The ONLY Two Functions of a Business? What Priority Are You Placing On Them?

By Posted in - The Public Blog on februari 23rd, 2013 0 Comments

I can recall, as if it was just yesterday, exactly where I was when I first read these profound words: Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.

Peter Drucker, The Practice of Management, 1954

This quote struck me for three reasons …

Firstly, it seems counter-intuitive: Two? Only two? What would an accountant say about that? Or a lawyer? Or the sales, HR or production areas in a business?

Secondly, once you reflect on it for a while, you see that it is true: Marketing attracts customers (clients), and innovation is figuring out smarter ways to deliver. Everything else is, in essence, simply about keeping score and supporting these processes.

Attract and deliver. That’s business in a nutshell.

Thirdly, Drucker’s words resonated with me immediately because marketing and innovation are my passions. My entire career has been a blend of both, starting out as an industrial designer, winning awards, inventing patented products and then gradually gravitating towards marketing (and being fascinated by the psychology and strategy of it) once I repeatedly observed that the best products and services don’t win, the best marketed ones do. My 20+ years in business have revolved around marketing and innovation.

I love marketing and innovation because together they really are the equivalent of modern day alchemy: You can create massive increases in value and outputs, without increasing inputs, just through better communication and changing of perceptions (marketing) combined with smarter, more leveraged ways of operating (innovation).

For example, imagine tripling the revenue of a software business within the space of 12 months, but with one-fifth the number of sales people (supported by leveraged marketing systems) compared with the previous year.

Marketing and innovation did that.

Or increasing the annualised revenues of a small suburban travel agency from $800,000 to $3.4 million within the space of 6 months without hiring one additional sales consultant or spending even one additional dollar on advertising or marketing (other than getting smart advice from us).

Marketing and innovation did that.

The leverage that marketing and innovation provide any business is profound. This is what Drucker observed and what I continue to experience first hand, time and time again.

So if Drucker emphasised, almost 60 years ago now, the importance of the functions of marketing and innovation, what do most management teams these days focus their energies on?

Marketing legend Jack Trout who pioneered the concept of positioning (which is crucially different to differentiation) wrote in a Forbes article back in 2006:

Today, when top management is surveyed, their priorities in order are: 
finance, sales, production, management, legal and people. 
Missing from the list: marketing and innovation.

7 years on, the same holds true.

What about in your business?

Where does marketing sit in the standard agenda for your management meetings? Your team meetings? Your Key Performance Indicators (KPIs)? Is it a priority? If not, you’re incurring a significant opportunity cost that you’re blissfully unaware of; the cost of being perceived as just another business in your profession or industry. Being lost in the crowd. Being perceived as average.

And innovation? Where does that sit in the priorities, the culture, the daily language used in your business? Is it a focus? Is it a core value that the leadership team constantly talks about, encourages and rewards? Does innovation ooze from your organisation’s pores?

Our member’s webinar series this year will focus on marketing and innovation, combined. We’ll be demonstrating a long list of tools and technology, showing not just the ‘how to’ practical details of using the tools (not ‘death by PowerPoint’ here!), but wrapping these practical demonstrations and case studies in the strategic context of why you should use these tools in your business.

As a business owner, you should be almost bursting out of your skin with excitement about your potential to grow.

Why do I say that?

It is an incredibly exciting era of business we all find ourselves in. The playing field is the most level it has ever been, because any business now has at its disposal an array of leveraged communication (a.k.a. marketing) tools that allows you to get your message and value proposition in front of precisely the ideal people and businesses you want to target, without needing to spend a cent on traditional advertising.

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