I distinctly remember the day that I learned in one of my many business classes in college that the purpose of any business is to “maximize shareholder wealth”. The professor taught that the end goal of any company is to make more money for the owners. I operated under this premise for many years as I ventured into and navigated through the business world. Somehow, that message stuck with me and I accepted it as fact without question. Then I discovered over time that I had been dead wrong all those years. That discovery fundamentally changed the way I view the business world, from the standpoint of both a business leader and that of a consumer.
As a knowledge enthusiast, I read a lot. I believe that devouring knowledge is the best way to learn and grow in every aspect of my life. I also love to share knowledge. A while back, I was at a business lunch talking to a colleague about the ACA and changes in healthcare, a topic that I am not particularly excited about. Then the conversation turned to strategy
That leads me back to a business’s purpose. Entrepreneurs create businesses that directly relate back to those things that they geek-out about. In his TedTalk, “How Great Leaders Inspire Action”, Simon Sinek points out that generating profit is not a purpose, it is a result. He goes on to talk about how smart business leaders focus on why they do what they do over what they actually do.
So, successful businesses don’t focus on maximizing shareholder wealth as their purpose, they focus on their own “why” and, hopefully, profits will result.
Much has been written about how to make money by delivering value to customers. Let’s reverse that order. Figure out first how to create value for customers, vendors, partners, and employees, then worry later about monetizing it as much as you can without degrading the value you’ve created for the customer. Value is about way more than money. It’s about how their interactions with your business make them feel.
Great companies like Zappos have done exactly this. Part of their culture is to “WOW” customers. Employees are encouraged to give customers free surprise upgrades and offer VIP status to repeat customers. Building up a loyal customer base who actively promote Zappos in their everyday lives has allowed them to create the economies of scale they need to drive profitability.
Find your “why” and invest in creating value for those around you. The ROI will be the monetization of that value – the money will come.
Jennifer Duff,
"Knowledge inspires ideas. Ideas inspire innovation. Innovation inspires achievement. Achievement inspires happiness." - Jennifer Duff, CPA