How business create value

Businesses exist for two main reasons:

1. Creating value for customers, and
2. Creating wealth for its stakeholders.

This article is my understanding of how a business fits into society. I don't have any research on this topic, so this is a brain dump of my thoughts.

Prelude

I came across a newsletter called The Business of Family. It's an interesting collection of interviews by Mike Boyd. The focus of his interviews is families business passed down for generations.

Reading through a link he shared I came across the Longnow community. It's a group of people focusing on creating businesses, which outlasts their founders.

I am not very educated on their principals and practices, but I found myself reading more of what they write. It's an exciting journey to build something which will outlast our tiny human lives. They are so focused on their mission, you can see it in the smallest things.

Now that got me thinking, how does a business work? What are the various parts of it? I don't have hands-on experience in managing a business, but I read.

This is what I think.

Businesses start with the customer experience and end when customer experience is compromised.

Humans have always been curious and sought comfort. In the pre-civilisation days, some were able to cut down trees to make their own hut. While some, blessed with other skills, had to get help.

The same is true today, and it's how businesses operate. They solve problems for consumers, and exchange money for it.

As you scale and grow, your operations get complex, leading you to create departments. Still keeping the customer experience at the centre.

The day a business start compromising on the consumer experience, is the day you see a crack in the window. If not fixed immediately, this is when a business's downfall begins. this may not be the straw which breaks the camel's back, but this could be the reason it starts feeling weak.

So let's say you found a problem which people were willing to pay to get rid off. You solved it, created a business of it, and scaled it.

Everything you build is only as strong as the foundations you lay while starting. Customer experience is at the core of your entire organisation.

After a few years, if your focus shifts from customer experience to the business side of things, you in for a punch.

Businesses help develop society and empower the economy by enriching their various stakeholders.

Growing up, I used to think there are two types of people. One who get a job and get a constant monthly salary. Second, people who start a business, and earn a massive amount of money.

Middle-class families have a common goal. Get a good education and be employable. Start a job with a low salary, but as you grow, progress and earn a good salary in a few years.

As I went through college, I started learning about the startup scene. Anyone who can come up with good ideas could find investors who are willing to put their money in your hands.

Reading educated me about the basics of a business. And now it sees business as the most fundamental part of our society. If no one is starting a business, then who is creating jobs?

Businesses are the reason we left caves and started being civilised. Or at least I think so to emphasise the role of a business in our society.

The economy exists because of business. And the following image shows how value flows from one stakeholder to another. Good businesses amplify the flow of value and benefits all its stakeholders.

Conclusion

I don't have any. I had a lot of thoughts in mind and ended up drawing the two infographics, and writing this.

What do you think is the function of a business in our society? How does it start, functions and grows? Curious to hear what you think.