Ask the average person why a business exists and they will tell you "to make a profit." Ask the typical business person about the purpose of a business organization and my non-scientific surveys at my speaking engagements tell me just over half the people in the room will say the same as the general public. But are they right?
Yes and no, mostly no! In the pure terms of the science of economics, yes, the purpose of business is to make a profit. This narrow, limiting view of business is one dimensional and ignores the essential role business plays in society. It is much like saying the reason teams play baseball is to obtain the highest score. It is a truthful statement, but a woefully inadequate explanation. It misses the larger context of relationships, play, exercise, learning, and self-understanding. There is so much more to business than simply making a profit.
Business is a political, social, economic entity essential to the progress of a society. A society with a thriving business community is one of higher living standards across the population. If a few are being enriched at the expense of others, then the living standards of the society are relatively diminished, e.g. see dictatorships and the communist system. The great industrialist Henry Ford understood this as he paid the highest of wages in his day so Ford Motor Company workers could afford to drive what they built.
The role of business in society is more than pure economics. The profit motive enables the creation of wealth and the lowering of costs. Any salesperson will tell you a lower price is a significant advantage to making the sale. Business is actually in the business of lowering costs to society and raising the benefits and standards of living. Business improves living conditions because goods and services become more affordable for more people.
For example, the computing power of my Apple MacBook Pro sitting on my lap as I type this puts at my fingertips more capacity than NASA had to launch the Apollo rockets that went to the moon and back. Their cost was in the hundreds of millions of dollars and their equipment occupied rooms that were supported by massive cooling systems. My laptop cost under $2,500 and weighs less than seven pounds and merely warms my thighs.
Business lowers the costs of medicines, durable goods, technologies, arts, services, utilities, food, and so forth because businesses seek a pricing advantage over their competitors. Businesses also provide jobs, places of lifelong learning, creative expression to ideas, and service to mankind. The confluence of all these elements is riddled with risk and complexity. It isn't easy to succeed in business. The failure rate of businesses is ample evidence.
For all the good business does, there are still a few bad apples (not the computers) that spoil it for the rest of us who are making a difference. So what is the purpose of a business organization? "To make a profit,"
is the naive, yet most popular response. The correct answer: business
exists to serve.
Be On-Purpose!
Kevin
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