Purpose Driven Startup Coherence Lesson from ‘Big Pharma’

 In Benefit Venture Blog, Entrepreneurship, Leadership, Stakeholder Capitalism, Strategy
Purpose Driven Startup Coherence

Young Beauty or Old Hag?

Purpose Driven Startup Coherence: purpose driven startups are sometimes exposed to criticism from skeptics, doubting their integrity. If you have a strong commitment of purpose to your stakeholders, then you’ll be scrutinized more closely than a business whose main fixation is on maximizing shareholder value. All your business behaviors have to show the same face or you are likely to lose credibility and support—this is the reason for purpose driven startup coherence.

The lesson for purpose driven startup coherence is easy to learn from Big Pharma. Most pharmaceutical companies have lofty aspirations. Like, “patients come first”. The top five US drug companies are J&J (“we aspire to positively impact patients”), Pfizer (“patients’ lives depend on us”), Merck (“a sense of purpose beyond just making money”), AbbVie (“create healthier, more vibrant communities”), and Bristol Myers Squibb “effective governance and high standards of ethical behavior”).

On the other hand, two examples of behavior that may open question these kinds of statement: J&J and their distributors recently agreed a $26 billion opioid settlement; PVA says Pfizer, with BioNtech and Moderna, are making $65,000 a minute profits from Covid vaccines.

They all espouse very high-minded societal aims and principles. Visit their websites, take a look and then reflect on what you read by comparison with what you see daily on the television screen. You may think it’s therapeutic or toxic. This article may help you: Should Prescription Drugs Be Advertised Directly to Consumers?

Six and a half billion dollars of influence

Pharmaceuticals are the biggest TV advertising sector in the US. Why is it though, that the United States, is one of the only two countries in the world where drug makers are allowed to market prescription drugs directly to consumers. The other, surprisingly, is New Zealand.

In 2020, the US pharmaceutical industry reached an direct to consumers (DTC) advertising spend of $6.58 billion, according to Statista. As well as DTC advertising, their indirect marketing to consumers is considerable, such as through program sponsorship. The United States accounts for 5% of the world’s population, but accounts for 42% of global prescription drug spending.

Drug companies also are the biggest spenders on political lobbying in the US. Statista says they spent over $300 million in 2020. That’s about double what the next biggest sector spends on lobbying—the electronics industry. The oil and gas lobby spent only $110 million. To be fair, they also spend huge sums on R&D (the top five spent $36.45 billion in 2019), and they may argue that this is only possible from maximizing sales to consumers, hence corporate profits.

Importance of purpose driven startup coherence

The principled entrepreneur who creates a purpose driven startup might ask herself why these things are so, especially with the knowledge that the American pharmaceutical industry used to abide by the term ‘ethical marketing,’ meaning that drug companies could only market to physicians, not directly to consumers.

There are many reasons why coherence of a company’s explicit or implicit messages and conscious or unconscious behaviors are so important:

  • insufficient thought given to the implications of the purpose or the potential behaviors that might conflict with it;

  • a customer may live in the local community, or a supplier might be an investor, a customer may be an influencer, such as a journalist or blogger or an employee might be an elected official and thus there’s a risk of incoherence or words or actions;

  • an employee, manager or outside contractor may be new to the venture’s purpose and inadvertently say or do something that is not aligned with it;

  • implicit ambiguities will face the company as time and circumstances change, so revisiting the corporate purpose and its consequences is something to be undertaken regularly;

  • pressure to produce performance or financial results may adversely impact ethical behaviors.

As the new venture grows and matures, risks will increase as well. The problem of the right hand not knowing what the left hand is doing, will grow as the company becomes more complex. Organizational bodybuilding may not keep up with the complexities or the implications of delegation of responsibilities. During the planning of a new venture, purpose driven startup coherence is considered very critically, but the day-to-day pressures of keeping the business afloat tend to make operational priorities dominate a reconsideration of plans made at the outset.

One look at the Big Pharma advertising story shows that purpose and profit can come into conflict, especially in those situations where government has not sought to legislate frameworks for corporate behavior either by default or the effect of lobbying. Entrepreneurs need to be very sensitive to any incoherence between purpose and profit, both intentional and unintended.

Entrepreneurs working to ensure purpose driven startup coherence can use this mindmap of stakeholders as a basis for building the map of their own venture’s future stakeholders. Thinking about them formally can avoid strategic error. Of course, you will need to define your own stakeholders—they’ll not be exactly like this schematic version. Purpose Driven Staartup Coherence

So, when you have defined your purpose, you can consider your business plans for each stakeholder to see whether you risk clashes between stakeholder interests and your own. You can also consider both formal communications with each stakeholder as well as the unplanned communication that takes place simply as a consequence of doing business.

Click here for the free Venture Founders Stakeholder Strategy Evaluation Tool


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