Oct 30, 2012

Joe’s Journal: On Customers and New Realities

“‘Who is the customer?’ is the first and the crucial question in defining business purpose and business mission. It is not an easy, let alone an obvious question. How it is answered determines, in large measure, how the business defines itself.”

—Peter F. Drucker 

Formulating the mission of an organization requires executives to look beyond the walls of the organization to the external environment. The environment is not limited to where the enterprise is currently operating, but also includes other ‘environments,’ such as those where noncustomers are being served and where future customers are likely to be served. In other words, the mission of an organization should compel executives to systematically evaluate current trends in the environment, emerging changes and current or emerging social problems that may be turned into innovation opportunities.

Emerging trends, changes and problems should be considered management’s new realities, influencing the environment of an enterprise. Current new realities include a falling birthrate in developed countries; the ability to use the Internet and other software tools to collaborate on a global scale; the growth of the practice of outsourcing; shifts in the distribution of disposable income towards knowledge workers; new definitions of performance to include the contributions of knowledge capital as well as contributions of traditional sources of capital; global competition; and the recurring conflict between economic globalization and protectionist political policies.

Executives must also understand the core competencies of the organization when formulating the organization’s mission. In understanding core competencies, executives must ask, “What are we really good at?” Executives often determine core competencies by examining successes, especially unexpected successes, and failures, especially unexpected failures.

With an answer to this question, and with an analysis of environmental forces, an organization can formulate its mission, a mission that answers the key Drucker questions: What is our business? Who is our customer? What does the customer consider value? In addition, executives also must ask the entrepreneurial question, What should our business be?

By focusing on questions related to the customer, Drucker places marketing and entrepreneurship as instrumental in defining the mission of the business, rather than something that happens as part of a process of strategy implementation.

—Joe Maciariello

Joe Maciariello is away this week. This piece is excerpted from “Marketing and Innovation in the Drucker Management System,” which first appeared in the Journal of the Academy of Marketing Science.

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