It’s All About Utility

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During its last meeting, the Harvard Business Review intellectual club held a debate: “What is a business’s main goal: to make a profit, or work for the benefit of society?” One of the participants, Sergey Vorobiev, used his presentation as the basis for an article.

Source: HBR

When executives say that their goal is gaining profit solely, it’s like politicians would say that they have come to power not to solve the problems of society or make themselves useful to the people, but just to rule them; or doctors would say that they don’t want to cure people, they just want to poke around in someone’s intestines. It’s an inhumane position. We hardly need such authorities and doctors. Look at the definition of the phrase ‘source of profit’. The notion ‘value added’ is inaccurately translated into Russian as ‘cost added’. In fact, businesspersons should produce some new value, create something that didn’t exist before, and spend less money on it than they will be able to get later. The difference between the value added and prime cost is what they put in their pocket. If the only thing they produce is profit for themselves, this value is only good to them, not to the consumers: people don’t care how much money goes into the pocket.

I admit that money can be a value – but just for those who don’t have them, for example the beginning businesspeople. Profit gives them freedom and opportunities to take new steps and move forward. But if they don’t give up this position further on, when they firm up and get on their feet, they will interest no one, except for themselves. Because in the pattern ‘I only work for profit’ there’s no place for the staff or society.

I believe that humankind moves from egoism towards altruism. Over the two centuries of capitalism people have understood that profit is a necessary, but insufficient condition for business existence. Profit in itself cannot be a goal; the mission of people’s life it to generate value for the others. Look at the major companies: Google, Apple, Starbucks. Their task is not maximizing profit, it’s not what they build their businesses for. They solve other tasks. Yes, they also thrive, and it’s fair, isn’t it? They provide value added to the society, and keep back part of it. But it’s a consequence, not a goal. Even most Russian oligarchs do not any longer strive for wealth. Now something different is important to them, such as competition – they play monopoly, it’s just that there should be real money in the game.

The point of business is to produce value added and get money for it. I would define business as utility with profit. Those who think vice versa – that it’s profit with utility – debar themselves from the market. I agree with Peter Drucker that of all the things a company produces, the market is interested only in two: marketing and innovation. The company should predict consumers’ interests, follow their fancies and adjust its model to them. Consumer oriented business gets everything: profit, a status, happiness, self-fulfillment. A businessperson’s mission is to move from egoism to altruism, to maximize utility, create value added and have a fair share of it. Companies ignoring public interests and providing no utility to the society will hardly get anything: people are unlikely to take their money to them on their own accord. Those who don’t understand that and are obsessed with their own growth in prosperity, degrade.

One more observation. Historically, only the commercial sector has been called business. It’s wrong because the essence of this word doesn’t automatically imply generation of profit. Private business has to return a profit: it takes money to develop, produce innovation, do marketing, modernize and follow the changing consumer tastes. Profit, according to the same Peter Drucker, is a constraint for private business. As for non-profit business, it doesn’t have such a constraint and, strange as it may seem, can develop more effectively and reach the goals faster.