John Lewis Opticians have just launched. How will they do? JLP’s mutual ownership model is much loved and admired. It’s working well. The total group’s revenues have grown by 50% in the past six years, through a recession. With profit distribution to all employees, known as partners, John Lewis has become the new Virgin, champion of the customer. I would love to buy a car from them, or have them sell my house. But the world of opticians doesn’t need John Lewis. In fact, John Lewis Opticians and their main competitor have a lot in common.

Specsavers, the UK market leader with over 40% market share, was founded by Mary Perkins and her husband, qualified optometrists who met on their first day at university. I’ve heard it said that she was motivated by seeing family members not being able to afford decent glasses. Whether that’s true or not, the Perkins vision, made possible by industry deregulation, was to make stylish glasses affordable to all. This required a different business model. It has two key elements. First, the high street branches are franchisees of a sort – not so different from the partners of JL. As Dame Mary said, “We would have partners in every shop we started who invest their money with us on a real 50/50 basis. If the shop was a success then we would all prosper.” The second key element is vertical integration – glasses factories in eastern Europe – which creates economies of scale.

This makes a great story, and the ownership model delivers superb service. I asked the chief marketing officer why they don’t tell people about their great customer service scores. Simply because the “Should have gone to Specsavers” and the “Two for one” message work so well. They flirted with changing it and realised there was no need. Besides, the price message matches their core reason for being: to make good glasses affordable.

Quality Solicitors is another professional service on the high street which uses vertical integration and a sort-of franchise model. Their business model looks a lot like Specsavers. It’s about achieving economies of scale through buying as a group, created by bringing independents together under a single brand, the inspiringly-named Quality Solicitors. (We’ll assume they mean good quality.) They launched with a big expensive bang on TV in 2012-13 and then went quiet. On the face of it, Quality Solicitors and Specsavers have much in common, but there’s a fundamental difference. One is driven by the opportunity to generate operational efficiencies. That benefits business owners but doesn’t necessarily offer anything to their customers. The other created those efficiencies out of a drive to make glasses more affordable, a benefit directed entirely and explicitly at the end customer and to which they committed fully. Result: a huge business with very high customer recommendation scores, profit for franchisees and a billion pound fortune for the Perkins family. Meanwhile Quality Solicitors growth seems to have stuttered to a halt. Motivation matters.

Motivation should be reflected in a company’s statement of purpose. Virgin Money’s purpose, “to make Everyone Better Off”, stands out in its simplicity and clarity. Virgin Money’s chief executive, Jayne-Anne Ghadia, encourages people in the business to ask themselves, when considering proposals and decisions, “Is it EBO?” This reminds me of Tesco in its heyday, where it was habitual to start every meeting by thinking about the needs of the customer, and where one of the simple rules to guide decision-making was: if in doubt, let the customer have the benefit.

It is perhaps surprising that the John Lewis Partnership’s stated purpose is about the happiness of its employees through giving them meaningful work – not about the customer at all. Yet we know the motivation of those partners is to do the right thing for us as customers in the short term, knowing it will work out best for them in the long term. The thing about purpose is, it’s not about whether you trumpet it, it’s whether you live by it.

JL’s purpose means they only enter sectors that partners want to work in. John Lewis Opticians will probably do well. But I’d love them more if they’d go where we really need them.

Comment, Thought leadership | January 2016