What is the purpose of your business?
A long held truism proposed that the purpose of a business is to maximize profits for shareholders/owners (sometimes with an added caveat that the business stay ethical, sometimes with this imperative missing). There are two issues with this definition and the notion that a business exists solely to make money.
First, the definition ignores sustainability/self preservation. A company can be profitable in the short term while hurting its long term prospects. This happens all the time, and one need not look further than the news to see examples of companies whose leaders leveraged the future of the company to maximize short term gains. Longterm viability is inherent to the purpose of a business, because profitability is maximized over time. In other words, profitability over decades is greater than profitability over months or years.
The second issue with this definition is a condition of the first. For longterm viability, a company must broaden its definition of “shareholders” beyond those invested monetarily to those invested as stakeholders: customers primarily, but also employees, and even the communities to which the business belongs. By broadening the benefactors, profits must necessarily come to mean more to meet the needs of the expanded audience— maximizing employee or customer “profits” might more readily translate to maximizing “returns” while still minding the bottom line. Returns in this case, a stand in for any version of satisfaction/fairness enabled by the business in question. I.E. the compensation exchanged for the business product or service is of value — the feeling of value is a return for the customer. In consideration of this expanded audience, a business builds customers and goodwill and ensures its longterm profitability.
The consideration of a larger audience as a necessary component of ensuring viability and profitability, is where a company’s story comes in. It’s not only necessary to have a story but a business must tell it. It’s where a business spells out its reason for existing beyond making money. In his Forbes article titled “What is the Purpose of Your Business?”, leadership advisor Mark Nevins defines a business’ purpose in the following way, “In simple terms, the purpose of a company is to have a meaningful vision and then be profitable achieving it.” This is my favorite definition of the purpose of a business. The “meaningful vision” is the backbone, foundational principals from which the company does not deviate in pursuit of profit. In putting that first, a company encodes the necessary conditions for its existence into its operations—defining it’s audience/stakeholders and building a relationship with them for longterm profitability. In this definition, it’s the company’s story/”meaningful vision”—It’s reason for existing, which provides access to stakeholders and ensures longterm profitability.
