In a recent Admap award-winning essay, Andrew Curry and Andy Stubbings explored how brands, not just parent companies, can be the driving force behind social good and greater profits. Below is a summary of the main argument. In “The brand: the machine that makes a difference” they argued that brands, not just parent companies, can be the driving force behind social good and greater profits.

The concept of businesses chasing shareholder value is relatively recent—and flawed. Businesses that have other main purposes perform better: they stand out more, engender loyalty and build businesses that are healthier in the long term. And all of this is driven by the power of the brand.

Despite the evidence, few ideas have been more influential to business over the past half-century than Milton Friedman’s theory of profit maximisation. As the libertarian economist put it more than 40 years ago in The New York Times, “There is one and only one social responsibility of business…to increase its profits so long as it stays within the rules of the game.” The rest, as they say, is history: Aided by the likes of GE’s Jack Welch and readily adopted by Fortune 500 companies across sectors, the concept of “shareholder value” became a dominant idea from the 1980s through the present day.

Yet, in recent years, it’s become increasingly clear that its core premise is fatally flawed. In fact, we now know that businesses that strive to be a “force for good” in society perform better than those that chase narrow, profit-maximising strategies.

According to Millward Brown’s BrandZ study, brands that over-index on purpose and commitment, representing businesses that appear to have a purpose beyond profit, have increased 87% in value in five years—roughly twice as fast as those that don’t. Jim Stengel (former global marketing officer at P&G) put together with Millward Brown a basket of 50 of the most “purpose-driven” brands, and found they outperformed the U.S. S&P 500 by almost 400%.

But how do they do this?

  1. They stand out from the competition: While many marketers routinely overstate consumers’ engagement with their category or brand, they often understate how much people care about broader social issues that affect them and their community. By aligning with social purpose and addressing societal contradictions, marketers not only create goodwill, but they grab the consumer’s attention in a world increasingly swamped with competing messages.
  2. They inspire their workforce to succeed: Profit maximisation does little to motivate people to go “above and beyond” their job descriptions. In fact, there’s ample evidence that companies that put purpose at the heart of their operations perform far better than those with a more traditional view of the role of business.
  3. They are focused on the longer-term: More attuned to the marketplace and the issues consumers care about, businesses with purpose seem to inherently understand Michael Porter’s recent argument that what’s good for society is good for business—and act accordingly. These brands look to the future while profit-driven businesses look to the past, since the P&L is a rear-view mirror.

It’s now clear that businesses should see their brands as machines that give them vision, that let them sense their environment and stand out from the crowd. A company may be the functional structure that makes money, but a brand is what breathes life into the company – offering a vision for action, and an emotional appeal for consumers, employees and society alike. The lesson is taking the next step beyond Porter’s Shared Value: companies must not only do good, but they must make people feel good about it as well. The brand is the vehicle for this.

If you’d like to read “The brand: the machine that makes a difference”, please contact The Futures Company via unlockingfutures@thefuturescompany.com and we’ll send you a pdf.

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