As a business student at Claremont, I had the unique privilege of studying with Peter Drucker, and he radically changed the way I look at business. He was brilliant with an unusual vision of society and versed in many subjects. Peter was especially respected for the questions he asked and his ability to cut through the clutter and get right to the heart of the matter.
His first question for any organization is, “What business are you in?” This sounds simple, yet it is probably the most fundamental and most misunderstood of the questions that executives must face.
The common response is, “I am in the consulting business,” or “mortgage business,” or “aerospace”, or even “manufacturing business”. The question, however, is much deeper than that and an executive must look at how the customer views the business.
“The question, What is our business? Can, therefore, be answered only by looking at the business from the outside, from the point of view of the customer and market. All the customer is interested in are his or her own values, wants, and reality. For this reason alone, any serious attempt to state “what our business is” must start with the customer’s realities, his situation, his behavior, his expectations, and his values.” Peter Drucker
The ability to understand the customer fully and understand what they are buying is critical. This can be functional, but also has emotional or even social implications.
- Starbucks has made it known that they are in the business of the “3rd Place”, that is the place away from home and business to hang out. They are now experimenting with wine and beer as other products to have available for the “3rd Place”.
- Canlis, Seattle’s premier restaurant is in the business of “celebrating life’s greatest moments”. Their food is amazing; they have "ninja" service, yet the customer is there to celebrate.
- When I bring my shirts to the Laundromat, I want them to make me look good.
This may seem obviously simple. Yet, when I talk with executives or leaders, many seem to overlook it. Without a clear understanding of this, you will likely miss the second part of the question, “what should your business be?” Or, maybe more importantly, “what will the business be?”
It’s remarkably easy to get caught up in the intensity of managing our selves, and our teams and to forget that customers have a different viewpoint. My experience in an industry or business is often my handicap. It is so easy to disconnect with the “reality” of the customer. In class, Peter once told us, “don’t be smarter, be more conscientious.”
The Most Important Questions
- After answering the question “What business are you in?, Peter’s next questions are:
- Who is the customer?
- What does the customer value?
- How do you measure it?What is the plan?
Since my graduation from Claremont years ago, I have owned small businesses, worked as an executive in mid-sized firms, and worked for major corporations like GE. In every context, I was reminded of Peter Drucker’s instruction, “it is important to start by asking the right questions.”