Business – A Definition [FP]

Business, a Definition – Also Fundamental Principle 1

Before going further, it seems wise to clarify some misconceptions (perhaps yours) about business by providing some really useful up-to-date definitions (really mine):

An organization (of 2 or more people) operates as a business (that is, on fundamental Business Principles) if/when an exchange takes place that benefits both parties.

That’s it, really simple.  And notice that the word “profit” doesn’t appear in it. Too often the concept is that a business operates with the sole goal of making a “profit,” or worse, extorting too much money for providing something worth far less.  Most people are ignorant of Peter Drucker’s definition of business, that it “exists to create and keep a customer.” It also doesn’t do any good that the perceived opposite of a business is called a “non-profit.”

If we start with the simple definition above, we can go a bit further, defining

A Business Transaction: an agreed upon exchange involving product, service, or information, for something of agreed like value, most often currency.

If we take this a step further we can ask the simple questions:

What do you call an exchange that benefits both parties? Business;

What do you call an exchange that benefits only one party? Crime (as in “That’s a crime”)

(For various reasons to be detailed later, I will put the first (Business) into a category called Positive Sum games (+∑), and the second (for simplicity called “Crime”) into a category called Negative Sum games (-∑). More on these later.)

What does an organization (or person) have to do before the exchange takes place? What are the Business Principles that apply? Traditionally, it should identify a need, identify a market that benefits from solving the need, develop a product / service / information that meets the need, communicate the benefit to the market (customers) in the value proposition, deliver the product / service / information to the right place at the right time and at the right and fair, agreed upon price. Then stand behind and service the product to keep it performing. All the while keeping everything kosher (transparent). Throw in a bit of strategic planning and accountability for good order.

A lot of work, frankly. But, if one likes what one is doing and wants to stay in operation for a long time, it needs to be done.

Curveball for you. If the above working definition appears to be valid, then is there any reason for these principles to be applied not only to a business but, for instance, a non-profit charity, a non-profit for-profit (hospital?), a non-profit higher education institution, a religious organization, government, or even marriage and parenting? If these were run effectively and efficiently, of course. And also run with a focus on a central, core ingredient that is not mentioned at all in the above. Which we will return to shortly.


About Jim Edmonds

I am a husband, father, mentor, who once was a chemist turned physicist turned marketer turned executive turned missionary turned professor. And survived it all.
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2 Responses to Business – A Definition [FP]

  1. Pingback: Games People Play I – The Zero Sum (0 Σ) Game [FP] | Road Signs and Blind Spots

  2. Pingback: My Top Thought Provoking but Obscure Articles from 2012 | Road Signs and Blind Spots

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