Buzzwords like innovation certainly galvanise activity. But how often does that activity end with the design of lackluster goods and services? For a market that doesn’t really need them, and their existence adding a net negative impact to society? In 2011, Jack Springman, a strategy consultant, dared suggest, in an article published in the Harvard Business Review, that we drop the word “innovation” from our vocabulary altogether. And yet, this word continues to headline corporate initiatives to signify progress, resilience and organisational health. Purpose provides the guard rails and fertile ground for thinking. The word “innovation” comes from the Latin word “novus” meaning new. To create something novel is often the goal of most innovation initiatives. But new does not always translate into value. Businesses that genuinely place purpose at the center of its strategy are fundamentally challenged to rethink deeply who, and indeed, what it considers stakeholders, and the ultimate beneficiaries of its business. Such a challenge comes without a well-trodden path, without clear boundaries, and as highlighted by some of the corporations listed on Fortune’s 2021 Change the World List, without precedent in their industry. A active purpose underpins the risk framework and decision-making process across an entire organisation So, what is the role of purpose in enabling long term value creation? Before answering that, let’s define active purpose. By this we mean an organisation’s stated purpose underpinning its risk framework and decision-making process across the entire organisation. Not just at the top. Purpose provides the guard rails and fertile ground for thinking. Just as entrepreneurs have been encouraged by thought leaders like Alexander Osterwalder to consider their customers’ needs through a value lens, so too does an active purpose provide the support and reassurance to know that the thinking is aligned with the intention. Without this alignment employees have no way of determining whether their decisions support the organisation’s vision. What a wasted opportunity. Data from the Contexis Index shows a clear and linear relationship between an activated purpose and effective innovation. With an active purpose, these same colleagues are tuned into the needs and values of the wide range of stakeholders the business is serving. Data from the Contexis Index shows a clear and linear relationship between an activated purpose and effective innovation. On average, for every 10 percent increase in purpose engagement, we see a 6 percent increase in openness to ideas. And the effect is broadly common across cultures and sectors. Individuals who identify with the organisation’s purpose record levels of openness and learning at least twice as high as those who do not. By extension, organisations that activate purpose are far more successful at innovating than those for which purpose is no more than a statement. In practice, what we’ll see is that employees develop a deep empathetic knowledge of what each stakeholder needs in order to thrive. Once these needs are seen, they are difficult to unsee. Whether that be “Plant a Tree” initiative to replace the tree stock that is required for your paper products; rethinking service delivery to minimise carbon footprint; employing marginalised groups; or at an individual level delighting a colleague when they need it most. It has long been recognised by leaders that the solutions for many of the challenges faced in a business are held in the minds of those working in the frontlines every day. A purpose that informs how these employees think, feel and act (all of which points to ownership of purpose), will no doubt result in breakthrough value-adding initiatives, and not just an idea sitting on a shelf. Importantly, as highlighted by the pandemic, active purpose strengthens organisational agility – an increasingly important marker of corporate resilience in an era of volatility and uncertainty. You might also be interested in these articles: White Swan. Why purpose lies at the heart of corporate resilience. 90% of CEOs don’t believe their business is moving fast enough to survive.