The word aspiration brings to mind a hope, or dream, but a company aspiration is more than that. To quote former Procter and Gamble CEO A.G. Lafley, an aspiration is a declaration of “where you will play and how you will win there.” Unlike a mission or vision statement, it includes specific, well-defined, and measurable outcomes.
Recent research from McKinsey on corporate transformations show just how important company aspirations are. In a study involving almost 3,000 executives, McKinsey found that companies that had established a transformation aspiration with well-defined targets had a 56% rate of success in their transformations, nearly three times higher than for companies that lacked a clear aspiration and target objectives.
Why is a clear company aspiration so impactful? First, it sets a clear and undisputable definition of where the company is currently or where it is headed. Second, unlike a mission statement or other corporate feel-good document, it gives the organization a clear way to measure itself as progressing or not progressing to its objectives. In addition, it provides the organization an ability to prioritize and focus on those competencies and initiatives that will produce the required success measurement.
I have worked with startups that use a company aspiration with specific revenue objectives as the overriding statement of focus for the organization for a given year, and then use 3-4 key actions the company needs to focus on that year to unify the company in its objectives.
An example of how impactful a clear company aspiration can be can be found in the example of two unrelated companies that recently announced exits, Dollar Shave Club and Yahoo.
Dollar Shave Club, was founded in 2001 with a clear aspiration to sell and deliver razors at an affordable price. It recently announced that it would be acquired by Unilever for $1 billion.
DSC created a simple, clear aspiration that covered much of what it wanted to be that naturally leads to the next important strategy question: How are we different? How will we sell them? How will we deliver them? What is our standard for affordable? How do we make money doing it? This type of focus helped the company align behind a small number of core capabilities that made them hard to beat: focus on brand and marketing, use the video, web-based outreach, and social media to directly target the customer, create a subscription that lowers the price and makes sure the user always has blades on hand, and bypass retail channel by delivering the product by mail.
Developing focus through aspiration also allows the organization to decide on what is not core. While Gillette developed a huge manufacturing base to produce razors around the world, Dollar Shave Club focused on demand generation and outsourced manufacturing to a company in South Korea. And since Gillette’s retail distribution could never be copied, instead Dollar Shave Club sold direct to consumers and outsourced its distribution, turning Gillette’s huge retail channel advantage against itself.
By contrast, Yahoo announced it was being acquired in an asset purchase by Verizon for $4.83 billion, ending its long and tortured road. That valuation is a fraction of its peak market cap of $125 billion in 2001 and at the low-end of its recent valuation range. Yahoo’s company aspiration over the years has muddled through six CEO changes since it was formed in 1994. Here is a sampling of how Yahoo framed their aspiration in the words of its CEOs:
CEO Terry Semel (2007): “Deliver great value to our consumers and, basically, value them.”
CEO Jerry Yang (second stint as CEO, circa 2008): “I think of Yahoo as, we have to be incredibly relevant and meaningful to consumers. And we’ve defined that around a starting point. We want you to start your day at Yahoo.”
And finally, the 2013 Version from Marissa Mayer, who made a third attempt at turning Yahoo into a media provider: "What we’re really focused on is inspiring and delighting users amidst their daily habits."
These kitschy, feel good statements leave focus open to ambiguity and debate. Due to this, Yahoo lost direction even as it accelerated its efforts since Marissa Myer took over as CEO. During that period they spent at least $2 billion acquiring 49 companies, including blogging site Tumblr, a social browsing company, and a video ad company. In the name of delighting and inspiring people in their daily habits, they also made a third attempt for the company at building its own media assets, even signing television personality Katie Couric to a deal worth $10 million. While the market cap of Yahoo increased almost three fold in the last five years, it was based exclusively on their investment Chinese online marketplace Alibaba. Meanwhile Yahoo’s share of the search market fell from 14% to 7.78% from 2012 to 2016. In 2009 it outsourced (for the second time) what was once its core competency, search, this time to Microsoft.
Coincidently, Dollar Shave Club amassed an 8% market share of the razor market in the same five years, along with $240 million in annual revenue, three million subscribers, and a base to build themselves in to a full consumer lifestyle brand for me.
DSC’s aspiration kept the company focused and directed them to figure out how to best deliver a low-cost, high-quality service to its customers without dooming itself to match how Gillette does business. Yahoo’s lack of focus directed it to try to match everything and anything anyone else was doing, and it ultimately didn’t give them a winning place to succeed.
Does a clear company aspiration account for the differences in these two companies? In an unconditional sense, no. Market, management, and execution are the difference. But a clear and measurable company aspiration is the starting point for every organization to create focus, measure success, and prioritize what is core and what is not core to winning.