In the late 1970s, my uncle, Stanford economist Dr. Marc Porat, coined the term "Information Economy." Through his research, he showed how information and technology were supplanting manufacturing as the core of innovation and economic growth. This month data released by PwC at the World Economic Forum shows that CEOs are predicting a new economic era will reach a tipping point in 2020.
In my 2014 book, The Purpose Economy, I predict that purpose will be the organizing principle for the fourth economy in history. Changes in the economy are happening even faster than I had predicted. By the end of the decade, CEOs expect major changes in consumer and labor markets that will cause a tectonic shift in the economy just as technology did at the end of the last century.
A New Force
Based on PwC's data, it appears the majority of CEOs now share the vision that purpose is the new driving force of the economy. They see that understanding the importance of purpose -- for employees, clients, and customers -- will soon mark the difference between competitive companies from others that fall off the map.
Purpose is a natural extension of the democratization of the economy made possible by the advances of the Information Economy. Just as the Industrial Age built the infrastructure needed to realize the Information Economy, the technological advancements born out of this last era are fueling the Purpose Economy.
Based on what they see in the market today, CEOs expect to see the demand for purpose in the consumer marketplace to increase by nearly 300% by 2020. This demand means consumers putting less emphasis on cost, convenience, and function and increasingly make decisions based on their need to increase meaning in their lives, and buying products and services that fulfill that need.
As Millennials increasingly take on leadership roles and become the majority of the workforce, CEOs see this shift in the consumer market happening with equal force across the labor market. They see the power of holiday bonuses and other extrinsic motivations declining and the demand for meaningful work growing rapidly -- across all sectors and industries.
CEOs are well positioned to lead this change. According to Imperative 2015 Workforce Purpose Index (WPI), 50% of CEOs are Purpose-Oriented leaders. These leaders see work as fundamentally about helping others and being a source of personal growth, rather than defining work as simply a source of ego or social status.
As a bellwether of this transformation, the largest professional services firms are embracing purpose as their new focus. PwC recently appointed a Chief Purpose Officer. EY created the Beacon Institute with Simon Sinek as their spokesperson. Deloitte has made purpose a hallmark under their new CEO. These companies see the changing economic climate and realize that being early adopters is not only a massive business opportunity but also critical to their survival.
Success in the Purpose Economy
In writing the Purpose Economy and working with leaders around the globe, I found that most companies are in the early stages of this evolution. They are still exploring what it means to serve the demands of the new market. Similarly, the efforts of the professional services firms to date have been focused on helping companies define and live their "purpose" but have yet to to understand the psychological underpinnings of th changing demands of consumers and employees.
What individuals are seeking is more meaning in their lives. This sense of meaning, or purpose, is driven by three specific and connected needs. Meaning comes from making an impact through our work, facing challenges and growing as individuals, and having strong relationships with those around us. The latter is the greatest source of meaning in our lives.
Understanding this need for purpose, and the factors that drive that need, is why companies from Whole Foods to LinkedIn are thriving. They are laser-focused on delivering purpose to their customers and employees. They understand that to build loyalty and value they need to play a core role in all three areas of meaning creation for their stakeholders: relationships, impact, and growth. These are the differentiators in the new Purpose Economy.
As CEOs look to transform their approach to business to thrive in the Purpose Economy, they should focus their efforts on understanding how they bring meaning to their current customers and employees. How are they helping them build strong relationships, make an impact, and grow? They can then use these insights to amplify these existing strengths and redefine their culture and consumer offerings to center on relationships, impact, and growth.
This is the heart of the new Purpose Economy. It isn't about some poetic purpose statement or set of values pasted on a wall. It is about optimizing the amount of meaning and fulfillment your employees and customers feel everyday. The companies that can do that are going to be leaders in this exciting new era.