Create a Customer

Definition

A business is not defined by its own activities or by the pursuit of profit; it is defined by the customer who buys what it offers. Profit is not the purpose of a business but a test of whether it has satisfied a customer and a constraint on its survival. Drucker states it flatly: "There is only one valid definition of business purpose: to create a customer."

In the Book

Chapter 3 opens by attacking the "typical businessman" and "typical economist" answer that a business exists to maximize profit, calling the concept "meaningless" and a "major cause of the misunderstanding of the nature of profit in our society." Drucker argues purpose must lie outside the organization, in society, because a business is an organ of society. From this he derives that a business has exactly two basic functions — marketing and innovation — and nothing else produces results; everything else is cost. He sharpens marketing against selling with the Sears example: true marketing does not ask "what do we want to sell?" but "what does the customer want to buy?"; the aim of marketing is to make selling superfluous. He then argues wants themselves are often not pre-existing but created by business action — no one knew they wanted a Xerox machine or a computer until it existed — so even markets are not natural but made.

Why It Matters

This concept forces a redirection of attention from internal metrics (efficiency, output, profit) to an external, falsifiable test: did someone outside the organization actually value this enough to pay for it (or, in nonprofit terms, act on it)? It applies wherever an organization can mistake its own activity for its purpose — a research team optimizing elegance nobody uses, a government agency measuring its own budget instead of citizen outcomes. It gives "purpose" a hard, external anchor instead of a value statement.