In this post, we’ll unpack all you need to know about business, defining exactly what a business is, its primary purpose, main components and more.
What Is A Business?
A business is a mechanism for providing value through goods and services in order to make a profit.
What Is The Purpose Of A Business?
A business is an optimisation function whose primary purpose is to minimise inputs and maximise outputs by processing large amounts of information and then pulling the right levers.
What Are The Components?
There are 6 main components of a business, each of which flow into the next.
- Operations: Responsible for producing goods and/or delivering services efficiently.
- Marketing & Sales: Responsible for attracting customers and driving revenue.
- Finance & Accounting: Responsible for managing money, budgeting and financial reporting.
- Human Resources: Responsible for hiring, training and managing employees.
- Customer Service: Responsible for ensuring customer satisfaction and retention.
- Strategy & Leadership: Responsible for setting goals and guiding overall direction.
Management
The output of a manager is the output of their organisation. Therefore, managers must move to where leverage is the greatest. Leverage can be both positive and negative.
Constraints
Constraints are obstacles that are preventing you back from your goal.
Your job is to identify constraints and then determine ways to eliminate them.
You will always have constraints — when you relieve one constraint, another appears.
It’s Is A Spiritual Game
Business is the ultimate spiritual game.
As an owner, you have the opportunity to do more for others than anyone else — regardless of the industry you’re in.
Business is about what you give, not what you get. When you’re obsessed with giving more — with serving — with meeting and exceeding the needs of your customers, you’ll not only succeed, but you’ll make a difference in their lives and you’ll experience an extraordinary amount of fulfilment.
Success Is Determined By Information
The success of a business is determined by how efficiently (speed) and how effectively (accuracy) information can travel within it.
The faster information can permeate an organisation and the more effectively that information can be communicated, the more successful the organisation is likely to be.
Therefore, organisational structure and culture determines a company’s fate because it dictates how well a business can process information.
Success Is Determined By Speed
Success in business is determined by speed.
Specifically, it is determined by how quickly you can identify successes and failures.
People Don’t Buy Products, They Buy States
People don’t buy products, they buy states. In other words, people buy things because of how they make them feel and how they make them look.
Underpromise & Overdeliver
Underpromise & Overdeliver is a strategy use to generate high customer satisfaction by exceeding expectations.
This strategy provides a way to manage expectations, prevent dissatisfied customers and ultimately generate Raving Fans.
Price Versus Value
In business, you want to maximise the difference between price and value. Price is what people pay for your products and services. Value is what they get.
5 Steps To Effective Communication In Business
There are 5 steps necessary to effectively communicate your message in business.
- Why do you need to share a message?
- Who needs to hear your message?
- What message needs to be shared?
- Where is the most effective place to share your message?
- When is the most effective time to share your message?
10 Factors That Make Any Product Infectious
There are 10 key factors that make a product infectious.
- Uniqueness which creates clear one-of-a-kind differentiation.
- Aesthetics which creates perceived aesthetic appeal.
- Association which generates positive associations.
- Engagement which fosters emotional involvement.
- Excellence which creates the perception as best of breed.
- Expressive value which creates visible sign of user values.
- Functional value which helps goal attainment.
- Nostalgic value which evokes sentimental linkages.
- Personification which creates character and personality.
- Cost which creates perceived value for money.
The One Thing
Everyone in the company should be responsible for one thing. Each person should at all times know what their one thing is and everyone should know everyone else’s too. This creates clarity, ensures accountability and maximises efficiency.
Two Businesses
All business owners have to be able to run two businesses: the business they’re running in the present and the business they want to create in the future.
In a constantly evolving world, it is the businesses that are anticipating what is around the corner that not only survive, but thrive.
Anticipation in business is defined as the ability to see potential problems that lie ahead and then developing solutions to those problems.
Winners are proactive. Losers are reactive.
Summary (TL;DR)
A business is an organisation that provides goods and/or services to customers with the aim of generating profit.
The primary purpose of a business is to minimise inputs and maximise outputs by processing large amounts of information and then pulling the right levers.
The 6 main components of a business are operations, marketing and sales, finance and accounting, human resources, customer service and strategy and finally leadership.
