“The purpose of any business is to create and keep a customer” – Peter Drucker
Five years ago, even two years ago, I would have said that the purpose of a business is to create value. Before that I would have said that the purpose of a business is to make a profit or to make “money”. As I understand the purpose of a business, it has been incredibly important to have an understanding of the story that business tells its customers. Take 15 minutes to watch this video if you are not already familiar
Start with why – Simon Sinek
What I have finally realized is this. The purpose of the business owner is to make money. The whole concept of a business centers around the notion of a customer from whom that money will flow to the owner. A business is not an arbitrary concept, it is a structure through which wealth flows from customer to owner. The value that the business produces is specific to the needs or perceived needs and wants of the customer that business creates. But that is not the “why” of the business…
The “why” of the business is not the “why” of the business owner, but the “why” of the customer. This is especially clear in a public corporation, where the “owners” don’t have much decision rights over much beyond who sits on the board of directors because of the amazingly small share of the business that they own. The board represents the interests of owners, but the corporate strategy is formed around the “why” of the customer.
When I think through this lens, I can take every department, every function, every part of a company, view it and see a different perspective. Internally in every small or complex business there are a series of interdepartmental relationships that can be contemplated as a “customer – provider” relationship. We don’t often think of it that way, because of the way that businesses grow.
Most insourcing relationships are considered in a monopolistic fashion, because of the management and employee relations issues associated with external competition. But what if every internal organizational relationship were subject to external competition? What if providing value to my customer was essential to keeping my job? What if every interdepartmental relationship had a contract with a finite and renewable term? What if once a year or once a quarter with some notice, my customer had the rights to terminate my contract and get their needs met by a different provider?
Don’t get me wrong, I am not advocating this kind of corporate environment. It merely illustrates that applying a market lens to interdepartmental relationships provides a view of the importance of understanding our customer value quotients.
That concludes the setup for this series of posts. Over the next few weeks I will be focusing on:
“What it looks like to understand and honor your customers, in the context of interdepartmental relationships that can feel monopolistic?”