Purpose of a business - how I see it

I believe that the way I look at organizations & companies is kinda atypical, and frequently renews a philosophical debate with Papa and some of my friends.  I felt like sharing my thoughts here; maybe some of you readers might feel like joining the debate.

Nature of the purpose

I find it absurd when someone claims that the objective of a company is to make money.  To say so is like saying that the objective of our life is blood circulation or breathing.  More on that later.

In my opinion, the objective of a business is to achieve a mission or to play a role.  Its objective is to serve customers in one or more specified ways, and to add value to their lives.  When people form a company, they specify how it will serve its customers, and who those customers will be.  GE was probably built to give us light bulbs.  Tata Motors might aim to offer cars and trucks.  Peach aims to help organizations become efficient through information systems.  The objective of a business may evolve over time, but at any time, a business must have a clear objective, for without it, the business ceases to have meaning, and will flounder and die.  I do not see much difference in the objectives of businesses and non-profits actually - for non-profits also seek to play a role and serve a specific market - IAC trying to drive out corruption in India, Red Cross to alleviate the suffering of the wounded, St. Xavier's Gandhinagar to educate & groom citizens of tomorrow, and Gandhinagar Municipal Corporation to maintain & enhance civic services.

Why businesses must expand

Businesses, like any organization, must strive to increase their effectiveness towards their objectives.  For a company to succeed in its objectives, it cannot stop at serving a few customers in its neighbourhood or town or country.  It must strive to expand the reach of its service to Africa and the Americas.  So long as there is an unattended customer, the company must continue making efforts to expand its reach.  When that is done, the company may simply close down - what does IAC need to do after India becomes corruption-free?  But generally, by then, the company would have already upgraded its objective by widening the range of its services or by upgrading the quality of its offerings.

The role of money

Money is blood and air for a business.  Businesses depend on several entities in order to succeed in their mission.  They need physical resources to house their operations.  They need materials and machinery to build their products and offer their services.  They need to avail services of external entities, such as transport, utilities, etc.  And they need a team to drive their operations - and they need to satisfy the roti-kapda-makaan needs of that team - and even do a bit more to attract good people to their team - cuz only motivated people can help a business cater to its objectives - of delivering the specified services.

But all through what I said, it is clear that businesses require money to maintain resources to offer its services, and expand its reach in doing so.  Money itself is not the purpose in any way.  It is like blood, because we cease to live without blood, but we do not live in order to make blood.

Frankly, I see no difference with non-profits even here.  Money is equally vital to achieving their objectives.

Money, more specifically profits, also serve another crucial purpose - they validate the meaningfulness of the purpose of the business.  If a business is not profitable, we must understand that either customers do not care enough for its offerings, or it does not have the resources required to serve them.  If it is the latter, it is inevitable that some other business will come up to cater to the needs that the first one failed to address - customers will not remain unserviced forever.

Likewise, in case of non-profits, if they do not generate money from their operations, they must generate money from donations - but generating that money is proof of validity of their objective - if they do not get enough to survive, it means that their mission is not something that people truly care for.

The role & attitude of the entrepreneur

When it is formed, a typical business is essentially just an extension of the entrepreneur(s) who formed it.  He/she forms it while declaring its purpose.  His own purpose may be to generate money to satisfy his basic needs or even materialistic luxuries, but that cannot be the purpose of his creation, the business.  If he does not realize that, the business will never grow into a mature organization.  People working therein will always face confused value systems, thus leading to bad quality of service, eventually driving the business down.

A mature entrepreneur must learn to detach the purpose of her creation from her expectations from the creation.  She has two roles - one as the soul of the business, and the other as a resource-provider.  She may provide some essential resources to the company - be it loans, management, technical expertise, whatever.  And as the soul/brain of her business, she should ensure that she - as the resource provider - remains satisfied and motivated, like all other resource providers in the business.  As the company grows beyond her personality, she may be replaced by a board of directors (probably including herself), who will serve as the direction-providing, strategist brain of the company.  And she may, independently, also remain as a resource - as an investor, as an engineer/worker, as an executive, or as an adviser.

So that concludes my sermon for today.  I hope you might have found my perspective here to be worth considering.

Finally, I must give credit to Peter Drucker, who I love to read, and obviously influences my thoughts on business, including what I've written above.