Know the purpose of your business or fail

Summary:

Long-established enterprises often fail because their leaders lose sight of the primary value needed by their customers.

JP_Zenger

20th century newspaper monopolists claimed to represent the legacy of colonial publisher John Peter Zenger (above), who symbolize the struggle between a free press and the powerful élite. In truth, family owned newspapers disappeared because their leaders were out-of-touch.

A business owner should know exactly what his or her company can do and do expertly. Ironically, certainty and stability can also be the kiss of death.

Business leaders risk failure unless they continually question, change and expand what they do for their customers. How do you know whether your company is heading toward the unseen but rapidly approaching edge of a cliff?

Certainty and hubris go hand in hand

Recently, I was a fly on the wall in a meeting between a business owner and a potential investor in his company.

When asked about serving certain unmet needs of his existing customers, the entrepreneur answered, “I’m aware of their problems, but that’s not what we do.”

“If that’s your position,” the person being wooed for money replied. “Then you will do what you do for two or three more years, and then you will be out of business.”

The entrepreneur, who had a long and enviable track record in his industry, snapped back: “I know my business and I don’t think that is true.”

Don’t confuse the two questions

He and many others cannot distinguish between two critical questions. The first question “What business are you in?” is far different from the second, “What does your business do?”

The types of executives who get it mixed up are:

  • Opportunists who propelled an original idea or were in the right place at the right time are CEOs (likely to be entrepreneurs) who became successful launching a particular product or service. These single-focus business leaders cannot see that their “better mousetrap” will not sustain long-term growth. They scoff at the need to define what their company is and where it might be heading.
  • Decision makers who rose through the ranks are found in established companies of all sizes. They started in well-defined positions. They excelled over the years and incrementally assumed strategic as well as tactical authority. These people likely never thought of such existential business questions.
  • Owners of family businesses who have either competently stewarded successful enterprises they inherited or ceded management to competent professionals while still making strategic decisions.

The entrepreneur I observed at lunch is in the first category. He and many like him are often fortunate because they sell their single-focus companies before becoming useless to their customers.

Truth, justice and the American way?

Because I started my career in newspapers, I’ve seen how the wilting of that industry exposed the two other categories of business owners. During the previous 100 years, a variety of factors led to dynastic ownership of powerful daily newspapers. The marketplace evolution of one newspaper cities was key. These scions earned huge profits while unabashedly proclaiming that their mission and sacred responsibility was to steward truth, justice and the American way.

John&James_Knight

John S. and James L. Knight (in front of The Miami Herald building where I had my first job) used their newspaper business fortunes to start the Knight Foundation, which now has assets over $1.2 billion. The publishing empire they founded disintegrated rapidly early this century.

That concept was as real as Metropolis’ Daily Planet. Family owned newspaper companies collected single-market monopolies under distinguished corporate umbrellas. In addition to brands such as Scripps-Howard, Knight-Ridder, Cox, Hearst and McClatchey, family owned companies included The Tribune Co., The New York Times and The Washington Post.

In 2007, as family ownership of Dow Jones & Co. was being transferred to Rupert Murdoch’s News Corp., Hugh J. Martin, professor of media economics at Ohio University wrote in his blog, The Economics of Media: “Family ownership has cachet in the newspaper business. The New York Times Co. and the Washington Post Co. are controlled by families that place a high value on journalistic excellence, sometimes at the expense of their short-term economic interests.”

Safer than gold in Ft. Knox

In actual fact, the economic interests of daily newspapers were safer than gold in Ft. Knox.

Then, how did these media monoliths topple so quickly when the Internet crashed their party? Why didn’t they foresee the future (after all, they hired the best reporters to find the most important news) and make it their own?

Many of them (not all) knew exactly what they did, publish newspapers, but did not know what businesses they were in, advertising and information, nor why their customers really needed them.

How can you avoid having the same thing happen to your company? Pay attention to the real needs that you fill for your customers. In the 19th century, the village blacksmith’s purpose was not to put shoes on horses; people needed him to maintain their primary mode of transportation.

Never lose sight of your real purpose.

  • Engsview

    Excellent article! It’s all about being proactive and change management.