A few years ago I witnessed a conversation that could have been heard in a coffee shop, but it actually happened in the office of the Regional Vice President of one of the world’s largest conglomerates.
-Why do companies exist? Asked the VP to the executive.
-To make money, he answered.
The answer seemed like it was straight out of a textbook on orthodox capitalism.
Surely the question and answer are familiar to you, because we consciously and unconsciously think about it all the time. You might have even heard other similar conversations as well.
So do companies really exist just to produce money? Could the capitalist model with all its failures really have survived all this time if this really was the objective?
In this case the executive who gave this answer was the Service Director of the company, whose core business is just that, service.
But this isn’t an isolated case; companies usually develop their strategic planning, and even sometimes their business model, based on making money. This type of focus has companies disappearing in no time, or in the best case scenario pass through without much attention and form part of the masses.
In more critical situations, well-known business executives that think this way can actually make organizations lose brand value, as happened in the aforementioned example.
The right answer is that companies exist in order to satisfy the needs of their interest groups with the objective of giving them value. Monetary gains are just a consequence.
What differentiates the leading companies in their markets is that their clients don’t buy what they make, but why they make it.
Let’s take as reference the “The Golden Circle” concept by Simon Sinek.
1. All companies must know what they do: Computers, printers, televisions, toilet paper… whatever.
2. Some know how they do it, for example their proposal for adding value.
3. Very few know “why” they do what they do.
These basic principles apply to all companies, from those that are just another company in the market to those that lead them.
Many companies can become leaders by incorporating just the first and second factors listed above, simply because their product is more innovative or because their added value is unique for the moment.
However, the product as much as the value proposal can be copied in a short amount of time, and as a consequence competitors can come take over as leaders in an industry.
From this strategic point of view, the importance is in making sure that the company’s plans are all oriented in the same direction. Not only are they making money, but also assuring that their company will sustain its position in the market for the long term.
When we talk about different interest groups we aren’t referring to just clients or investors, but also all and any group of people or individuals that can be positively or negatively affected by the results, or influenced by them.
Remember that you and your organization shouldn’t just inspire clients, but must also inspire collaborators to work with you, as well as suppliers, investors and some market leaders even inspire society itself.
Businesses incorporate the strategic development of mission, vision, values and principles, and later analyze SWOT (Strengths, Weaknesses, Opportunities and Threats), and PEST (Political, Economic, Social and Technological), making a strategic map. Some define indicators to finish off an operational plan. However there are few organizations that before all of this analysis take on the exercise of identifying and researching interest groups.
That is the fundamental work that strategists and organizational leaders must take on, identifying and analyzing the needs of these interest groups in order to develop a plan that will satisfy them.
As Dr. Nightingale (Professor at MIT and co-author of Beyond LEAN Revolution – Achieving successful and sustainable enterprise transformation) would have said:
“The thinking of companies that are centered on their interests grouped have the following fundamental principle: All interest groups must by sufficiently satisfied in order to continue collaborating with the company.”
This reflection merits work. Not only must organizational leaders hold to this fundamental concept, but also those they collaborate with. You could hire the best experts and workers available, but keep in mind that the most important contributions to successful companies come from those that believe the “why” of the company.
Finally, it would also be a good exercise to ask yourself why the company exists for which you work, and ask the same to your co-workers, executives and collaborators. Surely they will be surprised, and you can give them a good base on which to begin to share.