What’s the purpose of a company? Why do we do what we do?

Peter Drucker said: the purpose of a company is to create a customer.

The purpose is NOT to generate profit, nor make money. The purpose is NOT to generate shareholder returns. The purpose is NOT to hire and employ people, nor is it to give back to the community. Those are all by-products of the true purpose. All important and necessary by-products of a successful company, but far from the purpose of the company.

Everybody sells. Some do it literally (as in sales people). Some do it to get a date, or a job, or a raise. In every case you, as the seller, have to create a “customer”. Your product, service, offering, or whatever it is you want to call it must be more valuable to the customer than their time, money or some other tangible good they have and you don’t. In doing so, you have created the customer and they are willing to give you their money/time/good/thing in exchange.

Most companies, particularly start-ups, struggle with the definition of who their customer is and why that customer is being created. They spend most of their time building cool shit that the founders think is a good idea and should have major market acceptance. My experience is that sometimes this works and most of the time it doesn’t. The only real way to build a large and interesting company is to figure out who your customer is, specifically, and understand why you have created them as a customer. That means you have to really understand their motivations and create something that they value more than their money and time – a pretty tall order – but if you succeed in doing this and there are a lot of them you can build one hell of a company.