Hogwarts potions

The second in a series on the topic of the purpose of business:

  1. What, exactly, is the purpose of business? An answer post-Drucker
  2. Debating the purpose of business
  3. Talking garbage and the purpose of business

Steve Denning published an article to the Drucker Forum last week, How The Internet Is Forcing The Humanization Of Work, an argument founded on Drucker's assertion that the purpose of business is to create and keep a customer.

Steve found my post on the purpose of business post-Drucker via a thread with Kenneth Mikkelsen and tweeted his comments. His first quotes my re-definition of the purpose of business:

[The] Problem with "establish and drive mutual value creation" is that it doesn't tell me what anyone has to do.

and then:

"Delight customers" as the goal is crystal clear as to what everyone has to do.

and lastly:

Since power has shifted from seller to buyer, "delighting customers" sets priorities right, for firm to survive

I share Steve's optimism that we may be on the cusp of the potential to possibly humanize work (can my optimism be more tentative?!), but I cannot subscribe to his rationale.

Notably Steve doesn't waste too many words taking down the false idol of shareholder value (I'm guessing elaboration on that topic would simply be preaching to the converted on the Drucker forum). He points out that playing to the motivations of one single stakeholder group – shareholders – is never going to be motivating for another stakeholder group – employees. And Steve is on the money in at least partially attributing a lack of trust and poor employee engagement to this dynamic.

He quotes Drucker (from Management: Tasks, Responsibilities and Practices, Heinemann, 1973):

Profits and share price increases are the result, not the goal of a firm’s activities.

Yet having concluded that crowning one particular stakeholder group was a mistake, we should question the simple crowning of another. In my presentation The Future of Organization – a video presentation on the major themes and some new provocations (slide 23) I list these three heuristics all of which I consider fundamentally flawed in their isolating simplicity:

  • the customer is king
  • it's all about shareholder value
  • our people are our greatest asset.

It's not unusual to hear any one CEO avow each of these. One could be critical; how can a leader confess to three number one priorities?! Yet I would rather CEOs subscribe to all three than just one if it means they appreciate each can only stand in balance with the others.

The problem with "establish and drive mutual value creation" is that it doesn't tell me what anyone has to do.

Yes. That's right. The system of organization, its constituent systems and the systems of which it is part, are complex and simple rules of thumb close down viable opportunities for appropriate adaptive response. The seed of an opportunity to establish mutual value may come from many directions and will likely be subject to many interplaying influences.

I'm not saying that creating and keeping a customer isn't relevant, of course it is. I am saying that finding other people to work with, with complementary knowledge and skills, is also relevant. Finding the right investors is relevant. Creating and growing sustainable organization (as in organizing) is relevant. Understanding and working with the needs and within the constraints of our planet is relevant. Identifying and forging relationships with other organizations for mutual value is relevant. And the balance and interplay of these relevances is undoubtedly complex.

In shaping a view of work based on Drucker's assertion, Steve writes that:

... the Internet is now forcing change, by ... shifting power in the marketplace from seller to buyer. Customers, who have access to reliable information about the available choices and a capacity to interact with other customers, are now collectively in charge.

Yet isn't it more accurate to talk about Internet access in general? Customer is but one role we play. Every other role involved in establishing and driving mutual value in the business context gets Internet access too!

In summary, my argument pivots on complexity. There can be no one guiding star for navigating any complex adaptive system. Complexity is a complicated mix of order and chaos, and only complexity can absorb complexity – simple heuristics cannot. The sooner we recognise the fact, the sooner we might begin to humanize business for everyone involved regardless of the role they happen to be playing.

Photo source.