― Sam Walton
The date…September 13, 1970
The paper…New York Times
The author…Milton Friedman
The message…The Purpose of a Business is to Increase Its Profits and Shareholder Value.
Over fifty years ago…
One of the dumbest ideas in the world was presented by one of the most brilliant people in the world.
The idea that the sole purpose of a business is to make money for its shareholders was the brainchild of Economist Milton Friedman.
As the leader of the Chicago School of Economics, and the winner of the Nobel Prize in Economics in 1976, Friedman has been described by The Economist as “the most influential economist of the second half of the 20th century…possibly of all of it”.
Friedman’s idea was meant to deliver a message…a ferocious one.
He said that any business executive who pursued a goal other than making money were… “unwitting puppets of the intellectual forces that have been undermining the basis of a free society”, and that they were guilty of “analytical looseness and lack of rigor.”
IMPACT AND INFLUENCE
The theory that a business exists to increase profits and maximize shareholder value has had a monumental impact in the business world…and in the world itself.
This doctrine continues to be taught by numerous business schools, and has become a pervasive belief in the financial community and much of the business world.
Making profit and increased shareholder value as the key priorities has led to a dramatic rise in stock-based compensation, particularly to CEOs.
Why? Because what gets measured…gets rewarded.
It has led to a set of behaviors by many actors on a wide range of topics, from performance measurement and executive compensation to shareholder rights, the role of directors, and corporate responsibility.
As priority one, the profit motive has also led to fraudulent behavior, gaming of systems, price fixing, greed and other forms of institutional corruption.
All of this is done at the expense of employees and customers.
The point is, ladies and gentleman, that greed — for lack of a better word — is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind. — Gordon Gekko, Wall Street 1987
For every complex problem there is an answer that is clear, simple and pure.
In the case of the purpose of a business…the answer is:
To create and serve a customer.
It’s common sense, obvious, transparent, isn’t it?
Take care of the ones who count most — the ones who pick up the tab.
You would think more people and companies would have gotten the message that the customer comes first and that profit is the result of satisfying your customers needs.
Sadly, organizations that put customers at the center of the action are rare.
The pain and suffering that many companies put their customers though is disgraceful.
Far too often customers are subjected to dispassionate employees, voice mail hell and a begrudging gratitude.
Since the customer is the ultimate end user of a product or service, then it stands to reason that the customer is King and that a company and its employees are his servants.
This understanding calls for a genuine demonstration of gratitude and humility as the better role you perform as servant the more loyalty you garner in return.
No company can exist without happy, satisfied customers.
It is happy customers that pay the mortgage, put food on the table and help put your kids through college.
It is loyal customers that keep coming back, spending more and who become powerful advocates for your cause.
It is enthusiastic customers that make your work fun, enjoyable and purposeful.
B2B means Back to Basics — a return to business fundamentals where it’s all about the customer.
The purpose of a business is to create a customer, and then to deliver sustained quality service serve that is benefit oriented.
Profitability will follow as profit is the naturally resultant financial measure of the value of your service and a key success indicator.
Business must be run at a profit or else it is sure to become extinct.
However, when anyone tries to run a business solely for profit, then the business must die, for it no longer has a purpose, no reason for existence.
This skewed philosophy may bring profits today, but it will lead to becoming a white elephant tomorrow.
When you get beyond profitability and shareholder return what is the ultimate value that a business and its people bring to the world?
A business is defined by the WANT the customer satisfies when they buy a product or service.
To satisfy the customer is the mission and purpose of every business. To think otherwise is irrational.
The only view that matters is the customer’s; therefore, we all must step back and look at our work from the point of view of our customers and the market.
You can only create lasting value for your business by creating value for customers, and you can only do that by understanding what it is that customers themselves value.
Think like a customer, walk a mile in their shoes and you will see that friendliness, quality, convenience, timeliness, respect and gratitude all count.
Customer-centered leadership is the cornerstone of success. Here are seven value creation strategies that will keep your customers coming back for life:
Strategy 1: Adopt a Customer Service Maxim
“Everything Counts” is a maxim that sends a powerful message. It means that you see every customer interaction as an opportunity to retain a valued customer, increase your value proposition, build loyalty or strengthen a brand.
52 Ways to Increase Referrals, Build Raving Fans, and Maximize Profits
It means that everything in your business counts from the friendly hello to the appreciative thank you as well as every little paperclip and detail in between.
Strategy 2: Place Staff Needs Before Customer Needs
Without the right staff and proper training in place to deliver great service, other plans and programs won’t amount to a hill of beans. That is why customer-focused leaders focus on employees first.
Take care of your staff and they will take care of your customers. Leadership must put staff first and staff in turn will put the customer first.
Strategy 3: Keep Your Promises and Honor Your Commitments
If you make a promise to a customer, keep it. If you make a commitment, honor it. The absence of this discipline is a stain on your company reputation that is virtually impossible to remove.
Take your promises and customer commitments seriously because they do.
Nothing annoys customers and fuels their lack of loyalty more than being lied to.
Strategy 4: Deliver Quality and Excellence
A commitment to quality and excellence produces client loyalty. Quality and excellence are never an accidental happening. It is the result of quality thinking and exceptional execution.
Excellence creates confidence and enhances your customer’s peace of mind.
It functions as an insurance policy against mediocrity and an assurance of profitability.
Strategy 5: Focus on the Customer Experience
Making people feel good about themselves and your company makes it more conducive for them to spend their money.
Customer centered companies provide more than just a quality and excellence but a rich experience, too.
The total customer experience — the service, the quality, the design, the brand attributes — connects on an emotional level, keeping customers satisfied and feeling well-served, as well as loyal.
That loyalty can result in the capture of substantial lifetime revenue.
Strategy 6: Practice the Golden Rule
“Do unto others as you would have others do unto you.” When we show kindness, respect, courtesy, and humility to another a bridge is built.
Follow the Golden Rule to its logical conclusion and you will have formed binding relations with your customers.
If more of us practiced the golden rule as a consistent behavioral rule rather than the exception, there is no telling where such kindness might take us.
Strategy 7: Go the Extra Mile
An organization’s ability to elicit staff behavior that goes above and beyond the call of duty is a key asset and competitive weapon, one that is extremely difficult for competitors to imitate and virtually impossible to ignore.
This advantage is realized only when you stay ahead of your customers expectations and needs.
Talking about focusing on the customer and doing it are two completely different things.
The companies that put customers first win much more than loyalty; they win advocates.
As passionate advocates…customers drink the koolaid and freely recommend your company to friends, neighbors, and colleagues…they purchase your products and services as gifts…and they provide unsolicited praise or suggestions of improvement because they believe in you.
The customer is king. Long live the customer.
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