How Measurement Makes Deep Purpose Work

For thousands of years, the North Star has been a guiding light for navigators and travelers, letting them sail the seas without getting lost or crashing into rocks. More recently, when modern firms began formulating deep purposes for their businesses, they also sought a kind of North Star. Yet they often ended up with preachy social purposes and sham advertising slogans that did more harm than good.

Firms must learn that a declared purpose, no matter how eloquent, cannot serve as a North Star or have significant operational impact unless it is authentic and measurable. That was the whole point of the North Star in sailing. It wasn’t a vague aspiration. It was a way of clarifying where you were and where you were heading.

To serve effectively as a North Star, a firm’s purpose must relate to what the firm actually does and its implementation must be systematically measured throughout the firm, with incentives and rewards aligned with those outcomes. Amazon and Microsoft have shown how such a declared purpose can become a true North Star.

Microsoft’s Purpose

In the 20th century, with Bill Gates as CEO of Microsoft, the firm’s mission was: "A computer on every desk and in every home." Workmanlike, to be sure, but with no hint of anything inspirational, let alone exciting.

In 2013, under the previous CEO, Steve Ballmer, Microsoft’s stated mission became wordier: "To create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most." The primary emphasis was still on creating devices and services, but there was a least a hint that people might be empowered.

In 2015, the current CEO, Satya Nadella, clarified and simplified the vision and mission statements.

• VISION: to empower every person and every organization on the planet to achieve more.
• MISSION: to help people and businesses throughout the world realize their full potential.”

The statements have been criticized by outsiders for being too vague and uninspiring. But in the context of Microsoft’s business, they made sense. Microsoft’s products and services were widely used, but they had stopped evolving. They needed to be upgraded to enable customers to achieve more. As it happened, there was an army of Agile developers that had been waiting in the wings to implement Nadella’s vision.

The difference between the new mission statement and that of Nadella's predecessor, Steve Ballmer, was not great. What made the difference was measurement.

Measurement Makes The Difference

Nadella gave operational substance to the abstract concept of empowering customers. Nadella embraced the idea of empathy and understanding customers and anticipating their unexpressed needs. He lived the mission and insisted on measurement to ensure that it was real.

As Brad Anderson, Corporate Vice President of Enterprise Client and Mobility at Microsoft said, staff found that if they were having a meeting with Nadella, they had to begin with the numbers of customer usage, not technology, schedules, sales or profits. This underlined the principle that customers were truly number one. It turned Nadella’s concept of empathy into something tangible and measurable.

“When you go in to talk to Satya,” said Anderson, “you start with the customer. ‘What’s the customer’s problem? What are they trying to solve? How are we making their life better?’ And so, this concept of customer obsession and being really close to customers has been incredibly important. He focuses on usage and usage becomes the primary factor that everything that we do revolves around. In the past, we used to compensate and reward the engineering teams based upon factors like, ‘Did you ship on the date? Did you ship with the features that you said you would ship?’ We didn't know if it was being used or not.”

In due course, Microsoft changed the way it compensated the engineering teams—a crucial point for reinforcing the culture. The engineering teams were rewarded on the basis of customer usage. Revenue targets for individual teams were de-emphasized. The goal of each team was to enhance the user experience.

So measurement at Microsoft wasn’t just dry numbers. Nadella’s concept of empathy brought the numbers to life. Making empathy the keynote concept of a major corporation was almost unprecedented. But Nadella saw that without empathy, Microsoft would never succeed in understanding customer needs—particularly needs that customers themselves didn’t know they had—and delivering solutions to meet those needs. The bet paid off, as Microsoft’s staff found ways to enhance products that had users exclaiming, “I didn’t know I could do that!”

The result? Another $2 trillion in market capitalization.

Measurement At Amazon: Working Backwards From The Future

Since its outset, Amazon has obsessed with customer value. Its vision and mission haven’t changed since it became a public company.

• VISION: to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.
• MISSION: We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience.

How measurement evolved at Amazon is explained in detail in one of the most illuminating management books of recent years: Working Backwards: Insights, Stories, and Secrets from Inside Amazon” (Macmillan, 2021) by Colin Bryar and Bill Carr.

Amazon’s initial idea was to have a single equation or “forcing function” that could measure team performance in a single figure. The idea sounded great: a single equation could point each team in the right direction and alert them early if they drifted off course.

There was just one problem. But it didn’t work. “We tried them out for more than a year,” write the authors, “but fitness functions never really delivered on their promise for a couple of important reasons. First, teams spent an inordinate amount of time struggling with how to construct the most meaningful fitness function.…. Second, some of these overly complicated functions combined seven or more metrics…. Combining them into a single, unifying indicator was a very clever idea that simply didn’t work.” Instead, Amazon shifted to what it calls the PR/FAQ Process

This means imagining the finished product, with a 6-page paper, which is called a PR/FAQ, i.e. a “press release” and “frequently asked questions.” It’s essentially how Amazon would announce its product in the marketplace if it was ready to launch and how it expects the product to be received. It’s replete with “imagined customer quotes,” about how it will make customers' lives better. There are no PowerPoint slides. The PR/FAQ is about two pages of press-release prose, and four pages of frequently asked questions.

There are also metrics showing how customer behavior is expected to change and what elements will need to happen from Amazon to make those behavior changes happen.

Just as Nadella’s emphasis on empathy brought life to the dull customer-usage numbers, the future preass releases at Amazon brought excitement and energy to their statistics.

Amazon’s process has led to an astonishing array of major innovations: Cloud services with AWS in 2006; Amazon’s Kindle in 2007; video on demand in 2008; Amazon Studios in 2010; Amazon Echo in 2015; and Amazon groceries in 2017.

The secret behind these multi-trillion dollar gains: measurement.

And read also:

Why Customer Primacy Is Key To Getting The Benefits Of Deep Purpose

What Firms Must Learn About Deep Purpose