I have spent a quarter of a century building businesses, largely my own but offering a contribution of my humble expertise when it has been requested. Twenty five years ago I was a recent university graduate and a neophyte to the business world so naturally I collected books, magazines, white papers, . . . i.e., whatever I could put my hands on that would (hopefully) support the success of my enterprises. One of the first was a collection of work by Peter Drucker. While some of his wisdom is timeless, I found that there were some major gaps in his thinking. His definition of “business purpose”, is inadequate.
“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.”, wrote Drucker. A business that grows and remains relevant for many years must have another purpose, . . . to serve a social good. Creating economic value for an enterprise’s owners, employees and the departments of revenue is not “serving a social good”. So what is it?
How do we determine the true “purpose” of a business to ensure that it is one with enduring value? There is a special (albeit very old) tool for uncovering the root of the question. The technique is called the “Five Whys”. Start with what your enterprise offers, then ask “why”, until you have dug down to the core purpose or “root” of the cause that your business supports. Ex., . . .
- We offer financial services to people!
- Why? Because those people need them.
- Why? Because without them they cannot budget, save, prepare for the future, etc.
- Why would they need to do those things? To live a healthy life, provide for themselves and their families, to save for kids’ college and prepare for a dignified and happy retirement.
So, in the example above we didn’t need to ask “why” five times to arrive at our need. What is the business purpose? It certainly isn’t to “sell financial services” and if that is ALL that it is, then the enterprise wouldn’t last. It serves no social good. We see however that there is more. Looking deeper we perceive a different answer to this example. “What is the business’s purpose? To help people live a healthy life, provide for themselves and their families, to save for kids’ college and prepare for a dignified and happy retirement.”
Keep this “dual purpose” in mind as you develop a business plan. Without the “social good” element as fundamentally equal to the “to market and sell something” one, a business is doomed to failure.
~ Constantin Poindexter, CEO of Surety One, Inc.