Captain’s log, stardate 20210129
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Mailbag re “What is the purpose of a business?”
Thanks so much to everyone who replied to my question from yesterday’s email! I genuinely appreciate your willingness to engage with new ideas, and your generosity in taking the time to send in your thoughtful messages.
In case you missed it, my question from yesterday was:
What is the purpose of a business? (NOTE: Not YOUR business, but businesses in general.)
I’m going to weigh in with my thoughts and observations tomorrow. In the meantime, here’s what y’all had to say (all replies shared with permission)
(NOTE: My apologies if your reply didn’t make it into this message. I got about 150 replies in the first few hours, I read them all, and then replied manually to each to ask for permission to share. Some replies were still outstanding at the point when I had to start compiling this message. Sorry about that!)
A business provides a needed product or service to its market while maintaining profitability to continue functioning and providing appropriate compensation to its principles and employees.
Or something like that...
Looking forward to seeing what other, smarter people say. But here is what I thought:
The purpose of a business is to provide a product or service that someone else needs in exchange for a fee with the intention of making a profit.
A business that does this without a fee is a charity.
A business that deliberately and continuously uses all its profit is a Not for Profit.
A business that deliberately but momentarily uses all its profit is investing in itself.
A business that unintentionally uses all its profit is in trouble.
...is to generate profits which can be invested in equity (like stocks or real estate) which produce income so you don’t need to work.
The purpose of business is to enable the exchange of values at scale, while at the same time all sides gain from it.
Dino Chapman van Rooyen
Thanks for crafting and facilitating the 10DSC Jonathan! Even though our farm’s fibre was down till the 26th January, the text pings were great to keep top-of-mind during an unplanned digital detox.
Slotted ’intentions’ below as there are cases when complexities could shift the mbo, especially in hourly estimates, or scope-creep scenarios.
So business = Exchanging value after aligning intentions for mutually-beneficial outcomes.
Have a great week Jonathan - thanks again for generously sharing your expertise with the world!
Since I heard Guy Kawasaki’s definition, I’ve never been able to come up with a better one:
"The purpose of a business is to make meaning.”
This thought has sticked with me ever since.
I love your newsletter. I always look forward to receiving it, knowing that there will be something thoughtful, or fun, or interesting, in it to brighten my day.
To make money? 😬
Well classic Drucker says, to create a customer
And indeed, that is the point of a business. Create value which is exchanged for other value.
An organisation has a business, does business, and it’s purpose may well be that business, but it may well be other things (governments, NGOs for example... although even these are being required to think more ‘business’ like about value creation).
To improve its customers’ current state and deliver value for money.
Here’s my attempt:
To solve problems for your customers and make their lives better
Michael from Arsero
The purpose of a business is to provide a solution to a problem that a group of people are having and charge an amount of money that will result in profits for it.
To create value for society while capturing some of that value for yourself as your compensation.
to solve problems in a profitable way.
The purpose of a business is to help people do what they want, and in return get help to do what you want. E.g. I have a haircutting business. I help the coffee shop owner do what he wants (e.g. look nice, or be confident, or whatever), and in return the coffee shop owner helps me do what I want (e.g. enjoy an afternoon in a cozy environment, or whatever).
Specialization and money enables us to help more people and get help from more people, but fundamentally it’s about the exchange of goods and services.
What is the purpose of a business?
To provide value of some kind to a certain market in exchange for a different form of value. And all this ultimately to enable people to get the things (material or not) they need and want for a better life.
I really appreciate the generous work you do and all the examples you set for consultants.
What is the purpose of a business?
"To solve a well defined set of problems for a well defined group of people, sustainably."
Greetings from Budapest, Hungary,
I like Peter Drucker’s definition that ’the purpose of a business is to create a customer’.
To create a sustainable business, the organization must provide enough value to enough customers who are willing to pay (as a total group combined in volume, frequency, price) more than it costs the organization to develop, market and deliver the product or service.
Looking forward to this email series.
All the best,
Niaw de Leon
To create a profitable system that benefits its owners and employees, which means that it has to create more value than what it consumes.
The capitalist in me says: The purpose of a business is to make money to shareholders.
But I think besides money, a business also wants to provide value to others (by the services or products they offer).
I am a big fan and this is my first reply. Bear with me here:
What is the purpose of a business?
To enable the creation and transaction of value.
Sounds abstract but I guess from a art gallery to a ball bearing factory everyone is offering a service or product that contains value for both sides. Logically the monetary value the customer is paying for exceeds the production value but still feels like a good deal for the customer since what he receives enables him to satisfy a particular need. That way the business is perceived valuable by both parties.
Thank you so much for offering all these insights everyday. Super motivating and engaging.
Cheers from Hamburg, Germany
To maintain a competitive service.
José Martínez Alkimia Proyectos
A purpose of a business SHOULD be to provide something (a product or a service) to a part of a community to fulfill determinate wants or needs, making (or helping to achieve) a more complete, realised, advanced and happy community of human beings while, in exchange for the value provided, that group of people would give in return a fair (proportional, adequate and satisfactory for the business owner) amount of money (or goods).
Then the purpose of a business is to enable an exchange of value which ideally should create a positive impact in a group, which in turn would make people happy.
I do love Peter Drucker’s definition of what a business purpose is: to create a customer. And a customer is someone who has extracted value from their relationship with the business, becoming happier (ideally) and having given back some value in return. Seen this from an abundance mentality perspective, a happy person (customer) will impact positively in their community(ies).
In summary, business exist with the purpose of improve our society (or should).
Thanks for the patience of reading my lengthy two cents on this.
Have a great day.
Q: What is the purpose of business?
The purpose of business, as I see it, is to earn money. There may be other purposes, but most of them are very easily achieved in a non-profit way, so the only business-specific thing for me remains earning money.
Petr Sedlacek, Czech Republic
I’m gonna be boring as hell with this, but in my words (generally):
The purpose of business is to provide goods and/or services while making a profit.
Jonas Taulien Solutions
my first hint would be: To earn money by creating value?
To increase the wealth of shareholders by generating profit
The purpose of business is ...
to produce and sell, products and services that fulfill people’s needs, at a price they can pay.
What an intriguing question!!
I’d say the purpose of a business is to serve the community and make life better for those it serves.
Do I pass the question?
There are 3 things you need in life to be happy. Something (purposeful) to do, someone to love and something to look forward to. The purpose of a business is to provide us with the first and the third
Apologies for the train of thought response, but perhaps you’ll find it useful.
Personally - companies like my own are created out of the owner’s need to control their own income and direction of their career while not being limited by the restrictions typically placed on employees. The purpose is mainly to provide myself agency.
More broadly, my sense of a "business’s purpose" is determined by the business’s owners. Some companies are created simply to be sold, and their purpose is akin to a house being flipped for profit. I’ve seen "serial" entrepreneurs boast about starting multiple companies and selling them in the span of four years - whether or not those companies existed to bring actual value to the market was obvious when you examined them after their sale and saw they were ultimately absorbed for the assets they possessed, or shut down. There’s also the demise of companies like Toys R Us or Cabela’s, whose "purpose" at the time was to be decimated in order to make their owners rich.
An ideal definition is that a company’s purpose is to solve problems for its customers in a way that’s fair and equitable for the company’s interests - and those interests should always begin with the beings who comprise the company. That’s almost never the case though (at least in my experience). On a base level I think a business’s purpose is to simply "exist" though; I don’t know of any business that solves a single problem and then closes down because that’s all it was for (Except in order to be flipped for profit, as noted before. I’m not savvy about this though - my guess is there’s actual altruistic examples). Businesses seem to be like sharks - always having to move forward and feed; or risk dying.
Hopefully some of this strikes a chord? No worries if not; but thank you for the email content - it’s always interesting!
Make a profit with the least stress and risk possible.
Hi Jonathan, I would say "to earn money".
Bon dia, Jonathan,
This question reminded me of my CEO days at USA Canoe/Kayak where EVERYONE’s purpose in the Olympic and Paralympic movement was to win medals at the Olympic and Paralympic Games and international competition.
But, what I learned is that even the most altruistic purposes don’t get off the ground without capacity and resources.
So while we kept some words in line with the Olympic movement, our purpose was to fund the mission. Or in business terms, to make a profit.
I am sure there are a lot of chicken and egg positions about what comes first - making money and the good you’re trying to serve. But what absolutely MISERABLE for me as the CEO of an organization with bare-bones funding (with knowledge of what it takes to win Olympic medals) is arguing and fighting with people about how to succeed (programs, product, etc) when you have little to no money.
Just my two cents... which is literally two cents more than the United States Olympic Committee provided in support to the Flatwater Sprint canoe/kayak Olympic program the year I left the organization.
(Life is better now... and business too!)
With gratitude, -Joe
My contribution to the conversation:
To provide people with something they couldn’t get otherwise.
The purpose of the business for me is to serve its customers, its employees and to make a profit for the person who handles everything and everyone.
It should feed the family of all these people at the end.
I think the purpose of businesses is to generate wealth, usually by offering a service/ product that makes life more convenient for the community around you.
I’m looking forward to reading your thoughts on business.
What is the purpose of a business?
To make money and have fun doing so!
What is the purpose of a business?
To help bring customers to the doorsteps of my clients.
Helping office workers move away from their excel sheets as soon as it gets too crucial.
First off, thanks for all the very cool e-mails, love the quick tips! It makes me think about stuff. Bought your book btw ;)
To answer your question, I think the purpose of a business is to grow and have an upgoing financial trend. Always getter better at what you do and investigating how you can grow. A business should be growing with more clients, and or better paying clients.
Are we going to see a webinar about this subject?
Regards for the Netherlands,
To solve a need and become financially viable in the process
Simon Emanuel Schmid
Value creation. Or if you see the business as a system: There should flow more money in that money flows out.
The purpose of a business is to serve others (customers, employees, etc.) and make money in the process.
Most of the businesses including mine are focused on step 2 first though.
The purpose of a business can be many things, but first of all it must be to make money.
I think a lot of people will answer that the purpose of a business is to make money. While that is important to keep the business running, I don’t agree.
This might get slightly philosophical :)
Just like you can’t define "the meaning of life" for everyone, the purpose of a business is whatever the founders/owners decide its purpose is. For some, that will be helping customers achieve something. For others, it might be to change the world or the community for the better. In those cases, making money is a requirement, but not the purpose (just like abiding to local laws will be a requirement, or paying the bills). And for some, the purpose of their business might be only to make them money. Of course, some businesses will have a higher chance of building meaningful, trustful relationships with customers, depending on the purpose that was chosen. I think you can guess which of the three examples I gave will have less chance of achieving this :)
The purpose of a business is to generate revenue that is greater than the expenses of the business and those who operate it.
Appreciate all you do,
To generate wealth.
The answer seems to be simple: to make profit, be profitable.
It sounds perhaps too simple, but that is the bottom line (IMHO).
Of course it can serve some higher purpose, noble goals, making the world a better place or ... just the opposite of those ideas. But that is the other story.
After a couple of rewrites, and reflecting on my own budding ‘business owner’ journey…
“The purpose of a business is… to create something desirable for someone, in a profitable, sustainable and enjoyable way.”
I realize I could have picked one ‘way’, but felt each adjective rounded out the phrase.
Hope you’re doing well !
In my own words, the purpose of businesses is to expand the depths and flow of value in the human collective : to clear up and open the channels / circulatory systems of the many ways and levels at which humans interact in life-promoting ways — can’t stress that last bit enough, it is predicative.
Too abstract ? Here’s more and quite a mouthful.
The purpose of businesses is to render the word and root concept of "business" obsolete (bisignes “care, anxiety, occupation,” from bisig “careful, anxious, busy, occupied, diligent” => being busy) as it morphs from a debt-based operational frame of reference that is parasitic and predatory in nature — which includes "bitcoins" and blockchains, and drives the whole "hourly billing" soul-sucking trap —, (back) into the very weaving, by human beings, of exponential expansive exchanges and interactions ("co-creations") that elevate the center of gravity from which the collective human consciousness prehends, perceives and projects the creative juices and expressions of Life. Being busy or "in busyness" becomes Being the flow and overflow of Life (free energy) in a multi-directional array of collaborative endeavors for the enrichment, enjoyment and expression of ... well, Creation.
My feet are on the ground. Just saying.
Wishing you a rich day !
The purpose of a business in general is to make money :)
Exchange valuable service or goods for money, while getting a good profit.
The purpose of a business is to provide its owner(s) with income and its customers with a needed product or service.
James Bryce Smith
Here’s a couple of definitions:
- To create a customer
- To solve a customer’s problem
- To create value for customer and company owner
The purpose is to drive people to spend mental and physical effort contributing to each other’s lives.
I think another question that’s interesting to ask which relates to the ditching hourly themes is what’s the purpose of money. :)
To provide a service or material to someone else in exchange for a service or material, often money.
What’s the purpose of a business?
To provide value with what you are doing to be able to sell it to make a living.
The purpose of businesses is to maximize shareholder wealth. I learned this basic principle during my MBA program and I still remember (now probably 8 years later) the class discussion around the topic. The professor posed the question, "what’s the purpose of all businesses?" to the class and everyone shouted out different answers - provide a good/service, make money, give back to the community, and the list went on. But really, as our professor pointed out, all of those things were really tied back to the basic principle of maximizing shareholder wealth. Everything a business does is tied back to generating wealth for those with an interest in the business - owners, board members, stockholders, customers, etc.
Can’t wait to read your follow up email on this topic!
Thank you for your consistently valuable, thought-provoking content!
I think, at its root, the purpose of a business is to provide a specific service to a specific client.
To create value in the form of products and/or services.
Thanks for the regular emails. They are very thought provoking.
With regards to your question ‘What is the purpose of a business’ my answer would be:
‘To provide goods/services that are valued by prospects, customers or clients.’
I used ‘provide’ instead of ‘sell’ as some items are not necessarily ‘sold’ but they can still have value.
One thought: it’s a way to create better opportunities for society
Another thought: it’s a way to create better opportunities for the employees and shareholders
I like it when it’s both.
Love your work!
I think the purpose of a business is to add value to your customers’ lives and to your business.
The simple version I’ve heard before is that the purpose is to get customers and to keep customers, but I think that misses some of the value aspects.
Another version I’ve heard that I really like, from Justin Wilcox (creator of Focus Framework...a lean startup framework) related to product market fit is that "product market fit is fulfilling a market that fulfills you."
Marcelo Andrade R.
Create wealth so it can sustain me and my family
The purpose of a business is to help people achieving their objectives. That objective could be as simple as eating or as complex as sending people to space.
I’ll take a swing at this:
The purpose of a business is to systematically support the focused creation and exchange of value among multiple parties.
What do you think? Tom
Making profit. Period.
The purpose of businesses is to provide value to customers/clients/people.
To profitably provide something valuable to a customer.
What is the purpose of a business?
Adding value to the life and work of others, while providing income for the stakeholders of the business
Here’s my stab at it,,,
To solve a problem for someone, making their lives better or easier, through a product and/ service, while making a sustainable profit.
The purpose of a business is to produce income by making a lot of sales at a profit.
To help one another.
I think the point of being a business owner is to have freedom. You have the freedom to financially succeed or fail. Same in freedoms to make your own moral conclusions. If I worked at an ad agency and a cigarette company hired us I would have to do the job, me personally I would decline it even for 10x my pay.
Side note; I own a media company that does photography and videography for a few brands. I also have an interesting pay structure that is a mix of hourly pricing and value-based pricing. I would like to send it over and it may give you a different perspective.
The purpose of a business is to provide something of value to an individual or another business in exchange for money.
Recently, my view on the purpose of a business has changed. I believe a business should use it’s will and resources to advance a cause greater than itself. In my local economy, the businesses here are very selfish and squeeze money out of everything.
Purpose of a business is to deliver value to others.
To make a profit.
In the short term, create and execute engagements and transactions that lead to an increase in happiness for all parties in involved.
In the longer term, create - within a community - significant transformation that’s in alignment with the business owner’s vision of a better world.
That felt super heady to write, but it’s what comes to mind!
Great question, J!
The purpose of a business is to drive change in the community it’s a part of. It needs money to do this. That money is fuel to allow the business to do what it was intended to do. Just as the purpose of a car is to help people get from one place to another and it uses fuel to help it accomplish that aim.
Here there be dragons. Depending on who you ask the answer is philosophical or ‘other’ oriented but the cold hard reality is that the purpose of a business is to:
Sell product or service (something someone wants) at a price point higher than its cost, to provide for the seller an economic return that produces an outcome better than the alternative (not having a business)
To provide value in exchange for financial benefit
The purpose of a business is to make sales so that you can make a profit so that the business can grow, and so it repeats.
I like the imagery of the Tower of Babel. . . . .it’s three dimensional in that you go around and around . . . but you go up as well.
Well something like that!
The purpose of a business is to provide value/services to its customers and to provide value/income to its owners and employees.
Because it’s not a zero sum game, this exchange of value ideally leaves both the customer and the business better off than either started.
The purpose of a business is to serve society by solving people’s problems.
Daniel J. Summers
At its heart, a business exists to generate revenue for its owners. They succeed by creating value for others - who, in turn, provide money to obtain that value for themselves.
I think the purpose of a business in general is to create value for itself and it’s clients/customers - which often ends up in the form of money for the business and a product or outcome for the client/customer.
A business is a system that creates something of value for its customers, who in turn pay money for that "something", which is used to provide income to the employees and a profit for the owners.
(I’m trying to capture the idea that a business has 3 sets of stakeholders - customers, employees and shareholders - who all benefit from its existence.)
The purpose of a business is to solve a specific problem for a specific group of people.
Thanks for your thoughtful content, Jonathan. I enjoy it along with the podcast you and Rochelle host together.
Just like a $100 bill, it doesn’t have a purpose by itself until you give it one.
I’ll be curious to see what your answer is.
...to trade value for value
To relieve people of what they value in exchange for what the believe is even more valuable.
To add value into “the marketplace” for its customers
The purpose of a business is to help. Be it a a cause, thing, or person.
Thanks for asking the question. I like that it made me think of the good things.
In my head, the purpose of a business is to exchange value sustainably and profitably, in the best case exponentially.
P.S. Your content rocks and I’m always bombarding my colleagues and friends with it.
What is the purpose of a business?
Forward some aspect of a civilization & culture: better & more efficient design & thought (code, knowledge).
The purpose of a business is to provide a service or product that is needed by society
The purpose of a business is:
To improve lives.
Businesses don’t wake up in the morning to break even. They are to make a fair profit while upholding social responsibility.
Bring value to its customer to earn enough money to get to the business goals (what ever they might be) :-)
Generate revenue in excess of costs.
My first thought was something along the lines of ’help people in your target market,’ which I do strongly agree with.
But if you’re consistently generating a loss are you still a business? (Answer: Nope. You have an expensive hobby. "The IRS will only allow you to claim losses on your business for three out of five tax years. If you don’t show that your business was profitable longer than that, then the IRS can prohibit you from claiming your business losses on your taxes.")
So, in the end, the purpose is to generate revenue/profit. In service of that goal, we help people in our target market.
The purpose of a business is to provide goods and/or services which are fun and/or useful to clients (and society at large, hopefully.)
Its purpose is also to provide a livelihood to those who make it work.
To provide something of value (service, product) in exchange for something of value (money)
The purpose of the business is to get profit by creating value.
Love your question and the setup.
My response is below. It comes from Ted Levitt.
This definition resonates with me the most. Looking forward to hearing yours and others.
Purpose of a business is...
...to create and keep a customer
...by providing and delivering goods and services that people
...want, need and value
...at prices that are attractive.
Plus some important conditions, like revenues>costs, etc.
Good evening, Jonathan,
I’d like to take a swing at this:
The purpose of business is to maximize profit while providing value to its customers.
I look forward to learning from your insight on this. Thank you for teaching me volumes thus far.
Good evening, Jonathan! This will be so interesting to watch play out. Thanks for leading.
The the purpose of a business is to make money through exchange of goods or services.
The purpose of business is to provide a service or product to solve a need of a customer.
What is the purpose of a business?
To create, deliver and capture value. 😊
To solve a problem... the bigger, the better and more lucrative!
The purpose of business is to trade value for value. I value people’s money and they value my development skills. We mutually agree to the value of each and decide if we’d like to trade.
To solve problems
This is an interesting one!
I think the purpose of a business is to free the owner of having a job.
I’m looking forward to the next update!
I would quote Eli Goldratt, father of Theory Of Constraints: "The purpose of business is to make more money now as well in the future". Though given your topic it can be also said: The purpose of business is to solve customers’ problems in a way that is profitable for a problem solver"
To make people more happy in the future.
The purpose of business is to creates value, through voluntary exchange, elevate our existence, lift people out of poverty and creates prosperity.
Excerpted from the Conscious Capitalism Credo
To move society forward
eg agricultural farming helped the hunter and gatherer do other things and have more time, things that they were better at and more time for a better life, and let the farmers do what they’re good at and be paid for at scale. so everyone wins.
To help people (give value, bring impact) and make profit while doing it.
To facilitate people working together towards a goal that benefits all stakeholders.
Thanks again, everyone!
Stay tuned for my thoughts and observations tomorrow :-)
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