Drucker got it wrong. Drucker famously wrote that “the purpose of business is to create and keep a customer.” I’m as much a fan of Drucker’s as any management scholar, but I have to part ways with him here. The purpose of business is NOT to create or to keep a customer. Certainly it is an objective, even THE primary objective of business. If a business can not create or keep customers, then soon there is no business.
Still, objectives are not purpose.
Some have suggested that the purpose of business is profits, increase profit and shareholder value. For obvious reasons, this view is held by a majority of shareholders. The overwhelming majority of companies, though, are not publicly traded, even if the majority of wealth is in public traded companies. Most business are small, owned by a sole proprietor or small partnership. Sure profits are a part of any business, but it’s typically not the reason entrepreneurs start a business. Profits are a measurement. Charles Handy makes the case that measurement can NOT be purpose. No one plays baseball in order to increase their batting average. They increase their batting average in order to keep playing baseball. Profits are a measurement.
Measurement is not purpose.
Customers, Profits, Shareholder values. These are the measurements that determine if you can keep playing. Profits keep you in business so you can keep making or doing something. Every business was started by someone who wanted to make or do something and be able to eat at the same time.
Don’t confuse what keeps you in business, with why you’re in business.
wow. taking a swipe at Drucker
I wouldn’t say a swipe exactly. Drucker always kept an open-mind about things…I just think he got this one wrong. Fortunately, Handy got it right. Thanks for stopping by Michael.
I thought the purpose of business is to provide a product or service that someone needs for a fair market value.
To most reading this I must sound really archaic, but it is still the main point and purpose of business. I think everyone has lost focus of this. I thin k that even Drucker would agree.
Creating and keeping a customer sounds more like marketing with the side effect being business. Marketing convinces people that their brand is the best and you should be brand loyal. When the customer buys the product then business is made.
Joseph, Thanks for the comment. You’re dead on. Without a product and a customer there is no business. I’m trying to touch a little more on the why behind the business owners decision. In most cases, he/she didn’t start the business just to provide the product but because something about that product gives him/her passion. Many business need to re-connect with that passion.
In Post Capitalist Society, back in 1993, Drucker reminded us that organisations in a post capitalist society “must know their purpose and not be diverted from it”.
He was not directing us to see his ‘purpose’ but rather for organisations to do the hard work of finding this for themselves.
Leadership is about directing action and energy towards that purpose, anything else is management.
Great point. It is unfair to attribute this quote as Drucker’s err, as his writing changed drastically as he got older. Still, it made for a good headline.
absolutely a great headline!!
Hmmmm… have to think about this one for a while. I don’t need my business to pursue my purpose, but once I make my purpose my business, then attracting and maintaining customers becomes part of that purpose.
I’ve coached quite a few businesses on this. Wouldn’t recommend that their “purpose statement” include something like “to produce customer loyalty”. However, quite a few business people hire a coach, in part, because they want grow their business. Sometimes they’ve lost track of their purpose, the REAL reason they’re in business. And sometimes they’ve lost track of the need to attract and maintain customers while making a profit.
Your point is to dig deeper, or as I say, “look beneath the surface”, and you make a fine point in that. I’m just not sure I want to “separate” customer loyalty from business purpose. I think that was Drucker’s real intention. The purpose of *every* business is to attract and maintain customers while making a profit.
Kind of like Rick Warren’s all-to-famous “The Purpose-Driven Life”. Do Christians really need to read that book to know they exist to love and serve God? Warren fails to go deeper into “what is YOUR purpose” that is expressed in the unique manner in which you love and serve God?
I’ll keep thinking, but I guess as long as I am making these distinctions I am supporting your good point, without contradicting Drucker’s statement in any way.
True. I look at it like this: Customers are like oxygen. We need them, we must breathe oxygen. However, we don’t live for oxygen, we don’t live for customers. If we did, we’d do anything to attain them and then find ourselves in a whole mess of a situation. Customer service and making your customers loyal is important, however it’s a whole lot easier when you focus on purpose and identity first (consider Apple).