The question of ‘purpose of business’ is very intriguing with no conclusive answers. Is the purpose of business purely to make a profit? Or is it something bigger than just making a profit and involves contribution to customer, society and other higher and nobler objectives?
In other words, is the end goal of a business to make a profit for its owners with the business activities serving as the means? Or is the end goal of a business to carry out its activities, with profits serving as the necessary means?
Peter Drucker wrote that the purpose of business is to create a customer. When I read the statement, I couldn’t help but be amazed at the clarity of thought he possessed!
The amazement however was short lived, and dilemma set in again when I asked myself – “So who is the customer?”
So who is the customer after all?
I am very passionate about retail automation software. If I start an enterprise with my own personal capital to develop and sell retail automation software solutions – I clearly know who my “customer” is. It is the retail business that can benefit from my automation solutions. I also very clearly know that to be able to serve my customer effectively, my business must always remain profitable. In other words, profit or making money is a means to meet the end – the end being creating a customer and satisfying his need for a better retail automation solution.
At a later stage in time, I feel the need for additional funding and seek out partners who are willing to invest in my enterprise. The moment I do that, the investor becomes my primary customer. After all, he is looking for a solution as well – to get his idle money to make more money. The purpose of my business remains the same – to create a customer and to satisfy his need, however my new customer compels me to flip my means and end. My new end becomes making a profit, and selling retail automation solution becomes the means to achieve that end.
A story goes that when someone asked Russi Mody what business his company TISCO was in, he answered “We are in the business of making money. It is just a co-incidence that we also make steel.” [This line was later immortalized in the very successful TISCO advertising campaign that ran with the tag line “We also make Steel.”]