Sunday, March 07, 2010

The Purpose of Business

"EVERYONE LIVES BY SELLING SOMETHING." Robert Louis Stevenson, the Scottish traveller and writer, once concluded. In the knowledge industry of the modern era, the selling could be of — an idea, a change, an example (PoC), an influence, a model. The logical outcome of which is value creation. Which further translates into profit or benefits of various kinds at different levels of its hierarchy.

Peter Drucker had a different view. Creating profit didn't seem to him to be the main goal of an enterprise. While advocating for Not-for-profit organizations, Drucker observed that there are obvious limitations to making continuous profit-making business models. According to him, to be responsible and relevant in the society, a business model could make profit that is equal to its cost of capital. However, if the goal of the business model is to create a customer, that could possibly provide a sustainable model for existence of a business.

Taking this argument a notch further, FT columnist Michael Skapinker suggests that, like leaders and people, business indeed is in the business of gaining respect:
Some are lucky enough to fulfil the highest of Maslow’s [top need from his psychology theory of the hierarchy of needs], self-actualization, at work. All sorts of people find true fulfilment at work – software developers, recording artists, even auditors. But it is a lot to ask from a job. Others, perhaps most people, hope for work that is reasonably interesting, and indulge their true passions – singing, hiking, wine-tasting – on the weekends.

The best businesses are good at providing a sense of belonging. But belonging can be transient. Businesses succumb to competition and disappear. Or technological innovation makes them redundant. No doubt the photographic darkroom was a companionable place to work; so was a travel agency. There is less need for them now.

I suspect it is Maslow’s second highest need – respect – that people most crave from work: respect not just from their colleagues but from the world [...] and it gets us closer to what business is for: making profits and serving customers by doing something we can be proud of.
[Emphasis added.]
  • See also:
  • Go here for more on Maslow’s psychology theory of the hierarchy of needs.
  • Go here for the full article at FT.

2 comments:

  1. Well thought Milind!I think, respect has a new term in business world.."Brand". Repsect for a business is measured by the strength of its brand. In fact, the first four levels in Marslow's hierachy needs can be related to "breaking even", making profit, associating with bigger names, bulding a brand of its own. I wonder what is self tualization for business...live for generations?

    ReplyDelete
  2. Interesting point, Sujatha. I'm sure every industry, society and generation would derive their equivalents of Marslow's pyramid.

    I would think Self-actualisation for a given individual shall come about from the own value system that the person holds. It could be a nun, a nurse, a scientist, a war-hero. And I suppose this much remains independent of the any given generation. The "in thing" for a given generation would influence the value system, and shall determine appropriate choice.

    ReplyDelete