In the 20 years that we have been backing companies at Catalyst Investors, our best performing companies tend to have something in common – a clear sense of why they exist and what business strategy they are pursuing. Not only is that sense of purpose or mission clear when talking with senior management, but it also permeates the overall culture of these organizations. Ideally, such sense of shared purpose can be succinctly captured in a powerful mission statement. Great mission statements ground the core business strategies within a positive sense of purpose – combining high-minded visions with real-life approaches to problem-solving.
Our own mission statement is “to earn superior returns by helping entrepreneurs build great growth companies,” which combines our core business strategy with a positive sense of purpose. A central part of our playbook for building growth companies that are “great” is to make sure they each establish a strong sense of shared purpose or mission. But what makes a great mission statement?
The touchstone TED talk on this topic, Simon Sinek’s “Start with Why,” points out that most companies start with what they do in terms of how they think about themselves. He uses Apple as an example. If Apple were a typical company, they would say: “we’re a computer company.” A typical company would then say how they do it, referring to their competitive advantage. In Apple’s case that would mean they build computers that are beautifully designed and simple to use. Sinek says that’s less inspiring than how they really operate, which is by starting with why they exist: “Everything we do, we believe in challenging the status quo. We believe in thinking differently.” Companies based on beliefs appeal to the limbic part of our brains, appealing to our gut instincts to establish a customer relationship built on passion.
While it is a great thought, I find it hard to believe that Apple was founded in the 1970s as a business based on “challenging the status quo” and then happened to stumble on making computers. “Start with Why” is a powerful message but has led to a proliferation of overly-general purpose statements. A great example of this is the mission statement of recently-IPO’d Peloton: “We sell happiness.” Judging by my friends, Peloton certainly inspires a passionately happy following, but couldn’t they come up with something more relevant to their actual business? Are they looking to preserve the flexibility to someday sell lollipops or open a chain of comedy clubs?
I like Google’s mission statement: “To organize the world’s information and to make it universally accessible and useful”. Never mind that Google’s revenue actually comes from coaxing people to click on ads…the product portfolio itself generally holds to the mission. It’s general enough that it allows for an expansive vision, but it also provides some specific framework for how to prioritize product strategy. Helping people discover information – whether by search, maps, videos or artificial intelligence – is how they generate users. Access to users and their interests is what Google’s customers are after. I do wonder, however, if the shared sense of purpose at Google is diluted by their less-than-noble revenue model.
A portfolio company of ours that did a nice job with their purpose statement is ChowNow. ChowNow offers a SaaS platform that enables independent restaurants to offer online takeout and delivery ordering services directly to their customers without having to go through a high-commission “marketplace” like GrubHub or UberEats. Earlier this year the company adopted the purpose statement “we help local restaurants thrive,” which clarifies not only their positioning versus their competitors, but also how the company views its customers. ChowNow exists to help its restaurant customers succeed in the market by finding and retaining diners and encouraging those diners to order more food more often. The purpose statement drives the daily actions of the employees in product, development, marketing, sales and customer service.
Another portfolio company with a powerful sense of purpose is BrightFarms, which grows locally-grown salad greens in large hydroponic greenhouses outside of major metropolitan areas. BrightFarms’ mission statement is “to improve the health of society and the planet” – a little more general but still effective because the whole business model is so clearly grounded on an “impact investment” sense of mission. They grow healthy food, pay living wages, and have a business model that has clear environmental benefits relative to conventionally-grown produce shipped East from California, using 80% less water, 90% less land and 95% less shipping fuel. It’s easy to go to work everyday when your company benefits the world in that way.
Purpose-driven investing thrives by imbuing a sense of purpose into any business with a positive impact on society or the planet. Such businesses could include those that help small businesses succeed, those that produce and sell healthy food, those that help people exercise and lead healthy lifestyles, those that educate people and lead them to better career outcomes, those that help people enjoy hobbies and experiences, or maybe just companies that value their employees and communities. Purpose-driven investing gets harder with businesses that sell addictive or unhealthy products, traffic in customer data or misleading advertising, sell pointless luxuries or junk, aren’t loyal to the communities in which they’re based, or exploit cheap labor or the environment. The world is changing in ways that favor the purpose-driven companies and that disfavor the exploitative companies; consumers, employees and regulators are actively favoring companies with positive reputations. A company’s reputation among its stakeholders is a reflection of how the company delivers on its corporate purpose.
Having a positive mission is not a violation of the rules of capitalism – it’s the opposite! Great companies with positive missions have more engaged employees and more loyal customers. Great companies identify and embrace what makes them special and they can easily articulate it and ground it in a higher sense of purpose. The road to long term value creation is the high one – take it!