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)

How to stay hidden, yet visible: lizards and private companies know the trick

Having two faces is never a bad idea in business or nature
By George ILIEV

The advantages of staying private

Companies that stay private achieve two conflicting objectives: they can be as visible as they want to their customers but can hide strategic information from their competitors. A public listing on the stock market opens up a company for scrutiny by competitors, as the regular reporting to the stock exchange will disclose competitive information and strategic moves.

Lizards playing with colour

The male Iberian emerald lizard achieves the same double effect with the colouration of its head, according to recent research reported by The Economist. The bright blue colouring is iridescent: 

- when seen from above (by a predator bird) it reflects the surrounding landscape and blends in with the environment;

- when seen from ground level (by other lizards), the blue stands out against the landscape, potentially attracting mating partners.

(Photo: Iberian emerald lizard. Source: Wikipedia)

Aircraft privacy intrusion

In a starkly competitive move, Boeing bought 17 new Airbus planes from Singapore Airlines in 1999 in order to replace the Airbus batch with Boeing planes and keep the Singaporean flag carrier a loyal Boeing customer. In addition to getting the planes delivered (to be resold to other airlines), Boeing also received all the technical documentation that goes with an Airbus plane, thus gaining competitive intelligence directly from the horse's mouth. 

Competitors posing as customers to gain insight into their rival's business are not a new phenomenon. However, hawks have not yet cottoned on that they need to start hunting from ground level to catch a male Iberian lizard.

Further reading

The topic of how and why animals and companies operate in stealth mode is covered in my June 2014 blog post:

Stealth mode among companies and animals: Crickets and spiders learn to lie low 

(Crickets give up chirping, spiders disguise as bird poo, companies slip under the radar to avoid corporate predators.)