Ladies and Gentleman, The Beatles!

If ever there was one best Business Guru, it would have to be Peter Drucker. His work emerged during the height of the Industrial Age and serves as the foundation of management practice in most businesses today. Just like picking your favorite Beatles song (A Day In The Life), it’s kind of hard to boil his work down to one statement. But here’s mine:

Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business (The Practice of Management, 1954).

There is one word in this quote that might need to be modernized, but only because we can assume Mr. Drucker was naturally influenced by his era, and not yet hip to the power of design and the more recent practices of customer empathy. To make the most sense in today’s world, I propose we change the word “create” to “discover” as it better underscores the idea of providing something for a customer versus selling them some new widget. We’ve certainly learned by now that the world will NOT beat a path to your door if you build a better mousetrap (Ralph Waldo Emerson). Customers will flock to your company only if you are solving a problem or fulfilling a need, even if they aren’t aware they have it yet.

Marketing is responsible for discovering customer needs and innovation is responsible for solving them. Hand and glove. Many innovators have an initial customer insight and design a solution for that. Often this is “design for self” where the solution feels right to the one inventing it. I’d say most early stage businesses created only a minimum viable product or have no sustainable advantage, so quickly burn through early stage growth and stall. In today’s Internet fueled, flat world, companies can go through this initial growth stage in a matter of months. In the good ‘ol days of Henry Ford, it could take years to run out of the initial growth stage (perhaps 125, if they don’t get busy quickly at Ford).

The only way out of this problem is to understand your customer intimately, and adapt to the continual pace of change around you. This requires a new kind of corporate framework. The pace of business technology is moving so fast that people are now able to see the real impact of robots, machine learning, and computing power as human jobs are replaced by automation and artificial intelligence. Left to the Industrial model of organization, people are essentially machines who can be replaced with technological advancement. To function in our high tech, rapid change world companies need to build human centered organizations or risk losing all ability to market and innovate. This would be a very bad state for businesses because they would soon be without customers with no human insight, synthesis, or creativity operating within their organization.

Human Centered Organizations

Traditional businesses are built in a hierarchical model that works well in a predictable, stable business environment. In the past several decades, as uncertainty and change increase, there have been plenty of replacement designs proposed (e.g. Holacracy, Heterarchy, etc.). But these distinctions are missing the point, and therefore don’t solve the problem. A human centered organization isn’t a different way to decide or control, it’s purpose-built to enable creativity and collaboration. These are the two essential capabilities underlying the best marketing and innovation functions. Under the dominant hierarchical world, we’re stuck searching for Purple Squirrels to build Unicorns. Wait, What? We’ve designed companies that need extremely rare people to achieve what is now the expected standard of venture capital investments. Sorry, but I can’t help myself, here’s my other favorite Druckerism as it relates to organization design: (Beatles #2=Love Me Do)

No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings.

To be successful in today’s world, and achieve the purpose described by Drucker, businesses must enable average human beings to perform at their best. To perform at their best, people need to be well. I’ve covered this part before so I won’t re-hash it here. I will suggest a new label for human-centered organization design for those seeking a simple way to net this out: reciprocity.

Reciprocity

Reciprocity is the organizing principle of a human-centered organization. It is built on the seminal economic insight from the Prisoner’s Dilemma. The essence is that cooperation is natural for humans and better than the rational choice of selfishness. In common terms, we’re talking about “win-win” here. Most traditional organizations are designed to control for selfish/rational behavior and become disengaging as they dehumanize and under value collaboration. A reciprocal organization empathizes with human failings and has support and resources designed into the system to encourage higher order behavior in three ways:

1. Growth Mindset
2. Personal Effectiveness
3. Everyday Presence

When organizations are designed to support employees in these three areas they are far more creative and collaborative. Therefore, they are better able to market and innovate, which is to discover and solve customer problems.