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JANUARY 26TH 2011 

Do You Have a Sincere Business?

That’s what it’s going to take to be successful in a world of radical transparency, where consumers have the power and are learning how to use it better all the time.

Before you roll your eyes at the goody two-shoes notion of sincerity, or reject it as having nothing to do with making a profit, let’s check the definition, the abridged version of which is “freedom from hypocrisy”. Be honest with yourself—is the business you lead free from hypocrisy? If it is, congratulations, yours is a rare. If it’s not, I’m going to tell you why it’s critical and how to get it there.

Every business must meet the need of a customer, at a profit, if it wants to survive. If it’s a public company, add on the need of rewarding your investors with returns. This is capitalism at its most basic. And it has worked pretty well, which is why it has become the operating system for most of the world’s economies. And free marketeers around the world have done everything they can to keep government from messing it up.

But here’s the rub. Economists have this interesting concept of “externalities” which are the by-products of any economic transaction. To quote Nobel Prize-winning economist Paul Krugman:

“When there are negative externalities in an economic transaction—costs that buyers and sellers impose on innocent bystanders—any presumption that a free market economy will do the right thing goes out the window”.

We live in a world full of the results of negative externalities, like global warming, pollution, stress, the deterioration of our communities, and more. Your customer and/or consumer lives in that world too. And increasingly, they’re feeling it. And they’re caring about it, even if your business isn’t feeling the change in their purchase behaviour yet. But it will, especially if your competitor can give them what they are seeking without asking them to pay more for it.

So let’s get back to the notion of radical transparency. It’s an acknowledged fact that people can peer more deeply into your business today than ever before. You may be able to keep the formula for the secret sauce secret, but what you won’t be able to keep secret is how you behave as a company, especially towards your stakeholders, those who work for you, invest in you, and supply to you. And if you’re a manufacturer, even the people who live downwind or downstream from your factories. Not only can people learn more, they can tell others what they’ve learned with breathtaking ease, so that knowledge of your corporate behaviour becomes quickly widespread, especially if it’s bad.

So what are you going to do about all this? It all comes down to one simple concept, and one simple question.

The concept: articulating the purpose of your business in a way that provides a benefit to all stakeholders. Meeting the needs of your customers at a profit is just the starting point. It only covers the needs of customers, and maybe investors.

What about your employees? Sure they have a job, but they want more than that. The good companies know that the good people want to be engaged with a sense of organizational purpose. What about your suppliers? Yeah, you can grind them into an unsustainable position, but if they are genuinely adding value to your product and business, is that any way to treat them?

And finally, especially if you manufacture anything, what about your neighbours. Mess with their world, and it will eventually hurt you.

That’s the concept—consider and deliver the best you can to all stakeholders. So what’s the question? Why is the world a better place because your business exists? If you don’t have a really good sharp answer to that question, get help fast. We call the answer to that question the meta-purpose of your business, and it’s the key to success. But your work doesn’t stop there; in fact that’s where it starts.

Having articulated your meta-purpose, you now need to align everything you make, and more importantly everything you do, with it. It must be the driving source of energy in your business. And you must deliver it at every connection point with every stakeholder group. The devil is in the details, and it’s really hard work, but it’s the path to sustainable differentiation.

No company is perfect, just as no human being is perfect. We all make mistakes and we all do things habitually without thinking about the consequences. But if your business has a meta-purpose that is clearly demonstrated by all of your actions with all of your stakeholders, you will be forgiven when you screw up from time to time as long as you handle the screw-ups in a way that is congruent with your meta-purpose. And those people peering in to your business in this world of radical transparency will not only forgive your mistake, but congratulate you for the way you handle it.

That’s what it means to be a sincere business.



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