Corporate Alignment

Customers do not exist in a void. Individuals have needs and desires that are complex, ever-changing and often imperfectly fulfilled. The corporation exists to transform these individuals into customers.

To do so, a business must deploy a marketing function to identify precisely the needs and the value individuals assign to these needs. It must then deploy an innovation function to create a service or product within these parameters that the individual desires to acquire, and thus becomes a customer. Any other functions within the company exist solely to support these two functions.

Marketing is the function of looking at a business from the point of view of its final result, that is to say the individual’s point of view.

Innovation is the function of transforming goods, information and organisations so as to respond to needs in a new manner and for a different value to the individual.

Both these functions are so basic they cannot be separated from other aspects of the business enterprise. Marketing is not sales, nor is innovation limited to research & development. These two functions are elements that permeate any supporting function the business might require to develop itself.

Purpose is a corporation’s overarching objective. The business purpose guides the company’s understanding of the world and determines the implementation of every function it requires to serve the customer.

Only a clear definition of the business purpose enables clear and realistic business objectives. It is the foundation for priorities, strategies, plans and work assignments. The business purpose is rooted in the future and extends towards the present. It is the starting point for the design of management, organisational structure and strategy.

Decisions affecting the entire business and its ability to perform are taken at all levels of the organisation. A clear business purpose makes the method behind all decisions common and coherent. Business is a collective action, and as such requires forming a collective vision and a common understanding. This is the company’s business purpose.

A business purpose is not a vague set of values. It is a clear statement from which one can infer the organisation, management and objectives a company aims to achieve. A purpose is inherently unique, and is strengthened rather than weakened when imitated by others. It is never definitive, but is a product and an effect of its environment and should be challenged as such; a purpose that resonates deeply with the business and their environment will emerge strengthened from this process.

Corporate success is the autonomous survival of the business. A business that at all times is in a situation to make its own choices, without undue servility to creditors, shareholders or regulators, is a business that enables the untold rewards of business in the future.

Business purpose provides focus that enables a company to clearly identify key activities and the methods necessary to succeed in them. Management that is committed to fulfilling the business’ purpose will create a company that seizes opportunities, resonates with customers and attracts talent.

Fulfilling the business’ purpose creates an organisation that is designed to implement marketing and innovation at a fundamental level in every system and process. It enables the enterprise to constantly improve itself by looking through the individual’s eyes and clarify its value proposal.

A business that has achieved autonomy is not necessarily one that is completely independent, but merely one that has enough power regarding stakeholders to guide its own development. Businesses that define and work towards a clear purpose enable shareholders, creditors and regulators to become long-term partners and raise issues accordingly, rather than sources of unexpected problems. With reduced risk in the short term and greater managerial stability, these companies are therefore also better equipped to deliver increased value to the customer.

What the customer pays is revenue, everything else is cost. A business’ costs are an explicit choice and statement of its priorities, its organisation and strategy. These costs are partly investment capital, in land, machinery and raw materials, but much more so human costs; the cost of talented, driven and insightful employees, the cost of information and processing it, as well as the cost of organisation.

A corporation’s costs are however more than merely the expenses at the end of the year, but also the opportunities that were foregone, missed and turned down. Certain of these costs are strategic and deliberate, but many more are related to decision-making, lack of collective action or ignored insight and therefore involuntary.

Turning involuntary costs into deliberate costs is achieved through repeated action to build a purpose within the corporation. Focusing on the customer and how to transform individuals into customers is therefore the only valid approach a business can have.

Which costs a business chooses to undertake in order to secure revenues is therefore a choice by management of the corporation’s future. There is no disconnection between projects for the future and actions today, but rather the future is the continued realisation of current actions.

Humans are the ultimate business success driver. The most powerful quantitative analysis available, regardless of computational power, operations research and simulation, remains secondary to the invisible, qualitative control of any human organisation, its systems of rewards and punishment, of values and taboos.

Progress towards objectives, performance in key activities and productivity can be quantified, and management should monitor their evolution closely. However, there are no quantifiable measures of marketing, innovation, or adhesion to the business’ purpose. Quantitative data is a tool for management to compare business performance, but does not give an accurate or complete view of the conditions that produced the data.

The necessary condition for a company’s survival is the ability to manage human resources efficiently. Management’s ongoing concern is therefore for the company to secure effective long-term collaboration of the most able individuals and to create with them the organisation that is best suited to them fulfilling both marketing and innovation functions within their mission. Successful businesses respond to this concern in a manner that is directly derived from their purpose.

The way a corporation is organised is defined by its objective. Organisation should never be considered from the prism of what exists, but rather what needs to exist in order to achieve the business’ objectives. No organisation is inherently superior to another, nor is any organisation capable to respond to all kinds of objectives.

Organisation is the product of the techniques and processes available to the corporation at any given time with the structural requirements to achieve the business objectives. As the environment a business operates in changes, or new techniques and processes become available, then corporate organisation must be redefined.

The costs of changing an organisation are insignificant when compared to the recurring additional efforts and costs expended by corporations where their organisation is not suited to their objectives. The business is a human collaboration, and should therefore be at all times considered as such; the formal organisation professed by management is at best a guideline, and at worst an obfuscation of how the corporation is actually organised.

Without innovation, every business is speculation. The nature of business is to differentiate itself from its competition, through whatever means available to it. Innovation is the incipient stage of differentiation, the one where a corporation finds a new solution to a need. Business growth is therefore nothing more than the sustained rate at which the company can integrate innovation into their products, services and organisation.

In certain cases, innovation is exterior to the corporation; new techniques of organisation can be made available through the actions of another industry. In most cases however, innovation is from within the corporation. Businesses therefore need not only to create incentives and encourage the habit of innovation, but they must also pro-actively engage in integrating innovation within every department, process and function of the corporation.

Management should not be lured into believing that anything that leads to change is innovation. Innovation is purely the method of finding a novel solution to an individual’s economic needs, with the objective of transforming them into a customer. To distinguish change from innovation, the business needs to have a consistent frame of reference that guides its action, the business purpose.

Profit is the cost of remaining in business. It is the measure of how well a company fulfils the two fundamental functions of marketing and innovation, of how efficiently it undertakes transforming the individual into a customer. Profit is not a goal but a requirement of business, an essential component in securing resources for the survival of the corporation.

Achieving objectives is restrained by profit, in that the profit motive must be greater than the associated risk of doing business. Prioritising key activities, setting clear objectives and defining an appropriate organisational structure are essential to controlling the effort, that is to say the cost, which a business expends to achieve an objective. Constant focus on the needs and their associated value is the only way for a corporation to clearly judge revenues, and therefore profit.

Businesses do not maximise profit, they enable it. By determining a business purpose and continually working to achieve it, corporations are more reactive to individuals’ needs and better tooled to profitably answer them.

Decision is the quality required to deploy collective action. Businesses need decisions to be made at their level of relevancy, which is to say the lowest level at which all the required information is available and the effects of the decision are constrained. Decisions are never perfect, but the corporation needs the methods that govern them to be shared and coherent. Businesses that lack decision repeatedly expend more effort and incur greater costs only to achieve lesser results.

The main factors that influence decision within a corporation are neither hierarchy nor the individual incisiveness of middle management. A clear purpose enables the methods of decision to be known in advance, by creating a shared conscience of business’ strategy and objectives. An organisation suited to these objectives establishes a clear level of relevancy for each decision, and devolves sufficient authority to the person at that level so that the decision can be made in the best possible conditions of time and effort.

Business is a future-oriented activity. It is not the practice of creating future decisions, but rather the ongoing effort to deal with the futurity of present decisions. Central to every business is the effort to decide and act today in a manner that enables the objectives of tomorrow to be achieved. Achieving a minimum expenditure of effort and costs is therefore necessarily the result of a clear, shared and repeatable method within the corporation.

Management is the function of defining, carrying out and sharing this method. An efficient method is one that guarantees the business’ survival, its autonomy and the development in all tasks of the marketing and innovation functions. As such, this makes management the creator of a sum that is larger than the parts that compose it. In order to harmonise present capabilities and future opportunities effectively, a business is therefore dependent on how clear its purpose is.

© Copyright 2012 Corporate Alignment. Powered by Wordpress and 1&1.