Managers frequently ask questions about the Corporate Mission Statement... "What is it?" "Why do we need it?" and "How should we write it?"

A mission Statement is a short, succinct statement declaring what business you're in and who your customer is. By offering such focus, it provides direction for future corporate development.

Way back in 1960, Theodore Levitt wrote a significant article in The Harvard Business Review. In his article, "Marketing Myopia," Levitt criticized American business managers who, he claimed, define their business from the inside out. That is, American Business Managers focus on the products and services they provide...the nuts and bolts of their business. And this, suggested Levitt, is a serious mistake. Instead, suggested Levitt, they should define their business as satisfying specific customer needs.

To illustrate his point, Levitt claimed that the railroad industry caused its own decline by insisting that "We're in the railroad business."

That statement led the railroad companies to think in terms of great hunks of iron and steel, rights of way a quarter of a mile wide, tracks laid across the United States. As they thought in terms of these physical factors, and insisted "We're in the railroad business," they missed opportunities...opportunities to participate in the growth segments of the transportation industry...in automobiles...in trucks...in airplanes.

According to Levitt, if the railroad companies had said "We're in the transportation business," they might have fared much better. How come?

Because the railroad industry's customers don't care about great hunks of iron and steel. They don't care about rights of way. They don't care about tracks laid across the United States. They care only about moving people and products from one place to another. The market need that the railroads serve is transportation, not railroading.

Two Sides to the Story

Certainly, Levitt has a point. But there's another point too. The railroad industry happens to own the rights of way across the United States. They happen to own the tracks. They happen to own the iron and steel. All their assets have to do with railroading. There are, after all, two sides to this story.

OK, here’s an idea – what if you wrote a statement linking these two points of view? Let's call it a Mission Statement. And you'll be sure to include two dimensions in that Mission Statement. The first dimension is an inside-out description of what you do. It will describe the product or service you supply, and the activities you perform inside the walls of your company.

The second dimension of that statement is the "Who buys it, and why?" The market sided point of view.

An Example

For example: "Clayton Instruments Inc designs and manufactures highly reliable monitoring equipment to meet harsh or unusual environments within the process industries."

Consider the first half of Clayton's Mission Statement: "Clayton Instruments Inc designs and manufactures highly reliable monitoring equipment...."

It's an inside-out description of what the company does. It lists the functional activities performed: "design and manufacture". And it describes the products that Clayton ships out the back door: "highly reliable monitoring equipment."

Consider the second half of Clayton's Mission Statement: "...to meet harsh or unusual environments within the process industries."

It describes the "Who buys it and why?" It's the market-sided definition of Clayton's business.

A well-developed Mission Statement is broad enough to allow for the diversity management intends. And it also provides the focus to accurately describe what products and services the company offers.

Continuing with our Clayton Instruments example, though the company currently manufactures temperature and pressure monitors only, its Mission Statement describes the firm's products more broadly. It speaks of "monitoring equipment." This leaves room for the company's introduction of equipment other than temperature and pressure monitors. Thus the Mission Statement allows room for product expansion.

At the same time, the Mission Statement provides focus. It identifies the company's market as the process industries. And it specifically targets applications in "harsh or unusual environments."

Also, the word "monitoring" provides additional focus. Clayton instruments does not manufacture data logging equipment. It does not manufacture control equipment. The company manufactures monitoring equipment and consciously eliminates other products through its Mission Statement. Presumably, the company's managers have explored their position in the industry and concluded that their expertise is in monitoring.

Managers often ask, "How much change might we expect in our Mission Statement from year to year?"

Expect very little change from year to year. Change in your Mission Statement is evolutionary rather than revolutionary. That's because the Mission Statement describes the very foundation of your enterprise – what it does, for whom, and why. As the foundation of your enterprise – your link to your customers – you wouldn't want it to change very much from year to year. 

Think of your Mission Statement as you do the Constitution of The United States...because you CAN change The Constitution of The United States. But you can't change it much. And you can't change it fast. Same with your Mission Statement.

A number of companies (including a few of our clients) add one more element to their Mission Statement – a reference to "earning a profit" or "providing a return on stockholder equity."

This gives the Mission Statement a secondary purpose. Its primary purpose, of course, is to relate the organization to its market... to its customers. Adding "for a profit" to the Mission Statement relates the company to its stockholders. This can be helpful in getting the Board of Directors to approve the Strategic Plan of which the Mission Statement is a part.

How to Develop Your Mission Statement

A visitor to our website asked, “Is there some particular process you’d recommend my planning team use to develop our mission statement?”

Yes there is. First, have each member of your planning team independently write a mission statement for your organization. Then, have each of them read their statement aloud to the others.

Next, take a large piece of paper - a flipchart easel works great - and divide the page into four quadrants by drawing both a horizontal and a vertical line mid-way across, and mid-way down, the page. Label the four quadrants: “Product / Service,” “Function,” “Market,” and “Market Position.”

Ask your planning team members, once again, to read the mission statements they’ve written. As they read, write the specific elements of their mission statements in the corresponding four quadrants of the chart. When they’re finished reading - and you’re finished writing - your chart will contain a handful of ways to describe your products and services, a handful of ways to describe your market, etc.

Now you can tackle one quadrant at a time. By consensus, have your planning team decide which is the best way to describe the company’s products or services, its market, etc. In effect you’re separating the discussions of each of the four elements of your mission statement.

Following your group’s decision to adapt certain words and eliminate others - for each of the four quadrants - you’ll have most of the words in each quadrant crossed out, with just a few remaining. Next ask each of your planning team members, once again, to write a mission statement. Except, this time, instruct them to use the words remaining on the chart.

As your planning team members each read their mission statements, you’ll discover (to no one’s surprise) that they’re all quite similar. One or two will sound better, mainly because one or two individuals happen to have a flare for writing. Take those which sound the best, copy them onto a clean sheet of paper (on the flipchart). A bit of wordsmithing by your planning team, and you’ve got your mission statement.
  

This article is adapted from Bill Birnbaum's book, Strategic Thinking: A Four Piece Puzzle