The chicken and egg of business and brand

It’s a classic case of what comes first: the chicken or 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 Montgomery tells the story of Ingvar Kamprad and the company he founded in the cutthroat, boycotting-loving Swedish furniture industry, Ikea. From the outset in 1951, Kamprad knew price was the differentiator. “The goods must be such that ordinary people can easily and quickly identify the lowness of the price,” he said.

His determination for the company to be noticeably low-price influenced everything: the outsourcing to Poland, the wire-frame sofas, the board-on-frame furniture and the famous flat-packing and DIY assembly. 

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 the provider of desirable furniture.

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

The formulation of a company’s purpose is a statement, in the most fundamental terms, of why it exists, how it brings unique value to the world, what sets it apart, and what unmet needs of its customers it satisfies. Ikea’s purpose is what gets its employees out of bed every day and what drives it from strength to strength.

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

But is it? Ikea’s intrinsic qualities were the essential building blocks. These were “the differences that mattered”. Only with those in place could Kamprad formulate his extrinsically focused, and loftier, sense of purpose – the “better life for the many”.

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 the businesses success.

Turning to an SA example: our consultancy developed the Satrix brand almost from its inception in 2001 until early 2016. 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. Like other exchange traded funds appearing around the world, it offered a business opportunity.

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 informed each other. Both have been essential to the company’s success.

Unilever’s CEO, Paul Polman, has an ambitious sense of purpose for that company: addressing the United Nations’ 17 sustainable development goals, including the eradication of poverty around the world.

Too grand? Too lofty? The company’s share price has risen 70% in the six years he has been CEO and is trading 30 percentage points higher than its rivals.

“The stronger you [hold] a purpose, the easier it is to navigate these very choppy waters in the global economy today,” Polman 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. Does your company make a meaningful contribution to society? Do its intrinsics make a difference that matters? Do its purpose and its brand answer your customers’ unmet needs?

No matter what field you’re in, 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.