February 3, 2021

The Purpose of a Business

In his book The Practice of Management, consulting legend Peter Drucker declares there is only one purpose of a business:

“The purpose of business is to create and keep a customer.” - Peter Drucker

Drucker goes on to say:

“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.”

To me, this is the most useful way to think about the purpose of a business because:

  1. it is customer focused, as I believe every business should be
  2. it aims higher than to merely “find a customer” or “meet an existing need” or “make a profit”

Without this higher aim, our progress as a civilization would trend toward small optimizations of what already exists, and away from groundbreaking game changers that create a new reality.