I continually digest a steady diet of business related materials to see what others are doing that is successful and to generate ideas for my work routine both in business and hobbies. These business materials are in various formats, including books, blogs, published articles, and pod casts. Call me crazy, but I think about putting theory into practice at work to gain the benefits of the knowledge. One area where I see a disconnect between popular business theory and popular business practice is the fundamental basis for making business decisions. In my experience, its becoming more common placed to see individuals making business decisions solely on the basis of money. It gets me thinking about life lessons you teach your kids, “there’s more to life than money”, and the relevance it has in the business world.
I often hear statements like:
“Will it make us a million?”
“How do I make practice ‘abc’ turn into profits?”
“What’s the contribution margin of that?”
Now, I’m not saying these aren’t legitimate business questions. From an operational perspective and in consideration of financial stakeholders they are very valid. The disconnect I see is that business leaders are not considering the mission and purpose of their business. At some point in the past each company started with an entrepreneur who had a passion to create some product or deliver some service. He or she knew that if they created that product/service and it was valuable to someone then they would buy it and become a customer. The entrepreneur did want and need the profits from their work to make a living. But profits were a by-product of creating a valuable product/service. My point is, a company needs to make money and profits to survive, but profits are not the purpose of the business. They can often lead to short sighted decisions at the expense of their most valuable asset; customers buying their product/service.
Which gets back to my observation. Why are so many business decisions made now without consideration of the customer, the product/service, the mission?
Do you agree that true profits come when you fulfill the original purpose of the company? Do companies profit more in the long term (life time value of a customer) by focusing more on the customer, product/service, and retention?
Outside of business everyone seems to respect the golden rule; treat others as you would like to be treated. Maybe that’s not in business theory or practical business use because it doesn’t optimize profits. But then again, maybe following the golden rule does optimize profits for the long term by retaining customers longer.