The Purpose of Business

On a recent family visit to Columbus, Ohio, my granddaughter Adira invited me on a play-date to Kingmaker, a charming board-game parlor in the North Arts District. There we played a game called "What's It?" Adira and I are both competitive and both of us were determined to win; our determination reached screeching crescendos as the game progressed. But we were not focused on beating one another; on the contrary, we were a team. The idea of the game as Will, one of the game-sommeliers, explained, is that you don't compete with each other; rather, you collaborate with each other to beat the board.

The idea of collaborating with competitors to beat the board got me rethinking the very notions of competition and winning in business. We're seeing more and more how archaic and increasingly unrealistic the idea of competitive advantage has become to business strategy. To use Columbia University Professor Gunther McGrath's statement, "Competitive advantage is dead." Yet at the same time, companies are struggling with profit margin. Only the biggest and most powerful companies can scale to the extent that margin is not important in the face of staggering volume and revenue figures. For most businesses, it is still critical to make a reasonable margin on sales, something that is hard to do if you do not have competitive advantage. How do you compete without competitive advantage, and what does winning look like in the new post-competition business environment that we might be entering?

My epiphany at Kingmaker is that we might need to redefine who it is that we are competing against and what a win would look like. What would happen if we defined our competitor as the challenge or pain we are trying to solve for our customer? Our win would be the elimination of that pain. For example, a cancer research organization is aiming to beat cancer, not other research organizations. An airline might aim to beat the discomfort of flying without increasing the cost. A bank might win when it sees its clients grow their businesses more successfully than they could have without it. This view of what a win looks like would turn companies toward a customer focus rather than a competitor focus, creating a more meaningful experience, or win, for the customer. As much as companies currently claim to be customer-focused, their strategic language conveys that they are primarily focused not on their customers, but on their competitors. Militaristic terms such as win, capture market share, destroy competition and create barriers to entry incite a competitive spirit among employees. These terms are opposite in texture and timbre from the heroic ideas of service, culture, principles, values and value-creation that business claim to be about.

Redefining the win as beating the customer's challenge rather than beating the competition also opens up possibilities to collaborate with competitors to beat the challenge. A company could then think of itself as an orchestrator of multiple forces, including some from the competition, to solve big problems that it could not have solved alone. Competitors could collaborate as Adira and I did while playing "What's It?" rather than compete head-on. Companies that take the lead in this orchestration will be the winners of tomorrow.

You might be thinking that these ideas are quaint but unrealistically utopian. But this is exactly the type of thinking that mushroomed Apple's growth. When Apple opened its platform to Microsoft's Office products, it was collaborating with a competitor to make our technological lives better. It did the same when it opened its iOS to third-party apps, some of which compete with Apple's proprietary apps. Airlines that form alliances with their competitors have done the same. Amazon, originally an online bookstore, invited competing booksellers to use its platform to enhance the utility of Amazon for worldwide customers. Even now, Amazon's competitors sell their goods alongside Amazon's own merchandise. So my idea is not new; it just needs to be considered more widely and more deliberately. The opportunity for strategic innovation becomes big for companies willing to change the way they think about competition and winning.

Changing strategic focus from competitor to customer and redefining the win to align with this refocus uplifts the activity of business from one of self-interest and possibly greed, to one of noble cause and the service of others. This change is not small; it impacts business culture and will affect the acquisition and retention of talent, especially young talent. Increasingly research shows that talented millennials want to work for companies that make a difference and that are focused on work that matters, not just on satisfying Wall Street. This kind of strategic innovation will lead to organizations more suited to the future than many of our current organizations whose structures, management philosophies and cultures are fossils of a distant corporate past. In the future, our businesses will align more with the statement I made in Lead By Greatness:

"The Purpose of business is to make a valuable contribution to the well-being of others. Financial reward is the outcome of successful economic activity, not its Purpose."

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