3 Immutable Laws of Business

Almost 2014
“Business is sure not what it used to be!” said a nonbusiness friend the other day. She was implying that it used to be less complicated, less global and, in her mind, have fewer scoundrels. She has, unfortunately, bought into the theme that business is evil and unpredictable.
 I replied that I didn’t think business had really changed at all. My friend looked at me like I had three heads. Even though she’s in the 2 percent club, she has disdain for the 1 percent club and the process (her spouse’s business) that got her into the club. I think that’s dangerous, but I digress. … Has business changed?
If you’d told me 35 years ago when I started my business career that products would be sold without going to the store, I would’ve thought you meant that the Sears catalog was going to go gangbusters. If you’d told me I’d be able to buy a product that would let me call home, check the weather, find the nearest Starbucks (what in the world is a Starbucks?) or play the Black Keys through my car stereo just by telling it to do so, I would’ve poured you a stiff drink and called a medic.Yes, things have changed, but business really hasn’t. It all starts with three immutable rules.First, you must have an addressable market. People have to need or want what you build, and you must get it to them for a profitable price. (Sorry, but “free” only goes so far, and you can’t make it up in volume!) Sometimes people don’t know they want what you have until you show them. There’s a difference between need and want. I need my furnace. I want my 70-inch smart TV! Steve Jobs got this.

Second, individuals will look to maximize their utility, and if you find a few who value the same thing, you might have a market. As economists tell us, utility isn’t just happiness but rather our preferences and the things we care about — our self-interest.  I might like to eat pizza every night, but it doesn’t maximize my utility. I’d die happy, perhaps, but too quickly!

A firm’s employees care about many things other than compensation to maximize their utility.  On the other side of the equation, customers also want utility, and that certainly doesn’t just mean a cheap price. If I could afford a Bentley, I might buy one for several other reasons than just transportation. The question, “What’s in it for them?” is one that all business executives need to ask about their employees and customers. This hasn’t changed and won’t change.

Last, firms will try to make as much money as possible. This is good, but I’ll stop short of saying greed is good. This is why we need regulation, though hopefully not enough to destroy our ability to compete globally. A profit motive causes new products to be created. It makes prices drop. It creates many jobs globally — and destroys some in the process, but to the long-term benefit of the global community.

At its core, business hasn’t changed. My premise is that you can understand business and predict behavior with these three rules. Ignore them at your peril.

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I hope that you had a tremendous year in 2013! I have had the pleasure of working with great clients this year to help them grow their businesses and leadership skills and increase organizational effectivness. If you know of someone that I can help in 2014, please drop me a line.

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Todd Ordal helps senior executives lead better, profit more or sleep soundly…without narcotics! I can be reached at 303-527-0417 or todd@appliedstrategy.info. Follow me now on Twitter at http://twitter.com/toddordal

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