Why Your Mission Statement Must Include Customer Primacy

The last hundred years have seen saw endless discussions of the purpose of a firm, as professional managers took over from the 19th century owner-entrepreneurs, like Rockefeller and Carnegie, and firms explored stakeholder capitalism, then shareholder capitalism, and now customer capitalism. The fact that in different contexts, corporate leaders often say different things to different audiences, can make it difficult to see what the actual purpose of a firm is, and even to raise the question: does the firm has any clear purpose at all?

While many firms talk about having a “true North,” some of the best-known firms do not always act in a coherent way. The widespread practice of issuing mission statements can help a firm clarify its direction, or show that the firm is going the wrong way. Customer primacy is a key ingredient.

The Role Of Customer Primacy

The best performing firms today tend to have a constant customer focus. As Apple CEO Tim Cook repeatedly says, “The stock price and revenues and profits are a result of doing things right on the innovation side, on the creativity side, focusing on the right products, treating customers like jewels, and focusing on the user experience. And so that's where we put our energies. And we have the faith that if we do them well, then the other things, [like the stock price], will follow.” Apple’s mission statement reflects the fact that the whole firm has always been preoccupied with the primacy of the customer.

The current mission statements of the 30 leading firms in the Dow Jones Industrial Index are set out below. It is encouraging that 18 of the 30 firms assign primacy to the customer in their mission statements. Of these 18, 11 are performing better in terms of total return over five years than the average S&P 500 firms.

They are among the best performing firms in the entire stock market, as shown below in Figure 4.

Firms Without Customer Primacy Mostly Perform Below Average

Twelve of the firms in the Dow Industrial Index do not assign primacy to customers, and all but two of the twelve have five-year total-returns lower than the average S&P 500 company, even though they include some of the most famous firms in the world. (The two exceptions, which are above average, are Chevron which is benefiting from unusually high oil prices. and Amgen: both firms are only slightly above the average S&P 500 company.)

Do Firms Implement Their Mission Statement?

The fact that 8 of the 19 firms that have mission statements committed to customer primacy perform below the average S&P 500, suggests that merely declaring a mission is by itself not enough: firms have to actually implement the mission,

For instance, one of the firms with the lowest five-year total return (Verizon) for instance has a strong commitment in its mission statement to customer primacy but anecdotal evidence suggests that the mission statement is not yet fully implemented in practice as explained in this illuminating article by Columbia University business strategy professor, Rita McGrath, which explains the customer realities of dealing with Verizon. Verizon talks about customer commitment but doesn’t always deliver.

Customer Primacy Is Not Just A Financial Divide

The great divide between firms that commit to customer primacy and those that don't is both a financial, and a moral, divide. Firms that commit to, and implement, customer primacy not only tend to do much better financially. They also do the right thing. By being other-directed, rather than merely seeking advantage for themselves, they generate benefit for others and society as well as themselves. Making money is the result, not the goal of their work. Teachers, nurses and doctors understand this distinction instinctively. Now we are seeing some big businesses also “getting it.”

And read also:

The Triumph Of Customer Capitalism

Why Shareholder Value Is Still Dominant