What is "Doing Business"?
Why do we always give the wrong answer?
In my youth, I was briefly interested in the game Dune 2. When you start the episode, you have only a small part of the game universe available for you, the rest of the world is covered by a black «mist». You have a minimal set of resources that you can enhance by earning money and developing. When power is gained, you extend the visible frontiers of the world and attack enemies (unless they attack first). The goal of the game is to defeat opponents and win their resources. At your disposal you have an army of perfect, dutiful soldiers and employees who are performing only the functions specified in the algorithm.

I don't know if the authors of classical works on management played Dune 2, but sometimes it feels like that's the way they see the world. The market is the battlefield. Players (companies) compete for resources (labor and capital), and the combat mission is to destroy competitors. In this universe, bullets are flying and whichever one loses, dies (bankruptcy). In this way, the strategy is a plan on how to defeat the competitors.

«Business is not a battle with competitors, it is a battle for a consumer»
Jeff Bezos
Amazon CEO
What is wrong with that metaphor?
First, the goal of a market player is not to defeat competitors. He fights for the heart of the consumer, which is not the same thing. Jeff Bezos, creator of Amazon, has the phrase: «Business is not a battle with competitors, it is a battle for a consumer». And there is something we can learn from Bezos.

Secondly, there aren't any people in this model. Not at all. There are only «market forces», «consumers» and «human resources». This resembles soldiers and carpenters from Dune 2. Even in Michael Porter's books, who made an invaluable contribution to marketing development, the consumer is mentioned briefly. Perhaps, it is not surprising, since Porter is an economist rather than a marketing expert. The consumer is a passive market power in his works. It looks like the consumer is a baby bird in a nest with an open beak, waiting for someone to put something in it. Over many years of practice, I have come to the conclusion that a successful business can only be built by considering people - consumers and employees - as essential and active participants in the process. That's why I called my method People-Based Strategy.

What is «business»?
I ask that question during lectures for entrepreneurs or CEOs. I ask them to formulate quickly a definition containing a couple of sentences with a total length of no more than thirty words. I am sure you agree that if we are going to develop a strategy for business, it is useful to start by agreeing on what business is.

And no one has answered right off the bat, in six years. Let me remind you, that we are talking about people doing business every day.

As a rule, I hear the following version: «Business is an organized activity for profit-making». We cannot say that the definition is wrong. At the same time, it does not include critical aspects of the work of every organization.

What's wrong with the term "activity for profit-making"?

It is inaccurate because it lacks the main element - the consumer. Not all organized work aimed for profit has a goal of meeting customer needs. Let's say we pool our money together and sell and buy stocks for five years. We work together, so our activity is organized. And if we are smart, we make a profit. But this wouldn't be a business. Because this activity would only meet the needs of those who carried it out.

The work of any company is initially designed to meet the needs of someone outside the company. Every company has a consumer, and it is always a person (even if the money comes from the company's account). And this customer has needs. The effectiveness of a company is determined, among other things (but not only), by the ability to cover those needs. All organizations, including not-profit, charitable or public, cover someone's needs. That's the reason they're established.

That is the way every business works - from ice-cream stand to the technological giants of Silicon Valley.

The coffee point at the corner meets the need for a cup of fragrant drink.

The insurance company obviates the need to worry about the potential risks.

The car manufacturer will serve your need to move from point A to point B. And maybe also you need to impress others.

The computer manufacturer will respond to your need for a high-capacity and convenient computer, possibly for a gaming one. Or both at the same time.

The dental clinic will address your need for being healthy and avoid pain.

This list may be endless.

We forget about it
One as well could think - "So what is new here?" But for many years I have been asking entrepreneurs and top managers to list the main segments of their consumers and their needs. With few exceptions, this is always a difficult issue. If I were an investor, I would never invest in a company whose management cannot list (without hesitation) the main types of clients and their expectations. However, most of the books about strategic management do not focus on this. It is nothing but Dune 2.

To be continued

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