The Purpose of a Business is NOT Customer Value

I keep saying that the purpose of a business is NOT to satisfy the customer. And people keep asking me why.

Here’s why…

An organization is a multiminded system, a voluntary association of purposeful members who have come together to serve themselves by serving a need in the environment.

Michael C. Jackson – Systems Thinking

Every business is a complex adaptive system of stakeholders working together in order to create value for everyone involved.

Therefore…

The aim proposed here for any organization is for everybody to gain – stockholders, employees, suppliers, customers, community, the environment – over the long term.

W. Edwards Deming – New Economics

Unfortunately, again and again, management fads and hypes try to reduce this systemic view on organizations into a simplistic view, with dumb suggestions such as “maximize shareholder value” or “delight your customer”.

Nonsense!

A common deficiency is the failure of such panaceas not taking into account the social system of stakeholders.

Russell L. Ackoff – Re-Creating the Organization

Most fads and panaceas ignore that a business is a social complex system. It’s purpose is not to satisfy only shareholders, or only customers, or only employees, or only the local community.

A business must satisfy everyone!

We will have to redefine the purpose of the employing organization and of its management as both satisfying the legal owners, such as shareholders, and satisfying the owners of the human capital that gives the organization its wealth-producing power—that is, satisfying the knowledge workers.

– Peter F. Drucker – Management

Of course, managing multiple stakeholders is hard! It is difficult to satisfy customers and shareholders and employees and suppliers and the local community and the whole shebang. Indeed, nobody promised business life to be easy. Sorry! But because it’s so hard, dumb people tend to focus only on one kind of stakeholder, and they ignore all the others.

But you’re not dumb, are you?

Why would an intelligent group of people pursue a vision that  ignores the needs of customers, employees, or investors?

– John P. Kotter – Leading Change

As a reader of this blog, I assume you’re not dumb. You’re intelligent! You will follow the advice of leading systems thinkers and management gurus such as W.E. Deming, Russell L. Ackoff, Peter F. Drucker, John P. Kotter and Michael P. Jackson. I assume you will not make the same mistake as all those other people with their dogmatic and simplistic approach to “maximize customer value”.

Because if you do, you will fail…

A corporation that fails to see itself as an instrument of [all] its stakeholders will not survive.

Russell L. Ackoff – Re-Creating the Organization