"The Purpose of a Business is to Create and Keep a Customer": Drucker's Wisdom Meets Design Thinking
"The Purpose of a Business is to Create and Keep a Customer": Drucker's Wisdom Meets Design Thinking
In the world of business strategy, few thinkers have left as indelible a mark as Peter Drucker. With his keen insights into organisational behaviour and his unwavering focus on the customer, Drucker redefined what it means to run a successful enterprise. If you have not yet subscribed, join 900+ subscribers on Substack or LinkedIn.
As he famously declared, back in 1954, in his classic, The Practice of Management: "The purpose of a business is to create and keep a customer." This is simple yet profound statement encapsulates Drucker's philosophy: that businesses exist not merely to make money, but to serve and satisfy the needs of their customers. Drucker always had a way with words. He is a big fan of the idea of focussing on the human as the starting point.
In this article, we'll explore how Drucker's customer-centric approach from 1954 aligns with the principles of design thinking, particularly the concept of personas in 2024.
The whole statement is below:
“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic marketing and innovation functions. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
I love the way he clarifies the whole work into two key things - marketing and innovation. And for both of these activities, the customer is king.
As we work through a new Theory of the Business or the Four key questions of marketing, the customer is the starting point.
Design is a big part of this process. Design provides us strong approaches to understand the customer. Whether it is marketing or innovation, design is the approach, design is the process, design is the toolset and design is the culture!
Drucker's emphasis on understanding and serving the customer finds a natural ally in the world of design. Design thinking, which has gained prominence recently as a method for driving innovation and solving complex problems, places the user at the heart of the process. One of the key tools in the design thinking toolkit is the persona - a detailed, semi-fictional representation of a target customer. By crafting personas, businesses can gain a more profound understanding of their customers' needs, behaviours, and motivations. This understanding, in turn, informs the development of products, services, and experiences that truly resonate with the target audience. In essence, personas provide a way to operationalize Drucker's call to keep the customer at the centre of the business.
Persona is a word that comes from Latin and Greek and means a face or mask. In those times, actors used to wear masks to showcase different actors on the Theatre stage and try to personify that role.
In design, we use Persona as a way to understand customers, and I think that’s a great way to do this. When I was the Partner for ANZ for Business Models Inc, we extensively used the Persona Canvas to understand customers.
The beauty of using the Persona is to actually understand the person behind the mask - the hopes and fears, the headaches and opportunities and the actual need of the customer.
Doing this over many years, I can tell you that it is very hard for people to do this. It is quite a humbling experience. Working with $100B companies to startups, NFPs to government, I have experienced first hand the challenge of doing this.
The key reason is that we assume we know the customer. The challenge is to play a mind hack and tell ourselves that we don’t know anything about the customer, and we should explore with a beginner’s mind and see the customer for the first time.
Any organisation will have multiple personas and this will be the starting point of analysis for marketing or innovation.
Persona Examples:
Sarah, a 35-year-old working mother who values convenience and reliability when it comes to household products. She's always on the lookout for ways to simplify her busy life while still providing the best for her family.
Mike, a 25-year-old tech enthusiast who is an early adopter of new gadgets and services. He's willing to pay a premium for cutting-edge features and seamless user experiences.
Rachel, a 50-year-old small business owner who needs efficient and cost-effective solutions to manage her growing company. She values personalised customer service and products that can scale with her business.
David, a 60-year-old retiree who prioritises health and wellness. He seeks products and services that help him maintain an active lifestyle and manage any age-related health concerns.
In today's fast-paced, hyper-competitive landscape, my goal is to continue to show that Drucker's insights are more relevant than ever. By combining his customer-centric philosophy with the powerful tool of personas, organisations can gain the in-depth understanding needed to drive meaningful innovation and build lasting relationships with their customers. As Drucker reminds us, the purpose of a business is to create and keep a customer - and personas provide a clear path to achieving this purpose. So let's take a page from Drucker's book, put on our design thinking hats, and start creating the customer-centric strategies that will propel our businesses forward.
Start crafting your customer personas today. Download the free persona template from Design a better business and begin understanding your target audience on a deeper level.
Want to learn more about how personas can drive marketing and innovation in your organisation? Just hit reply or DM me on LinkedIn.
Looking for hands-on guidance in applying Drucker's principles and design thinking to your business? Just hit reply or DM me on LinkedIn.