Why are Companies in Business?

Why are companies in business? The answer that I will inevitably get is, "To make money! Why else?" Maximize profits. Increase the return on investment. Raise the stock price. These are all metrics we associate with the primary purpose of the corporation in our world today. But are these things really their purpose? Are they really in business simply to make money?

I recently read a quote from Tachi Kiuchi, a former Managing Director of Mitsubish Electronics. Kiuchi says, "People talk about businesses needing to be responsible as if it's something new we need to do on top of everything else. But the whole essence of business should be responsibility. My philosophy is 'We don't run companies to earn profits, we earn profits to run companies.' Our companies need meaning and purpose if they're to fit into the world, or why should they live at all?" I could not agree more. Profits are merely a means to an end.

I remember, when I worked for one Fortune 500 company, a bullet-point in the employee's mission statement stating, "Profits are essential to our future success." At the time, I thought it was hokey propaganda designed to garner a team effort in increasing profits. As I look back, I realize how much truth is in that statement. The statement could have read instead, "Success is essential to our future profits," but it did not. That's because profit is only fuel to be reinvested into the business in order to make it more successful--more effective at what it does. If you're Starbucks, profits go back into the coffee. If you're BMW, profits go back into the engines. If you're Target, your profits go back into the stores.

While profit is merely a means to an end, that end is different for each company. Whatever market the company serves, that is its purpose. A higher quality coffee. A more ultimate driving machine. An enhanced shopping experience. Whatever the case may be, a company's profits are merely an investment in its market. "We don't run companies to earn profits. We earn profits to run companies."