Those who know me well know that I read a lot of business books. Besides Jim Collins, the books and articles by the late Peter Drucker have probably had the most profound impact on how I think about management and leadership.
Of late I have been thinking a lot about Peter Drucker’s aphorism that “the purpose of a business is to create and keep a customer.” More fully, Drucker said, “Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
When Drucker references marketing, he is talking about the fundamental need to deeply and completely understand the customer. “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Drucker maintained that effective marketing should render selling unnecessary.
These quotes from Drucker have had me thinking about two things. First, I see how easy and natural it is in a growing company to lose focus on the paramount activities of marketing and innovation. We hire many supporting – and important – roles in a business beyond just those outwardly directed at marketing and innovation. And as people, it’s in our nature to try and expand our roles, whatever they are, and do them to the best of our ability and to continue to see them grow. Without overarching leadership focus, our supporting roles, which are costs, can take on outsized importance and this typically comes at the expense of marketing and innovation. As CEO, I even find myself contributing to this when I sponsor new company initiatives via our HR and OD functions or through finance or administration projects. While investing in the growth of our people is extremely important, as is understanding our business metrics, so too is finding the right balance between investment that helps people grow while not directing undue time and energy away from the crucial activities related to innovation and marketing.
The second thought has to do with the role of marketing as it relates to our need to deeply understand customers. As Drucker points out, business only happens on the outside of the four walls of a company. Marketing defined as gaining deep customer understanding isn’t the sole purview of the marketing organization. In highly successful companies, this will be happening in ALL departments; processes and tools to develop and share this understanding will be ever evolving and expanding. And yet, it strikes me as a common organizational tendency to focus more and more inward over time as a company continues to grow revenue and hire more people.
So as we build ReadyTalk, it’s worth applying Drucker’s insights about marketing and innovation on a regular basis. We should be vigilant and regularly ask ourselves “is this activity in line with our long-term objective to create and keep a customer?” If we can’t affirm that without hesitation, it’s probably worth reconsidering altogether.
How focused is your organization on the notion that the purpose of business is to create and keep a customer? What does your leadership do to keep this top of mind? I’d enjoy your thoughts.