Series: Keeping Up in a Down Economy

“Business has just two functions;  finding a customer and innovating.” Peter Drucker.
by Ronald L. Burgess 6/25/2009

Peter Drucker, perhaps the most noted business professor and philosopher of our time, continued, “everything else is just cost.”

This really provides a different perspective for most businesses where production, finance and accounting rule the roost. Yet it is clear that the innovators are the really big winners. We see it all around us; Apple Iphone, following the Ipod, following on the MacIntosh, following on the GUI (graphical User interface). Or Google with its completely original notion of organizing the world’s information, then inventing a new advertising industry too boot.

And innovation enabling wealth creation is not new. Ford invented a new way to mass- produce cars for lower selling prices, Carnegie developed the Bessemer furnace in the US and drove steal prices ever downward. DuPont developed better gunpowder.

Market domination or even creation; provide great opportunities for wealth creation, as well as many times increasing our standard of living. So why is it that so many business people concentrate on cost cutting, financial leverage and tax avoidance instead of finding customers and innovating?

It is a question that still escapes me too. My three decades of business consulting tells me that many choose to preserve existing wealth rather than risk greater riches. This is not a fault and can lead to comfortable circumstance and company stability. But at the same time if Drucker was right, if the company is not creating a customer, how long will the stability continue?

Recessions usually cause companies to pull back on creating customers. This is a curious circumstance, because new customers can mitigate tough business from existing customers. I find that businesses that make great cuts to advertising and marketing during a recession, really don’t understand why they advertise and how it works in the best times either. Many of these businesses simply do not know the best ways their companies create customers. Instead they put out a shingle and throw money away with wasteful ad spending and are “too busy” to measure for success.

What intelligent business person would cut back on an activity when they know it creates business? Not many, but very few really know what works.

Recessions take out the ones that don’t understand this first reason to be in business-to create a customer. This could be a long recession so its not too late to start, measure the effectiveness of all marketing activates, advertising, distribution, sales, materials and direct mail, website visits and closes, and everything else you can. Pay attention to why each customer is doing business with you. Then just do more of what works, and stop what is less productive.

Tell your CFO or controller, to measure it all, or the financial measurement won’t matter anyway! Nothing happens until the cash register rings.

Other articles in the “Keeping Up in a Down Economy Series”

Companies Turn Online to Manage Marketing Budgets

Paramount Windows and Doors still fits their niche —even during troubled times.

Brithinee Electric is Beating the Odds With Quality Motor Repair