A glass exists to hold water. A company exists to serve its customers

By George ILIEV
CorporateNature Metaphor Series, No 104

A glass full of water is a container that makes a valuable liquid useful and accessible. Sometimes people collect glasses for the sake of the glasses themselves, e.g. to put them in a display cabinet of Waterford Crystal. But most of the time glasses, cups and pots exist to serve a higher and more useful purpose.

Metaphorically, companies are glasses and cups while their business activities are the useful liquid they contain inside. 

Before the 2008 Global Financial Crisis, most economists agreed with Milton Friedman's 1970s theory that companies exist for their shareholders. Back then, the key objective of a company was seen as generating shareholder returns, which was akin to believing that a glass exists for its own sake.

However, ever since the 1970s, Peter Drucker, the father of management, has maintained that companies do not exist for their shareholders but for their customers, so the primary objective of a company is to be useful to its customers. This is akin to maintaining that the glass exists to hold a liquid.

The financial crisis has ultimately shown that Milton Friedman was wrong and Peter Drucker was right: the glass exists for the liquid inside, not for the melted and strangely-shaped quartz that makes up the glass itself.

Glass of water (Source: Wikipedia)