The #1 goal of every successful business
That one goal is not to 'maximise shareholder value'.
At its essence, being an entrepreneur is super easy.
That's because for every business that exists, there is only one goal, one primary purpose that needs to be constantly focused on and achieved.
That one goal is not to 'maximise shareholder value'; it's not 'to make money for yourself'; it's not 'to make the world a better place' (this one is possibly the biggest nonsense people in business tell themselves).
It's none of these things.
Peter Drucker - the renown management guru and author of many tomes of business wisdom - stated often in his books:
“There is only one valid purpose of a corporation:” he wrote, “to create a customer.”
Making money and maximising shareholder / stakeholder value is created as a result of consistently 'creating and keeping a customer'.
Here's the rub
Many businesses may publicly profess to be 'customer-centric', or have sterile and meaningless statements like 'we care for our customers above all else' printed on wall posters that are dotted around the office, that everyone obviously ignores.
Then when push comes to shove and the difference between the CEO getting a $1 million bonus and a $100 000 bonus comes down to how much more margin they can squeeze out of that same customer; the business will opt to take a flame thrower to the customer relationship every time to hit their financial targets.
What to do?
If a business relentlessly pursues the wellbeing of their customers instead of the personal wealth of their shareholders, then quite naturally those businesses will organise themselves to be environmentally sustainable, non-polluting, economically sustainable and beneficial for society.
They will as a result of their design be innovative, creative, respectful of their employees, agile, resilient and profitable.
These things then are not a reluctant add-on depending on what is trending at any given time, they are key business steps to continuously adapting to the changing needs of customers and satisfying them in the best way.
There is a lot of debate currently which is focused on the future of capitalism. Some are calling for a Great Reset of sorts, while others are proposing that business structures itself to be stakeholder-orientated rather than shareholder-centric.
These conversations are important and all carry valid points, but the kernel of truth to which they all must first obey is that every business must have as their #1 goal, the creation of customers.
'A business enterprise has two basic functions: marketing and innovation.
If we want to know what a business is, we have to start with its purpose. And the purpose must lie outside the business itself. In fact, it must lie in society, since a business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer. The customer is a foundation of a business and keeps it in existence. The customer alone gives employment. And it is to supply the customer that society entrusts wealth-producing resources to the business enterprise.
Because it is the purpose to create a customer, any business enterprise has two – and only two – basic functions: marketing and innovation. These are the entrepreneurial functions. Marketing is the distinguishing, the unique function of the business.
ACTION POINT: Find out what needs your customers want fulfilled today. Determine how well your products are meeting the needs of your customers. That is the purpose of business.' - Peter Drucker
Roger L. Martin
Jonathan Cherry