By Lawrence Chong –
In an age where businesses are downsizing, rightsizing or just doling out the pink slips that has fast becoming the norm, it’s time to rethink and update the purpose of business to add the sensible role of inspiring employees and shaping responsible growth. #bigideas2017
Peter Drucker, the father of 20th-century management principles, said:
“The purpose of business is to create and keep a customer.”
Since then, many businesses have indeed taken this to heart, and it has guided corporate development for decades. Billions have been spent on understanding what the customer will buy and then create products and services to create or fit customer needs. Then even more time and resources were spent on elaborate schemes to retain the customer. This has led to extreme behaviors, and one would remember the Volkswagen scandal or the recent Wells Fargo incident where staff created ghost accounts to generate more sales.
In the name of the customer as the ultimate goal, a class system emerged. Employees became second class citizens in this process, serving as mere cogs in the machinery to serve the customer. Products are a means to an end so long as the margin is good and if the customer buys, it ought to be right.
I believe Drucker who has defined the ethos and thinking of management for so many of us meant well. Most probably he limited his definition of the purpose of business to the concept of creating and keeping a customer as an definitive truth. Obviously without a customer you would have no business and what you offer is essentially of no value. But I don’t think he meant it as the existential truth because if it were it would not be practical in today’s context.
First and foremost, identifying what you can offer and why you are doing it matters more before you can even answer the obvious question of creating the customer. This takes vision and requires founders to have extraordinary faith to inspire a motley crew to join you. Just look at this recently unearthed video about Jack Ma, see how he defined a vision for the nascent Alibaba with purpose and ambition. Imagine if he simply went with the usual pitch of talking about serving customer needs, no one would have joined him to come this far.
The second problem with limiting the purpose of business to only serving the customer is, it totally undermines the obvious and critical role that employees play in the process of creating value. In the book The Game-Changer, A.G. Lafley explains that when employees understand what it truly means when the customer is king in P&G’s case and are engaged as equal partners, then the innovation processes and practices start to generate results. He further shared that:
We had to redefine our social system to get everybody into the innovation game.
The recent revival of Japan Airlines is another example of why inspiring staff matters. Kazuo Inamori who founded Kyocera was asked by the government of Japan to help revive the failed airline after it filed for bankruptcy. He explained that the revival of the airline was only made possible after trust has been established and the staff worked as one.
The third problem with limiting the purpose of business to only creating and retaining customers is: business is always part of a community and being responsible is simply good business sense. Because it is almost impossible to do business today without caring about the community at large. Unilever did the unexpected thing to close the corporate social responsibility department in order to adopt a whole-of-company approach to build a business that makes a difference through daily work.
Argued Unilever CMO Keith Weed who led the move:
Don’t get me wrong! We very much want consumers to buy and use our products. We just want to make sure our products are a better, more sustainable alternative to what they would use otherwise. That means innovating products to reduce their impact and changing consumer behavior about how to use products.
As more companies move in the direction of taking a whole-of-company approach towards making a difference, it is clear that the idea or the purpose of business is ripe for an update.
The essential question then is, what is the existential rule which enables a business to thrive in a sustainable way in the 21st century? From our work with companies in over 18 cities throughout the Asia Pacific for 12 years and study of trends, we discovered that if the purpose of a company has these three elements, it will nurture trust and innovation:
The 21st century purpose of business is to deliver meaningful value to customers by inspiring employees to do insanely great work and shape the world into a better place.
We have found that it is a rather dynamic relationship and it works something like this visual:
Let us review each one of them:
1) Deliver meaningful value to customers
In a day and age where manufacturing and production quality has improved so much, people are looking for something extra. They do not just want great coffee but they want to know that their coffee comes from farmers who are paid well for their effort. So beyond just a great product, ask yourself, how are you helping those in your supply chain. Are you simply supplying or making a real difference at the same time.
2) Inspiring employees to do insanely great work
Today some employees are also entrepreneurs on the side, leasing out their homes or taking on a gig. Some even have a bigger personal brand name than their bosses through social media, it is really time to take a different approach towards the concept of employees. See them all as business partners and since many will not stay long with you. Inspire them so that they will give their best while they are with you. It is great for business performance and good investment for the future of your firm.
Recently two of my ex-colleagues sent messages to thank us for inspiring them. Both are doing well: one just started a business and another has gone on to greater things. They gave their all while they were with us and we had fond memories of their time with us. We were moved by what they shared and their testimonials affirmed the purpose of our work which is to shape the world.
3) Shape society or the world into a better place
The question one must ask is, can you even run a business today by being irresponsible to society and the world. The answer is increasingly a resounding no. Global firms know that being a responsible corporate player makes it easier to attract top talent. And it makes customers happy to be associated with you. That is why global fashion brands were worried when poor working conditions led to deaths in Bangladesh. They were more afraid of the backlash from customers and indeed a move is taking place to improve working conditions. In a world of instantaneous broadcast, to be irresponsible is simply being stupid.
There is now a growing movement of companies who seek to go beyond corporate social responsibility and take a whole-of-company approach to make a difference. Some chose the more obvious path of being a social enterprise while others have decided to build businesses that make a difference by rethinking how they develop responsible products and services; treat employees and customers as partners and be a responsible partner in society and for the planet. One such network which Consulus belongs to, is the Economy of Communion (EoC). Initiated by Chiara Lubich in 1991, the idea of EoC is to have a preferential option for the poor, bridge inequalities and to build economic unity through business. There are about 800 businesses world-wide that put this model into practice.
For the future of business, it has and should be a force for good
If business continue to take the path of exploitation to please customers, it will just result in a catastrophic backlash which is already affecting all of us: from abuse of labor rights to the environment, hence the 20th-century version of purpose for business is not enough. It is time to be responsible and sensible so that business can have a thriving and sustainable future. The days for business as usual is over, time for more businesses that make a difference.
I am keen to hear what you think about our proposed new purpose for business. Share with me your comments and ideas.
In the meanwhile, have a great 2017 shaping a better world through your work.
Lawrence Chong is the Co-founder and CEO of Consulus, and is also a featured speaker at global events such as World Marketing Summit and World Brand Congress. Consulus is an EoC enterprise that operates in 10 countries. Lawrence regularly shares about the experiences of helping companies transform to enable innovation through purpose and unity. His passion is in shaping purpose-driven companies that will contribute to shaping a better world.