The Purpose of a Business is to Create a Customer
Management thinker Peter Drucker said, “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”1
He stressed that functions such as new product development must make a conscious effort to get answers on questions about an innovative idea from the customers themselves. They should not try to read the customers’ mind. “Management should not even try to guess at the answers — it should always go to the customers in a systematic quest for them.”2
Many new product developers rely on information gathered inside the firm to guess at the value of an idea before beginning development. These inside-out enquires resemble what a Hewlett-Packard manager termed the “next-bench syndrome.”3
The manager said, “Before we changed our innovation process, we did almost no front-end marketing research with customers. Often our marketing research consisted of the innovator talking about their idea to the people working on the next lab bench. They would ask ‘John would you buy a new product based on this idea?’ If John said yes, we went ahead with development pushing features and our technology out to the customers. Since moving from the ‘next bench syndrome,’ we place the emphasis on face-to-face interviews with customers on how the customers’ needs were changing.” A guide to HP’s outside-in process is now in its 3rd edition.4
Discovering, Confirming, and Creating Customers
Outside-in questioning focuses on discovering, confirming, and creating customers. Throughout the questioning, developers’ center of attraction is how they can deliver new value to prospective customers and what skills they need to deliver that value.Developers view value from the customers’ perspective and use the customers’ terms in building a value proposition. This view takes the position that for mutual benefit, developers’ questions help their customers find value and make money.5
For early positive cash flow and sustainable revenue, your new product idea must morph so it fits effortlessly inside the puzzle piece in customers’ heads. Without a comfortable fit with customers’ needs and values, your idea faces a steady uphill, resource-burning slog to create customers.
1. (1954) Peter F. Drucker The Practice of Management NY, NY Harper & Row Publishers
2. (1993) Peter F. Drucker Management Tasks, Responsibilities, Practices NY, NY HarperCollins
3. (1989) Mark Hallorhan Remarks on Accepting the Product Development and Innovation Management’s Outstanding Corporate Innovative Award to Hewlett-Packard
4. (2008) Edward F. McQuarrie Customer Visits: Building a Better Market Focus 3rd Ed. Armonk, NY M. E. Sharpe, Inc.
5. (2010) George S. Day and Christine Moorman Strategy From the Outside In: Profiting from Customer Value Chapter 1, p. 5 NY, NY McGraw-Hill