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Organizational Purpose

One of the primary responsibilities of managers is to position their organizations for success by establishing goalsOpens in new window and strategiesOpens in new window that can keep the organization competitive. Establishing mission, goals, and strategy is the first step for any business to achieve its purpose.

Managers have to know where they want the organization to go before they can take it there. When managers don’t have clear goals, or have conflicting goals, the organization finds itself in a difficult position and achieving anything may seem improbable.

All organizations, including Instagram, WalmartOpens in new window, Procter & GambleOpens in new window, UberOpens in new window, Stanford UniversityOpens in new window, Google, the Catholic ChurchOpens in new window, the U.S. Department of AgricultureOpens in new window, the local laundry, and the neighborhood deli, exist for a purpose.

This purpose may be referred to as the overall goal or mission. Different parts of the organization establish their own goals and objectives to help meet the overall goal, mission, or purpose of the organization.

Strategic Intent

Many types of goals exist in organizations, and each type performs a different function. To achieve success, however, organizational goals and strategies are focused with strategic intent.

Strategic intent means that all the organization’s energies and resources are directed toward a focused, unifying, and compelling overall goal.

Examples of ambitious goals that demonstrate strategic intent are Microsoft’sOpens in new window early goal to “Put a computer on every desk in every home,” Komatsu’sOpens in new window motto, “Encircle Caterpillar,” and Coca-ColaOpens in new window’s goal “To put a Coke within ‘arm’s reach’ of every consumer in the world.”

Strategic intent provides a focus for management action. Three aspects related to strategic intent are

  1. the mission,
  2. core competence, and
  3. competitive advantage.
  1. Mission

The overall goal for an organization is often called the mission—the organization’s reason for existence.

The mission describes the organization’s shared values and beliefs and its reason for being.

For example, the long-standing mission of Berrett-Koehler PublishersOpens in new window is stated as, “Connecting People and Ideas to Create a World That Works for All.”

An organization’s mission is sometimes called the official goals, which refers to the formally stated definition of business scope and outcomes the organization is trying to achieve.

Official goal statements typically define business operations and may focus on values, markets, and customers that distinguish the organization.

Whether called a mission statement or official goals, the organization’s general statement of its purpose and philosophy is often written down in a policy manual or the annual report. Figure X-1 shows the mission statement for CVS HealthOpens in new window.

CVS Health's Mission Statement Figure X-1. Credit — CVS Health Opens in new window

CVSOpens in new window defines its mission (or purpose, as shown in the Figure) as “Helping people on their path to better health.” The statement also defines the company’s core values.

One of the primary purposes of a mission statement is to serve as a communication tool.

  • The mission statement communicates to current and prospective employees, customers, investors, suppliers, and competitors what the organization stands for and what it is trying to achieve.
  • A mission statement communicates legitimacy to internal and external stakeholders, who may join and be committed to the organization because they identify with its stated purpose and values.

Most top leaders want employees, customers, competitors, suppliers, investors, and the local community to look on the organization in a favorable light, and the concept of legitimacy plays a critical role.

CVS Caremark changed its name to CVS Health and redefined its purpose to reflect a broader healthcare commitment and the company’s vision to “drive innovations needed to shape the future of health.”

CVSOpens in new window, which provides health clinics as well as pharmacy and retail sales, stopped selling cigarettes and other tobacco productions in all its stores by October of 2014.

For a company involved in promoting health and wellness, managers say, selling tobacco products didn’t make sense and hurt the company’s reputation.

Other pharmacies involved in providing healthcare have also stopped selling tobacco products because of the need to communicate legitimacy.

Companies where managers are sincerely guided by mission statements that focus on a larger social purpose, such as Medtronic’s “To restore people to full life and health” or Liberty Mutual’s “Helping people live safer, more secure lives,” typically attract better employees, have better relationships with external parties, and perform better in the marketplace over the long term.

  1. Core Competence

A company’s core competence is something the organization does especially well in comparison to its competitors.

A core competence may be in the area of superior research and development, expert technological know-how, process efficiency, or exceptional customer service.

MimeoOpens in new window, an online printing and copying company, for example, excels with core competencies of superb customer service and the application of technology to ensure internal process efficiency. MimeoOpens in new window can handle rush jobs that larger companies can’t.

At AppleOpens in new window, strategy focuses on core competencies of superior design and marketing skills. In each case, managers identified what their company does especially well and built the strategy around it.

  1. Competitive Advantage

The overall aim of strategic intent is to help the organization achieve a sustainable competitive advantage.

Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace.

Strategy necessarily changes over time to fit environmental conditions, and good managers pay close attention to trends that might require changes in how the company operates.

Managers analyze competitors and the internal and external environments to find potential competitive openings and learn what new capabilities the organization needs to gain the upper hand against other companies in the industry.

Competitive opening might be thought of as spaces that a company can potentially fill. This section’s BookMark describes how organizations can move from competing in “red oceans,” crowded markets where companies chew each other up for smaller and smaller chunks of market share, toward “wide open blue oceans,” where there is more promise and less competition.

BOOKMARK 2.0 | HAVE YOU READ THIS BOOK?
Blue Ocean Shift: Beyond Competing; Proven Steps to Inspire Confidence and Seize New Growth
By W. Chan Kim and Renée Mauborgne

Almost every book or article you read about strategy focuses on how to outpace rivals, beat the competition, and win at the expense of other companies. That’s why there are so many managers and companies out there fighting in the “red ocean” of cutthroat and bloody competition. In their previous book Blue Ocean Strategy and their new volume, Blue Ocean Shift, W. Chan Kim and Renée Mauborgne’s more recent Blue Ocean Shift gives managers a roadmap for doing just that.

MAKING THE SHIFT

Kim and Mauborgne’s book is based on decades of research into successful and unsuccessful strategic moves spanning more than a hundred years and 30 industries. They describe three components for successfully executing blue ocean strategy.
  • Start with the Right Perspective. A shift in perspective means recognizing that managers can shape industry conditions and create or expand new markets. They cite powerful real-life examples such as Square, which opened up the credit card market for small businesses and sole proprietors, and French appliance maker Groupe SEB, which established a goal of producing a French fry maker that didn’t involve any actual frying.
  • Applying the Right Set of Tools. Kim and Mauborgne provide a set of market-creating tools, such as “The Three Tiers of Non-Customers,” which helps managers identify various levels of people who do not currently patronize the industry in which the company operates.
  • Use a Humanistic Process to Create an Involved Workforce. The thired key component is to ensure that the blue ocean shift recognizes and harnesses the humanity within people, “acknowledging their fears, their insecurities, their need to be treated with dignity, their desire to matter.”


MAKING THE PROCESS HUMANISTIC

Without employee contributions and buy-in, the new strategy will fail. A successful blue ocean transformation process recognizes that “each pair of hands comes with a brain and a heart” so it involves people by weaving three humanistic elements throughout the entire journey:
  • Engagement. Managers actively involve people in the change process. If people aren’t involved in the strategic decisions that affect them, the transformation from red to blue ocean strategy could founder from lack of involvement.
  • Explanation. Managers give people throughout the organization “a clear account of the thinking that underlies the process.”
  • Reassurance. Managers might not adopt all employee ideas and opinions, but they are careful to reassure people “that their opinions have been considered.” Providing reassurance also means letting people know what to expect and clarifying their roles and responsibilities in the new blue ocean world.
Blue Ocean Shift, by Chan Kim and Renée Mauborgne, is published by Hachette.
Remember This
  • Organizations exist for a purpose, and top leaders are responsible for deciding the organization’s strategic intent, including a specific mission to be accomplished. The mission statement, or official goals, makes explicit the purpose and direction of an organization.
  • Two other factors related to strategic intent are competitive advantage and core competence.
  • Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge.
  • A core competence is something the organization does extremely well compared to competitors.
The Series:
    Research data for this work have been adapted from the manual:
  1. Managerial Accounting: Tools for Business Decision Making By Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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