Wednesday, August 28, 2013

Why the purpose of business isn't to satisfy customers

Over the decades, what society expected of business, what it thought as its purpose, has changed.

Way, way, back, during the time of Hudson's Bay Company, corporations were chartered (with a specific purpose like building a road and a sunset clause) to serve the public good (and often feed the coffers of the nation states that chartered them.)

By the time I was out of college, long gone was the focus on public good. In the 1970's it was vogue to say the purpose of business was to make money. (And I thought, huh? That's like thinking the purpose of living is to breathe... a requirement for existence but not much of a purpose!)

Then in the 1980's the quality revolution happened and suddenly all the gurus were saying that business was to serve customers: Edwards Deming, Philip Crosby, Tom Peters. "The customer is always right" became the mantra.

Courtesy stockimages,
Yes, business has to have customers and they need to make a profit. But is that really their PURPOSE? It seems so limiting to view it as such. If my job as the president of a company is to serve customers, then it begs the questions, Which customers? Which services?  AXIS Performance Advisors could have been flipping burgers or making dog food. But it matters what business you go into! What do YOU want to do in the world? Why do we as humans come together into organizations?

So let me offer a reframing. I think organizations are the primary way in our modern society that we ....

What does this reframing do?
  • It shifts the focus from customers to managers and employees—who are we, what are we good at, what do we love to do, what problems do we want to be part of solving. what do we want our legacy to be? At AXIS, Marsha Willard and I reinvented our focus about every decade, following our interests as we developed and grew. This is far more empowering and satisfying than viewing your job as life-long servitude to customers. 
  • It calls on business to serve the greater good—Goodness knows, we need a bit more ethics and morality in business these days after the Enron-Worldcom-LehmanBros-JunkMortgage-CreditDefaultSwap messes! Instead, calls for Conscious Capitalism are emerging, recognizing that society needs business to help solve the world's problems and business needs a moral underpinning to attract talent and customers alike.
  • It makes it easier to reinvent the business when things change—In today's fast paced world, entire industries come and go. Think about the video rental stores, now empty storefronts. But if you keep asking yourself, "What does the world need from us now?" it opens up new lines of business and avoids the stagnation trap so many successful organizations fall into. 
  • It makes it easier to collaborate—Too many organizations and executives want to control it ALL. Gobbling up competitors, moving into all territories, bankrupting local businesses. But this often leads to hubris and over-reach. Why can't we just do what we do in our own ecosystem and help others succeed in theirs? For example, at AXIS, we designed our products like S-CORE and SPaRK in a way that other sustainability consultants could use them and profit from them, while we got a bit of income along the way. 
  • It makes it easier to let organizations die a natural death—In today's world, organizations take on a life of their own, fighting to stay in business, sometimes outliving their usefulness. But if the organization is the way each of us in the organization offers our talents to society, then when we leave, perhaps the organization doesn't have to keep going. Maybe perpetual growth isn't the goal or even useful. I have seen too many non-profits and a number of for profits try to hang on way past their use-by date.
So is the purpose of business to earn profits? serve customers? or provide a venue for us to contribute to society? I guess you could argue any of them as the 'end' rather than the 'means.' It is in fact a circular argument: customers can lead to profits which can lead to work that contributes to society which then can lead to more customers and profits. But "can" doesn't necessarily mean "will." I believe the starting point in that circle—the 'end in mind'—matters. If you think your purpose is ultimately to make profits you will act in one way. If you think it is to serve customers, it will lead to some different behaviors. Or if you think it is to manifest our gifts to society, yet other outcomes. Which organization would you rather work for? Or lead?

Try putting up this assertion on the company bulletin board next to the coffee pot and see what happens:

The purpose of organizations is to provide a venue for each of us 
to offer our talents to contribute to society. 
So what does the world need from us now?

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