Why Profit Should Not Be The Primary Objective Of Your Business!
Perhaps, you are one of the many business owners and senior managers who follow the profit theory, and believe that the primary mission of a business is to maximise profit or shareholder value. If so, in your company all business skills and competencies stand or fall on their capacity to contribute to profit.
Unfortunately, the good old solid and dependable advantages of profit theory, such as market share, cost position, and service no longer guarantee success. A new breed of enlightened, high-achieving owners and managers are now advocating that your future commercial survival demands a new approach which is called the value theory.
If you adopt this new theory, then the fundamental mission of your business will be value creation for the customer, and not profit. Of course, profit is important, but it is a vital consequence of value creation, which along with business loyalty makes up the heart of any successful and long-lasting business. The supporters of the value creation theory are convinced that it also helps businesses unify the disparate perspectives of investors, accountants, marketeers, and human resource management.
On the face of it, the value theory concentrates on customers, employees and investors, and ignores vendors, distributors, local communities, and all the other obvious stakeholders in a business. This is not true, because it is actually about value-sharing partnerships in which ALL - customers, employees, investors, vendors, distributors, communities – share in the value they help to create.
Vendors seem particularly important now that so many companies are outsourcing more and more of their work. Moreover, the information revolution has made it possible for more and more employees (and vendor employees) to work at remote locations, linked to one another and the company only by computer.
These two trends have convinced many people that we are heading toward a future of virtual corporations - companies comprised primarily of vendor relationships, with few employees of their own. Every vendor relationship that you have should be seen as a customer relationship, because it is the vendor’s responsibility to create value for its customer (you), not the other way around. This same logic applies to any of your employees, who is in essence a vendor selling his/her time to your company. It is each employee’s responsibility to create superior value for you (the customer).
The value theory will enable your business to build effective, beneficial relationships today and pursue the virtual realities of tomorrow. The guiding commercial principle seems to be a commitment to creating so much value for your customers that there will be plenty left over for your employees and your investors. Profit is not seen as the primary objective, but as an essential element in the well-being and survival of the three principal partners to every business:
“If a man has talent and cannot use it, he has failed. If he has a talent and uses only half of it, he has partly failed. If he has a talent and learns somehow to use the whole of it, he has gloriously succeeded, and won a satisfaction and a triumph few men ever know.”
Thomas Wolfe
Unfortunately, the good old solid and dependable advantages of profit theory, such as market share, cost position, and service no longer guarantee success. A new breed of enlightened, high-achieving owners and managers are now advocating that your future commercial survival demands a new approach which is called the value theory.
If you adopt this new theory, then the fundamental mission of your business will be value creation for the customer, and not profit. Of course, profit is important, but it is a vital consequence of value creation, which along with business loyalty makes up the heart of any successful and long-lasting business. The supporters of the value creation theory are convinced that it also helps businesses unify the disparate perspectives of investors, accountants, marketeers, and human resource management.
On the face of it, the value theory concentrates on customers, employees and investors, and ignores vendors, distributors, local communities, and all the other obvious stakeholders in a business. This is not true, because it is actually about value-sharing partnerships in which ALL - customers, employees, investors, vendors, distributors, communities – share in the value they help to create.
Vendors seem particularly important now that so many companies are outsourcing more and more of their work. Moreover, the information revolution has made it possible for more and more employees (and vendor employees) to work at remote locations, linked to one another and the company only by computer.
These two trends have convinced many people that we are heading toward a future of virtual corporations - companies comprised primarily of vendor relationships, with few employees of their own. Every vendor relationship that you have should be seen as a customer relationship, because it is the vendor’s responsibility to create value for its customer (you), not the other way around. This same logic applies to any of your employees, who is in essence a vendor selling his/her time to your company. It is each employee’s responsibility to create superior value for you (the customer).
The value theory will enable your business to build effective, beneficial relationships today and pursue the virtual realities of tomorrow. The guiding commercial principle seems to be a commitment to creating so much value for your customers that there will be plenty left over for your employees and your investors. Profit is not seen as the primary objective, but as an essential element in the well-being and survival of the three principal partners to every business:
“If a man has talent and cannot use it, he has failed. If he has a talent and uses only half of it, he has partly failed. If he has a talent and learns somehow to use the whole of it, he has gloriously succeeded, and won a satisfaction and a triumph few men ever know.”
Thomas Wolfe
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