The goal of a business is not to earn profits but to create a company that earns profits
The way you put your business mission, vision, and purpose can ruin its future.
My typical discussion with businesspeople these days looks like this:
Me: “Any business must create value for customers and other stakeholders. That’s the primary goal and purpose.”
Businesspeople: “But what’s the point of that if it doesn’t earn profits at the end of the day? Profit is the goal and purpose, and all the rest is a means to an end.”
Let’s find out why they miss the point.
Artificial Intelligence vs Natural Fallibility
AI hasn’t surpassed the human mind, but not because humans are so smart – they’re too illogical.
Linear-thinking computers can’t replicate such intricate imperfections.
We’ve built our world around imperfection, and machines try hard but keep hitting the wall trying to be like us.
Shah, Friedman, and Kruglanski (2002) proved that individuals with multiple targets tend to focus only on one of them at a time.
Gilliland and Landis (1992) gave participants quality and quantity goals. When the goals were challenging, participants concentrated on the quantity ones.
Imagine gathering your team and saying: “Our goal is to make a billion. But we’ll do it by crafting high-quality products, taking care of our customers and partners, building good working conditions, being socially responsible, and staying efficient.”
What will happen next? Your good intentions will pave the road to hell.
Your goal ‘to make a billion’ will stick out in your employees’ memory as a skyscraper in the desert.
All other goals and conditions—efficiency, social responsibility, etc.—will fade away like a distant echo.
The challenging quantity goal—to make a billion—will squeeze them out of the employees’ minds.
Team members will pay no more attention to these secondary goals than we usually pay to terms and conditions when installing a mobile app.
Another human trait is to look for the shortest way to their goals.
Some of your team members will find ways to cut corners on the way to the goal.
I help businesses scale fast by creating new markets. Want to brainstorm new strategic or product ideas but need the right facilitator to lead the session? DM me.
A goal of business is… to build a business
Goals, KPIs, and strategies are the tools for finite games such as football, hockey, or hide and seek.
Business is an infinite game.
· The goal of a finite game is to win your competitors by the end of the game.
· The goal of an infinite game is to stay in the game and develop.
That’s why I prefer the no-strategy approach.
Every business has six stakeholder groups: customers, employees, shareholders, business partners, regulators, and society.
The primary objective of any business is building a great company by maximizing stakeholder value and striking a balance between various and sometimes conflicting stakeholder interests.
We should switch our attention from selfish short-term goals such as profit, EBITDA, or market capitalization to establishing conditions under which profitability and market value growth become the natural outcomes of our efforts.
If you create conditions in which customer satisfaction is the natural outcome, profit will follow.
Stay in the game!
Download my new mini-book The Plague of Strategic Goals for free here—a gift for my subscribers! Oh, and by the way, the same link also has free checklists (in case you haven’t grabbed them yet)!
Svyatoslav Biryulin
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I help businesses scale fast by creating new markets. Are you looking for a strategic adviser? DM me here.
Read also: The Profit Paradox: Why Creating Problems Often Outweighs Value Creation
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