The Purpose of Business

It would be impossible to clearly define the purpose of business without quoting large portions of Peter Drucker’s chapter in his masterpiece “Management: Tasks, Responsibilities, Practices”. He writes a chapter on the specific question: “What is a Business?”. His argument is so simple, profound and convincing that I cannot escape its power and am convinced it is the clearest explanation available. Simply, it reflects the total truth of business and has much explanatory power. This is in no small part to Peter Drucker’s own sympathy to the Christian faith. He has seen past culture and opinion to drill down to the very core truths. I am in awe of some of his writing. He is in short the philosopher of business. Moving away from my obvious appreciation for him, I’d like to concentrate on one of his key ideas: The purpose of business.

My interest in the purpose of business is twofold. First it is something I just want to know. Secondly I am intending to study a Masters in Business Administration soon. I figure that if I’m going to do an MBA I should know what it’s all about at it’s core. My interest as a Christian is to understand how a business glorifies God if indeed man’s chief end is to glorify God, and to enjoy him for ever. Wayne Grudem wrote in his book “Business for the Glory of God” about what the Bible teaches on the moral goodness of Business. This book examines many facets of business (employment, ownership, competition, borrowing, lending et cetera) and discusses how each one specifically glorifies God. Unfortunately he does not say how business itself glorifies God. Perhaps this is because Grudem didn’t want to get into a debate on the purpose of business and why it exists and must exist.

So how do we go from what Peter Drucker claims to be the purpose of business to the ultimate purpose of creation, which is to glorify God?

Well let’s get into it. What is a business?

To know what a business is we have to start with its purpose. Its purpose must lie outside of the business itself. In fact, it must lie in society since business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer

Markets are not created by God, nature, or economic forces but by businessmen. The want a business satisfies may have been felt by the customer before he was offered the means of satisfying it. Like food in a famine, it may have dominated the customer’s life and filled all his waking moments, but it remained a potential want until the action of businessmen converted it into effective demand. Only then is there a customer and a market. The want may have been unfelt by the potential customer; no one knew that he wanted a Xerox machine or a computer until these became available. There may have been no want at all until business action created it—by innovation, by credit, by advertising, or by salesmanship. In every case, it is business action that creates the customer.

It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance—especially not to the future of the business and to its success. The typical engineering definition of quality is something that is hard to do, is complicated, and costs a lot of money! But that isn’t quality; it’s incompetence. What the customer thinks he’s buying, what he considers value is decisive—it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him.

The customer is the foundation of a business and keeps it in existence. He alone gives emplyment. To supply the wants and needs of a consumer, society entrusts wealth-producing resources to the business enterprise.

So this purpose is in fact compatible with a Christian world-view. If we give God glory by imitating him then creating is about as basic as you get. In fact an understanding that creating customers as the primary purpose of business leads you to business’ two basic functions: marketing and innovation. Marketing, or creating markets, is the distinguishing unique function of business. A business markets a product or service and in this it is different from any other organisation. An organisation without marketing, or an organisation in which marketing is incidental, is not a business.

Marketing is so essential that it cannot be separated from other business activities such as personnel, sales or accounting. Sure it can require separate staff and activities but it is first the central activity of the whole business. If the ultimate aim is to create customers, and it is marketing that primarily achieves this, then seen from the customer (the final point of view) it is the key activity. It must be a knit into every part of the business.

This post is in progress but feel free to comment anytime….