Strategy Unit at Harvard, regards purpose as the first step in developing a business strategy. But is that right?

There is the chicken and the egg. When it comes to business strategy, there is a company’s sense of purpose and there is its ‘difference that matters.’

But which comes first?

In her book, The Strategist, Professor Montgomery tells the story of Ingvar Kamprad and the company he founded in the cut-throat, boycotting-loving Swedish furniture industry: IKEA. From the get-go in 1951, Ingvar Kamprad knew what difference would matter: price. “The goods must be such that ordinary people can easily and quickly identify the lowness of the price.” *

From this, everything followed: the outsourcing to Poland, the wire-frame sofas, the board-on-frame furniture and the famous flat-packing and DIY assembly. But along the way, something fortuitous happened. Scandinavian design became popular and its simplicity allowed IKEA to pursue its low prices and, at the same, become desirable furniture.

This, in turn, allowed Ingvar Kamprad to formulate the purpose of his business: “A better life for the many.”

Professor Montgomery says a company’s purpose is where everything starts. It is the foundation of its business strategy.

But is it? To me, IKEA’s intrinsic qualities were the essential building blocks. Only with those in place could Ingvar Kamprad formulate his extrinsically-focused – and loftier – sense of purpose. The “better life for the many.”

But while I believe IKEA’s sense of purpose – and the heart of IKEA’s brand – had to follow from the company’s intrinsic qualities, not the other way around, I have no doubt that both have been essential to Ingvar Kamprad’s success.

Turning to a South African example. Our consultancy developed the Satrix brand almost from its inception in 2001 until the beginning of this year. Satrix allows people to invest in the top 40 shares on the JSE by buying just one share. That was something completely new at the time. A difference that mattered.

The chicken and the egg? Again, I believe the intrinsics of the business had to be in place before Satrix could formulate its sense of purpose: to make it easy for ordinary South Africans to “own the market.” Would Satrix have succeeded without its brand? As with IKEA, I have no doubt that Satrix’s brand and its intrinsic offerings have informed each other. Both have been essential to the company’s success.

Unilever’s CEO, Paul Polman, has an ambitious sense of purpose for the company: addressing the United Nations’ 17 Sustainable Development Goals, including the eradication of poverty around the world. **

Too grand? Too lofty? Well, the company’s share price has risen 70 percent in the six years that Paul Polman has been CEO and it is trading 30 percentage points higher than its rivals.

“The stronger you have a purpose, the easier it is to navigate these very choppy waters in the global economy today,” he says. “It keeps you focused on the long-term things, and you don’t get side-tracked by the short-term temptations of quick wins that undermine the long-term viability of a company.”

Every business faces the harsh reality of establishing itself in a cutthroat environment. No matter what field you’re in, it seems to me that business strategy and brand strategy should become the twin strands of a company’s DNA, informing each other.

As with the chicken and the egg, it’s not about which comes first. It’s about both being mutually dependent – and mutually beneficial.

 

 

* Montgomery, C. 2012. The Strategist. HarperCollins: 40 – 49

** http://www.bdlive.co.za/companies/2016/06/24/ceo-lines-up-unilever-goals-with-society