One of the most important and challenging elements of any business plan is the mission statement, which should be a short and concise pronouncement of the purpose for which the company has been organized and the specific targets and objectives of the company’s business activities. The process of developing the mission statement forces the founders and other members of the senior management team to carefully evaluate the resources of the business, their own personal goals and objectives and the function that the company’s product and services may serve in the marketplace. The mission statement should not be confused with operational aims such as achieving profitability or accumulating wealth for investors—the statement should educate customers, employees, business partners, regulators and members of the general public about the social function that the company intends to serve (i.e., the value that the company will create in the marketplace). A statement of purpose creates an identity for the business and also helps guide decisions about key issues such as what products and services to offer and how they should be positioned and marketed. The mission statement also become a rallying point for the company’s human resources and plays a strong role in how and where the company seeks capital to fund its operations.
The process of creating a mission statement forces companies to address a fundamental question that is often deceptively difficult to answer—just what business is the company engaged in? While it is typical for companies to define their business by reference to the specific products and services that they offer the better approach is to focus on the value associated with the output of the company’s business activities and the core competencies that the company has developed in order to generate that value. By taking this approach companies can avoid defining their businesses too narrowly and thus missing out on opportunities for positive that may be created by unforeseen future events such as new technologies and competitors. For example, the launch of a new company may be based on development and commercialization of a specific device to provide greater protection against theft at the homes and offices of customers. While the particular product may be sufficient to sustain the company in the short-term, the ultimate survival of the business will likely depend on the continuous development and introduction of a suite of security-related products and services. In fact, this will be crucial given that competitors may soon duplicate the original device and drive down prices and margins. In that situation the company must embrace a mission statement that institutionalizes a broader goal of offering value in the form of superior security products and services and acquiring the resources necessary for creating and sustaining the necessary core competencies to developed value-added outputs.
Although the mission statement should be short, often no more than a single sentence, it can take days or months to emerge and once the statement has been drafted there is still more work to do—the founders and other members of the management team must identify the basic philosophical tenants of the firm that will support the mission statement and serve as the foundation for the appropriate corporate culture. There is obviously a vast array of issues and questions that might be considered when crafting a company’s basic philosophy and organizational culture has become an important sub-discipline within the broader field of organizational studies and theory. In any case, serious thought needs to be given to fundamental questions such as the level of risk that is appropriate in making decisions about new products, services and business relationships and the best ways for the company to interact with its external environment (e.g., customers, suppliers, competitors and regulators). The answers will determine how the business operates and the decisions by managers and employees that are considered appropriate. For example, if the firm philosophy is relative “risk averse” the sales team may shy away from aggressive credit policies for new customers and the product development group will be more likely to select projects that incrementally improve on current offerings as opposed to pursuing ideas that may lead to true innovations but also carry much higher levels of uncertainty.
The content in this post has been adapted from material that will appear in Business Transactions Solutions (Fall 2008) and is presented with permission of Thomson/West. Copyright 2008 Thomson/West. For more information or to order call 1-800-762-5272.