Defining Business Purpose and Mission: The Customer
Who is the customer?
“Who is the customer?” is the first and the crucial question in defining business purpose and business mission. It is not an easy, let alone an obvious question. How it is being answered determines, in large measure, how the business defines itself. The consumer – that is, the ultimate user of a product or a service – is always a customer.
Most business has at least two customers. Both have to buy if there is to be a sale. The manufactures of branded consumer goods always have two customers at the very least: the housewife and the grocer. It does not do much good to have the housewife eager to buy if the grocer does not stock the brand. Conversely, it does not do much good to have the grocer display merchandise advantageously and give it shelf space if the housewife does not buy. To satisfy only one of these customers without satisfying the other means that there is no performance.
ACTION POINT: Take one product or service that you are responsible for and determine how many kinds of customers you have for it. Then figure out if you are satisfying all of your different kinds of customers, or if you are ignoring some category (ies) of customers.
Test of Innovation
Measure innovations by what they contribute to market and customer.
The test of an innovation is whether it creates value. Innovation means the creation of new value and new satisfaction for the customer. A novelty only creates amusement. Yet, again and again, managements decide to innovate for no other reason than that they are bored with doing the same thing or making the same product day in and day out. The test of an innovation, as well as the test of “quality,” is not “Do we like it?” It is “Do customers want it and will they pay for it?”
Organizations measure innovations not by their scientific or technological importance but by what they contribute to market and customer. They consider social innovation to be as important as technological innovation. Installment selling may have had a greater impact on economies and markets than most of the great scientific advances in this century.
ACTION POINT: Identify innovations in your organization that are novelties versus those that are creating value. Did you launch the novelties because you were bored with doing the same thing? If so, make sure your next new product or service meets your customers’ needs.
Knowledge External to the Enterprise
The technologies that are likely to have the greatest impact on a company and an industry are technologies outside its own field.
Many changes that have transformed enterprises have originated outside the specific industry of that enterprise. Here are three notable examples. The zipper was originally invented to close bales of heavy goods, such as grain, particularly in seaports. Nobody thought of using it for clothing. The clothing industry did not think it could replace buttons. And the inventor never dreamed it would be successful in the clothing industry.
Commercial paper (that is, short-term notes originated by nonbank financial institutions) did not originate with banks, but had a tremendous negative impact on them. Under U.S. law, commercial paper is considered a security, which means that commercial banks cannot deal in it. Because financial services companies, such as Goldman Sachs, Merrill Lynch, GE Capital, and so on, discovered this, they have largely replaced commercial banks as the world’s most important and leading financial institutions. Fiberglass cable, the invention that has revolutionized the telephone industry, did not come out of the great telephone research labs in the U.S., Japan, or Germany. It came, rather, from a glass company, Corning.
ACTION POINT: Identify at least one change that has originated outside your industry that either has transformed or has the potential to transform your enterprise. Look for ideas in other industries that can be used profitably in your industry.
Understanding What the Customer Buys
What does the customer consider value?
The final question needed in order to come to grips with business purpose and business mission is: “What is value to the customer?” it may be the most important question. Yet it is the on least often asked. One reason is that managers are quite sure that they know the answer. Value is what they, in their business, define as quality. But this is almost always the wrong definition. The customer never buys a product. By definition the customer buys the satisfaction of a want. He buys value.
For the teenage girl, for instance, value in a shoe is high fashion. It has to be “in.” Price is a secondary consideration and durability is not value at all. For the same girl as a young mother, a few years later, high fashion be comes a restraint. She will not buy something that is quite unfashionable. But what she looks for is durability, price, comfort and fit, and so on. The same shoe that represents the best buy for the teenager is a very poor value for her slightly older sister. What a company’s different customers consider value is so complicated that it can be answered only by the customers themselves. Management should not even try to guess at the answers – it should always go to the customers in a systematic quest for them.
ACTION POINT: What do your customers consider most valuable about the product or service you provide? If you don’t know, find out. If you do know, ask your customers if you are delivering.