The purpose of a business is to create a customer.
The legendary Management theorist and consultant Peter Drucker believed that Management was a practice. As per Merriam-Webster, “Practice: The actual application or use of an idea, belief, or method, as opposed to theories relating to it. In his seminal book “The Practice of Management,” Drucker, when describing the jobs of management, stated:
“The ultimate test of management is business performance. Achievement rather than knowledge remains, of necessity, both proof and aim. Management, in other words, is a practice, rather than a science or a profession, though containing elements of both.”
Therefore, as we look specifically at the management of a product or offering, we need to be looking through the same lens. Product Management is a Practice, the application of a “method” with the ultimate test being “business performance.” This is an essential belief: there is a method to Product Management that needs to be applied and used.
“The Practice of Management,” and the updated-expanded version “Management: Tasks, Responsibilities, Practices” are foundational works for the modern-day practice of Product Management, not only in asserting the concept of [product] management as a “practice,” but also in introducing the key concepts around market and customer focus.
“There is only one valid definition of business purpose: to create a customer.”
It is as simple as that – the purpose of a business is to create a customer.
“It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods.”
Drucker continues “because it is its purpose to create a customer, any business enterprise has two—and only these two—basic functions: marketing and innovation.
They are the entrepreneurial functions.” Drucker sees marketing as “not a specialized” activity, but one that “encompasses the entire business.” The “whole business seen from the point of view of its final result, that is, from the customer’s point of view,” and that because of this “concern and responsibility for the market must expand across the entire company.”
Here’s the thing. I learned that marketing is the grand game described by Drucker, but for many firms, Marketing is the department that supports the sales channel with leads and promotions.
This view of marketing – “the whole business seen . . . from the customer’s point of view” – actually is a common description of product management.
Product Management is responsible for business results for their products. Product Management is responsible for discovering and validating the needs of the customer and translating those needs into products to address those needs. Product Management is what Drucker was describing as “marketing.” In “Management: Tasks, Responsibilities, Practices” Drucker goes even further in defining this:
“Indeed, selling and marketing are antithetical rather than synonymous or even complementary. . . There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.”
To know and understand the customer, and develop products that fit them and sell – this is the ultimate test of Product Management performance. This is the foundation for the Practice of Product Management.