One of the very first business books that I ever bought was simply an accident. I was hanging out in a bookstore as a high school junior and thought I might like to start reading about business. Maybe strange for a 16 year-old kid, but it was the 1980s, and business was king… Mike Milken taught us how to create giant asset pools on the public market. Miami Vice showed us how great it looked to drive around in a Ferrari.
And remember when Gordon Gekko told Bud Fox how greed was good in the classic flick "Wall Street"?
So there I was, just a kid tooling around the business section of the Books & Company store in Dayton, Ohio, looking for something that might help me understand business. That’s when I laid my hand on "The Marketing Imagination", by Theodore Levitt.
In short, Ted Levitt blew my mind. He completely dispelled my 1980's Hollywood-driven notions of business.
I had a pretty decent understanding of sales, growing up with a dad who sold enterprise software in the mainframe heyday. That’s when you could land a $500,000 licensing deal and walk with a $75,000 commission. So, big dollars and big business never really fazed me in any way – even as a kid. It was all about ROI, even back then. A company spent $500K to get a $10 million return… no brainer.
But little did I know just how badly Ted ruined me as well. Everything I have ever done in business since that time has been deeply influenced by Ted’s very granular breakdown of the connection between marketing and the purpose of business. It was at that moment, I learned for the first time how marketing really is the essence of entrepreneurship.
I frequently refer to Ted Levitt’s musings for fundamental inspiration about business itself. It’s sort of like a basketball coach forcing the players to go back to basics and just dribble, just do jump shots.
Levitt further introduced me to guys like Peter Drucker when he wrote:
- The purpose of a business is to create and keep a customer.
- To do that you have to produce and deliver goods and services that people want and value at prices and under conditions that are reasonably attractive relative to those offered by others to a proportion of customers large enough to make those prices and conditions possible.
- To continue to do that, the enterprise must produce revenue in excess of costs in sufficient quantity and with sufficient regularity to attract and hold investors in the enterprise, and must keep at least abreast and sometimes ahead of competitive offerings.
- No enterprise, no matter how small, can do any of this by mere instinct or accident. It has to clarify its purposes, strategies, and plans, and the larger the enterprise the greater the necessity that these be clearly written down, clearly communicated, and frequently reviewed by the senior members of the enterprise.
- In all cases there must be an appropriate system of rewards, audits, and controls to assure that what’s intended gets properly done, and when not, that it gets quickly rectified
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What amazes me is just how simple these five tenets really are – yet how distorted they become. I marvel at how far off purpose so many business owners stray from the path.
Yes, the translation of these five fundamentals into a viable, systematic operation can be incredibly complex - especially in a world where the underlying platform of product and service delivery requires millions of lines of programming code. But in the end, it all comes back to the fundamentals.
What’s interesting is that Levitt also immediately followed up this list with the distinction between the purpose of the business, and the requisite of the business being to create a profit. Ol’ Ted was already approaching the idea of social entrepreneurship and greater purpose even back in those days.
To make money isn’t the purpose… that’s the requisite. To have “making a profit” as the general purpose of the business, well… interestingly even Levitt called that “an empty idea”. In fact, he went so far as to call it “morally shallow”.
“Who with a palpable heartbeat and minimal sensibilities will go to the mat for the right of somebody to earn a profit for its own sake? If no greater purpose can be discerned or justified, business cannot morally justify its existence. It’s a repugnant idea, an idea whose time has gone.”
WHAT? HUH? WOW!!
Incredibly poignant words – and maybe even more relevant today in this “Occupy Everybody” era of general angst over the mere notion of creating a “profit” – whatever that might be.
Levitt’s take was that the most powerful idea of all is marketing and the marketing view of a business process: the purpose of a business is to create and keep a customer.
His was the idea that there cannot be any corporate strategy that isn’t fundamentally welded to a marketing strategy - there is no purpose that doesn’t respond somehow to what people are willing to buy for a price.
This brings us to the very doorstep of the idea that the business solely exists for the purpose of solving a very specific problem or satisfying a very specific kind of need for a very specific kind of person.
Who is your customer? What specific problem are you solving for that specific customer?
If you’re around me with regularity in a professional context, you’ll hear me uttering those questions a lot… and now you can begin to understand why. Thanks to Ted Levitt, I learned a long time ago that it’s not about making a profit – that’s inherent. That’s a given. It’s about the defining purpose of why the business even exists – and that is marketing.
Marketing is the essence of entrepreneurship.
Marketing isn’t a department that cranks out pretty graphic design and sales collateral.
Marketing IS the business.
It’s the purpose.