What is “Doing Business”? Part 2
Business is not (only) about making money
Do you know the answer?
Business is not (only) about making money
Henry Ford once said that the employee gets the money paid not by the manager, but by the client. The manager only passes the money. It’s a beautiful thought, it is a pity that few of us remember it. When I start working with a new company and I have my first interviews with key people, I ask them about the consumer. And most often it turns out (especially it happens for some reason in companies whose websites say that their credo is «customer focus») that the client for them is just someone’s smiling face in the second to last slide of the corporate presentation. Abstraction. They say someone once saw him and even talked to him, but that was a long time ago.
In all honesty, I am sure that most companies (and yours is perhaps no exception) treat a client as a walking purse with extra money. The mission of such companies is to relieve him of this burden by selling him something and getting a profit. Often there are no thoughts about the long-term consequences. The whole corporate mechanism (from culture to bonus systems) is set up in this way. Both ordinary employees and top officials get symbolic «medals» and real money not for the happiness of clients, but for the happiness of shareholders. That is, the indicators of sales and net profit are those who rule. They hypocritically mention clients in corporate documents, but nobody really cares about them until they suddenly disappear.
Checklist
Check if the following points are corresponding to your business:
1. Your clients are segmented by industry (for b2b) or social demography (for b2c). Segmentation by industry means that you, for example, divide customers into «construction companies», «producers», «dealers» and so on.
2. You have no employee in your company whose main task is to identify the needs of your clients in one way or another.
3. Your company does not have an algorithm for the systematic collection and analysis of customer needs data.
4. Customer needs are not the main topic of business development meetings.
If you answer “yes” to any of the questions — Houston, you have a problem.
However, if many companies work like this, why could not other ones do the same? Absolutely, they could, but only up to a certain time. Taxi companies, traditional retail stores, travel and real estate agencies, manufacturers of computers and printers were living happily until they discovered that their customers started to give their extra money to young and daring Internet startups. What did startups offer? They offered more convenient, comfortable, quick or simple ways to satisfy the customers’ needs. In today’s world, only natural monopolies can afford the luxury of ignoring customers’ needs. And it won’t last forever.
Okay, so how does it work?
The company meets the needs of clients by creating values for them. Value can be defined as the product itself, its individual elements (for example, the logo on the car’s hood) and/or the related service. In short, value is everything the buyer is willing to pay for, and free items of commercial offer that encourage the customer to choose it. We will talk about values in the relevant story. But here we will define that the ability to create a distinctive value (a value which other market players cannot duplicate or outdo) determines a company’s success. Marketers would call such a value a «competitive advantage», but I do not like this definition, as it again leads us away from the consumer (see Jeff Bezos quote in the previous story).
Customers’ values are created by the company using sources of value — assets. This is a broad concept that includes both tangible assets such as buildings, machinery, cars, etc., and intangible assets — brand, know-how, unique expertise, software development, etc. We will also talk about them separately.
If the company understands the consumers’ needs, if it is able to create unique value for them by effectively using assets, it can create long-term profit or market capitalization. Since profit is a very painful subject, it deserves a separate story. So far, I will give only a brief definition of profit, how it should be understood in commercial organizations, in my opinion:
Profit is a bonus to a company’s shareholders and employees, which is earned from consumers when a company creates value to cover consumers’ needs.
So what is «doing business» in my opinion?
Business is the organized activity of covering customers’ needs by creating customers’ values. Values are created by using assets. Business results in capitalization. It is based on mission, company’s values and vision.
So, I have made it with thirty words. We’ll talk about all of this in detail in the following stories.
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