What is The Golden Circle And Why It Matters In Business

The Golden Circle attempts to explain how certain businesses can inspire others and differentiate themselves in the market. Originally developed by author Simon Sinek, the concept helps businesses identify their purpose and then communicate that purpose to consumers in a meaningful way so that the brand can be highly differentiated in the marketplace.

Understanding The Golden Circle

The Golden Circle is represented by three concentric circles, with each circle in turn representing a particular facet of market differentiation.

The outermost circle denotes the “what”, or the particular product or service a business offers. Next is the “how”, or the steps involved in delivering that product or service. At the center of the three concentric circles is the “why”, which is the most important part. This circle describes the purpose, cause, or belief of a business. It is the very reason that a business exists – aside from profit generation.

In his book Start With Why: How Great Leaders Inspire Everyone to Take Action, Sinek notes that too many businesses start with product creation and then determine their purpose afterwards. To differentiate themselves, he instead argues that they start with “why” and then move through to the “how” and “what” of product creation.

When a business starts by identifying its purpose, it can inspire consumers to take action and align with their brands. This is primarily achieved by tapping into certain parts of the human brain that govern trust, loyalty, and decision-making. 

The Golden Circle in digital marketing

Since purpose is closely related to branding in digital marketing, it is helpful to look at The Golden Circle in the context of three brand characteristics.

Brand mission (Why)

The brand mission describes the reason that a brand exists. Again, this does not include making money or generating profits. For businesses that are hoping to reach consumers on a personal level, the brand mission should at least strive to make their lives better. More often than not, this means solving a problem that they or wider society are experiencing.

For example, Elon Musk founded SpaceX with the mission of reducing the costs associated with traveling in space. Apple’s brand mission is to deliver unrivaled user experiences through innovative technology.

Brand character (How)

Once a business has determined its purpose through a brand mission, it’s time to focus on the behaviors that will exemplify this purpose in practice. To be effective, behavior must be aligned with the purpose and brand mission across all business operations.

Indeed, only businesses that communicate in alignment with their mission are seen to be authentic by their target audience. Authenticity then creates the right positive emotions in consumers, who are then more motivated to buy. 

Apple’s aesthetically pleasing and functional products are very much in alignment with its mission to deliver high-quality user experiences.

Brand identity (What)

Brand identity is the physical manifestation of a company’s mission and character. In addition to products and services, brand identity also includes company logos and the language and visual elements that are used in promotional materials.

Apple CEO Steve Jobs was, in some respects, the physical manifestation of his own company. His interest in Japanese Zen and minimalist design became Apple’s purpose. His signature outfit of a turtleneck sweater and jeans was also specifically worn to convey the company’s mission of simplicity and functionality.

Key takeaways:

  • The Golden Circle is a concept that explains how a business might provide maximum value to consumers by changing the way it thinks.
  • The Golden Circle advocates businesses starting with why they are in existence and then developing a product to suit – as opposed to the reverse.
  • The Golden Circle is useful in branding because it is closely related to purpose and the story or message that a business wants to tell.

Connected Business Concepts

Economic Moat

Economic or market moats represent long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Circle of Competence

The circle of competence describes a person’s natural competence in an area that matches their skills and abilities. Beyond this imaginary circle are skills and abilities that a person is naturally less competent at. The concept was popularised by Warren Buffett, who argued that investors should only invest in companies they know and understand. However, the circle of competence applies to any topic and indeed any individual.

5 Whys Method

The 5 Whys method is an interrogative problem-solving technique that seeks to understand cause-and-effect relationships. At its core, the technique is used to identify the root cause of a problem by asking the question of why five times. This might unlock new ways to think about a problem and therefore devise a creative solution to solve it.

First-Principle Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and any eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"