Wednesday 20 April 2011

What is the purpose of business, really?

The following is an article I wrote for In-business magazine. If you live in South Australia I highly recommend you subscribe to this publication. You can do so here.

Ask most business people what is the purpose of their business and they will tell you, to make a profit.

Ask me and I will give you a different answer.

I don’t believe profit is a reason for being in business, rather profit is a result of being good at business! I am not saying we shouldn’t make a profit, we should, however how we make it and what we do with it is becoming increasingly important to our stakeholders and to the value of our brand.

What is modern business really all about?

For me all businesses exist to define and deliver the value to all stakeholders that they demand, desire, and feel they deserve.

…the future face of capitalism, say authors John Gerzema and Michael D’Antonio in their new book Spend Shift will be defined by delivering value and values.

I have been saying this and helping my clients to actually do this for two decades, so it is nothing new, however what could be new is that the masses embrace this new kind of capitalism.

Where does one begin?

The massive fallout from the global financial crisis and the rise of people power in Egypt, Libya, and other places, means many people are not only examining their values, they are also refusing to do business with people they perceive are not in alignment with their values. So the first step for me is to define our values.

We have all seen values displayed on walls and written in annual reports. The failure to live what is said and written is one of the biggest reasons for poor levels of employee and customer engagement, and so defining our values is not just about words, rather it is about defining the actual behaviours.

In my experience when agreed behaviours are measured as part of performance leadership and management, not only does greater accountability occur, the corresponding increases in engagement and therefore productivity, mean profound changes in the delivery of value to stakeholders.

How do we define value to all stakeholders?

Broadly speaking there are two kinds of businesses. Firstly those finding customers for our products and services, and secondly those finding products and services for our customers. I see a surge in the latter. Whatever kind of business we have however the simple rule is to ask stakeholders what they demand, desire, and feel they deserve.

Thinking of these three in terms of must haves, should haves, and nice to haves is a useful way to begin.

Helping other people get what they want is still the easiest way to get what we want.

Creating shared value

My expertise centres around the concept of creating shared value or CSV, a business growth strategy referred to in a recent Harvard Business Review article by Michael E. Porter and Mark R. Kramer as The Big Idea.

I believe creating shared value begins with discovering shared view.

We live in three worlds; the world in here, the world out there, and the world we share. In here our views are just that, out there are other people’s views. In the world we share are the views we agree on. In any successful relationship the world we share is the critical one.

Human conflict is fundamentally the result of firstly, failure to agree on the goal, and secondly, failure to agree on the strategies to achieve the goal. I guarantee that today all of our troubles, personal, local, national, and global, are fundamentally based in our perceived need to hang onto the world in here, our issues with the world out there, and, our failure to focus more on the world we share.

Shared view in business is critical in seven areas.

Where we’re going.
Why we’re going there.
How we will get where we’re going.
Who will do what and when and how.
The behaviours we will live in all our transactions and interactions.
Who we serve.
What those we serve demand, desire, and feel they deserve.

To be successful in a competitive environment, we have to offer something that is valued by our customers more than that being offered by our competitors. There is really only two ways to gain the number one strategic position in our market, do what our competitors don’t do, or do what our competitors do differently, better, or more uniquely.

Discovering shared view and creating shared value means all stakeholders including our planet, can win, and everybody winning is the future of the world.

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make a real difference
leave a legacy
do something pioneering, breathtaking, and truly innovative
do well by doing good i.e. thrive in your business and solve a problem in your world at the same time
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