Purpose Driven vs Profit Driven — The Myth

Much is being said about purpose-driven organizations: organizations that put the purpose before the profit.

While profit-driven organizations are seen as selfish organizations that only care about reaping value out from the society, purpose-driven organizations are usually seen as giver organizations that focus on the positive social impact of their activity.

Ironically, the opposite might be the case, and selfishness lies closer to the purpose-driven organizations.

The key thing to keep in mind is who gets to decide the social impact of an activity. While for purpose-driven organizations it is the organization itself (or a politician), for profit-driven organizations the one who decides their value is an independent third party: the customer.

Not only this. The customer has a strong pressure to undervalue the organization. A customer usually does whatever is on her hands to avoid paying (recognizing value) to an organization, since any value she recognizes (pays) is value she cannot recognize to someone else.

On the other hand, those who value purpose-driven organizations have a strong pressure to overvalue their product, since the more value they assume they produce, the more of a reason they have to exist.

It’s not a surprise then, that some purpose-driven organizations end up wasting value recognition from the society (money), while some profit-driven organizations end up creating products that improve the lives of millions of people.

Of course, not all profit-driven organizations have a net positive balance of value creation, especially if one takes into account environmental damage, health issues or manipulative advertisement, and not all purpose-driven organizations have a negative balance. However, the nature of the value recognition process of the two does suggest that profit-driven organizations will result in higher and better value creation for the society than purpose-driven ones.

The conclusion of all this is not to ignore or avoid purpose but keep it, in most cases, after the profit.