Let’s quickly dive into the subject of corporate purpose. More and enough debates have been had by academicians and practitioners on what the goal of an organization is and very often you hear the banal “Shareholder value” answer. Shareholder value is a function of profitability. So, is profitability really the goal of an organization?
Is eating the goal of our personal lives? I mean, without eating, unarguably, you can’t survive and therefore you must eat. Profits’ becoming the goal of an organization is very similar to eating becoming the goal of our life. Not for once will I say that profits are not important. Profits are as important to the organization as food is to us. So, that’s a given. What I’m hinting at is having a purpose that drives our philosophy and motivates us to be in business.
How you define and more importantly what you believe to be the goal of your organization will define your perspective for your start-up. Are you going to chase numbers or are you going to chase the value you set out to deliver in the first place? Are you going to cut corners to drive profitability or are you going to figure how to win and keep customers?
To me the main goal of the organization is just that – winning and keeping customers happy. If that’s the lens you wear, most things will fall in place. The products you develop, the service you deliver, the features you introduce, the communication you send out will all be geared towards that one purpose of creating a happy customer. These happy customers will more than make sure that you make profits exponentially.
I’ll end the article with a very interesting story. There was a man who went around collecting jet fuel everywhere he could find it. When people asked whether he wanted to become the largest collector of jet fuel he said “Not at all. I just want to go very far.”
Don’t let profits become your driving purpose of your start-up.
What’s your opinion?
[Guest article by Mayank, Marketing head of RedBus.]
Nice one, Mayank. The answer could vary a bit for individuals, but it helps to spend some time trying to figure that out.
- Sameer
Good one and a thought provoking discussion. If we think of it as not just profits, but sustained profitability , generally it can be achieved only if one does not cut corners.
It’s a chicken and egg situation.
“purpose that drives our philosophy and motivates us to be in business.”
It can be said in the both the ways. What motivates us to be in business? – Profits. How to make profits? – Make customer happy. So what should be the organizational goal? – Making customers happy! But why make customers happy in the first place? Because the goal is to make profits! See its not very clear what drives what. Is it an urge to make profit that drives us to server customers in a better way or is the main goal just making customer happy and profits are a byproduct(not a guiding factor)?
What came first chicken or egg?
What should be the organizational goal? Profits or Customer Service?
I’d say the primary goal of running a business is profits. And smart entrepreneurs know that only way to make sustainable profits is to make customer happy! Cutting corners might make a quick buck for the business, but it wont last. So making customer happy becomes the organizational goal, but the motivating factor still remains to be profits!
If customer service becomes primary goal, outcome is wikipedia. If profit is the goal the outcome is Google. However both concentrate on one aspect – impeccable service and product!
Your statement “What motivates us to be in business? – Profits” is completely wrong.Profit is the by-product of the efforts to create value.
You will find many enterprises, who dies not expand even if they can easily find investors, just because they love their joy of giving the personalized value/service to the customer.
At least for me, profit do not motivate me.Its the joy of creating something which motivates me.
Profit is of course important, but value creation is equally important.
I hope you will understand it sometime.
@ Yash
Hi Yash.
Well, I completely understand what you’re saying but if you were to read some cult management books where practitioners have analyzed some of the oldest and most successful organizations, you will notice that they had a very strong philosophy that drove and motivated them. Many start-ups are born with the founders having some dream product or service that would solve a real problem and that’s what drove them. Sure they would make profits otherwise they wouldn’t get funded in the first place.
Since you bring up Google, let me tell you that it’s not profits that drove them. They didn’t even think about how they could monetize the service till much later and they still aren’t doing a brilliant job at it. Considering they are the largest site in the world, I am not sure they’ve milked the opportunity. So, profits is definitely not what’s driving them and I’m sure they’ll make a killing one way or another. Wikipedia on the other hand doesn’t want to make money I guess. Their philosophy is to keep it advertising free. It’s not that they don’t know how to monetize it. It gets billions of hits a month and they have a lot of intelligence on the searches they get. Companies and brands would pay through their nose to access this intelligence.
Having said all this, I guess it’s more a personal thing like Samir said. Different things drive different people. I guess what my article meant was how you can drive the organization to think in a particular direction. It’s more to do with having a BHAG (Big hairy audacious goal) that the writers of Good to Great talk about that keeps you up at night and keeps the whole company motivated.
To me, profit is the quantitative representation of happy customers (revenue growth) + well run operations (optimized cost).
Creating wealth (profit) – for self, stakeholders, the nation – is the reason any business should start. Unless we get into that frame of mind, we are research scientists trying to solve an unaddressed problem (to make users happy) – as Yash rightly paralleled with the wikipedia – which is good too.
Very true.
Mats Lederhausen also keeps writing about his philosophy of “purpose bigger than product.”
http://bit.ly/1kdu2U
Having a purpose is the key to creating sustainable business.
Very interesting discussion..Well,it’s the value system and the philosophy of the founders of the organization which sets the tone (vision statement) for the organization and also differentiates from the competition.
Almost all companies would have a vision statement but when companies live up to it, people can see the clarity in their operation, those companies stand out and become entities which go beyond the quarterly profits game.
I’d even go a step further and say, even winning and keeping customers happy is as banal as profits now a days.
The question to ask is what business are we in (Like Meg Ryan asks for herself in You’ve Got mail, “What is it that I do?” )and would the industry we operate in look complete without us for all the stakeholders? It’s in tune with BHAG author has mentioned and no startup can answer these questions in the early days but if they constantly strive to ask these tough questions again and again and be able to define and adapt themselves, they would reach that subliminal state where they should be able to articulate the reason for their existence as a business entity (apart from profits & customers)
As I write this, I’m seeing how interlinked this one question can be as it ties together Profits + Winning and Keeping Customers + ——– + ——– etc
I quite like the “profilt = food” analogy. Critical, and occasionally, you need a fun snack, but even so, a balanced diet helps
Profits critical for success, like food. But unlikely to be the primary reason for the business’ existence.
- Sameer
I like the comments the article has started. As a trainer, that eggs people on to add value to their organizations and life, i am in total agreement with Mayank. Individuals are seldom “driven” by numbers, they are passionate about what they do, how it adds value, the difference that they make – be it making a customer happy, introducing the slimmest apple machine.. the drivers for these are often a crazy idea, pursued and executed where “profit” is only ONE of the factors.
Point being, that each orng needs sustained profits, and usually can grow at x% year on year. this by itself however never gives a high as great as doing something that CREATED VALUE, made a difference, even if it is something as small as a jingle, that red bus used as a filler when a customer was on a call wait as opposed to the deadpan… please stay on line, your call is valuable to us.
Both need to co-exist else we may be featured as the extras in Matrix 5
Yes it really boils down to personal preferences. Sangeeta has put it in a better way, if a venture is started with the sole purpose of solving a problem and serving the society, its not a business, it is aptly called a Non Profit Organisation.
That absolutely absolutely (sic) does not mean that creating value for end user is less important. In fact for a profit driven business it becomes even more important than a Non Profit. But at the end of the day if an entrepreneur gets into “business” then it is for making money, and creating value for himself and other stake holders.
Noble men and women with kind intentions of making a difference to the world either do it on donations (which ironically come from profit making businesses!) or from their own money which they have made from a successful for-profit venture like Warren Buffett or Bill Gates.
But again, its all personal choice.
@Yash
Yash, I don’t think anybody in this forum would disagree with the point that profits are critical. If I were to re-phrase the article in a few lines in the form of a question, it would be this:
“If you were to put up a statement of purpose on your company wall so that your employees and you yourself are motivated, what would that statement be?”
If you want to write that you want to create the most profitable company in your sector etc, then that’s a different thing. It’s not a question of whether or not profits is important. That’s a given and we’d be wasting time discussing that. That’s why an analogy as simple and stupid as profits=food has been discussed.
The question is wouldn’t you want your organization to be the largest/best/most respected manufacturer/marketer/distributor of xyz in the world or the country? There’s got to be a higher purpose that motivates the organization. We are discussing a philosophy that can be shared by an organization, not an individual.
Without any question both are important. Organization need to have its goal and people have passion to create difference. At the same time you need to keep on earning profit otherwise your passion cannot survive. If company has four passionate people then company need one man who keep on showing mirror with his number skills.