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Asked what a business is, the typical entrepreneur is likely to answer, “An organization to make a profit.” The answer is not only false, it is misguided. The only valid definition of a business is an organization which creates a customer.

Because its purpose is to create a customer, the startup has just two – and only these two – basic functions: marketing and innovation, both of which must be the charge of all the employees of a startup.

Marketing is not asking, What do we want to sell? Rather true marketing answers, What does the customer want to buy? To answer this question, the business must start out with the needs, the realities, the values of the customer.

Today, consumerism is rampant. And what is consumerism but the failure of marketing? Consumerism is nothing more than potential customers voicing their unaddressed needs in an area where marketing has failed. And for a startup, consumerism in a segment represents an opportunity.

This is because most marketing is confused with selling. Marketing discovers latent and sometimes hidden customer needs by listening, understanding the consumer and translating those needs into profitable products, i.e. innovation. Sales is the process of demonstrating to the customer that the product satisfies their needs.

There is certain magic in discovering a product that has been built to solve a problem one has as a consumer without having told anyone about it. We all know it and this is the driver of Apple’s success.

Profit is a by-product of great marketing and successful innovation. Maximizing ongoing customer satisfaction at a price that enables continued investment in marketing and innovation is the goal all entrepreneurs should look to satisfy.

— A riff on Peter Drucker’s ideas

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8 thoughts on “Defining the startup

  1. I disagree.Firstly not all businesses are startups and you switch between the terms.Secondly, While a business needs a customer to buy it’s product. A customer without a product is worth nothing and a company without a product is worth nothing. A product is the first step before you have a customer. Therefore a product is the most vital part, a customer is needed secondly and the profit is the result of that equation.A business that has a product but has no profit is BARELY a business. In fact it’s a soon to be dissolved business.Thirdly, Sales is not the process of demonstrating. It’s the process of convincing. A lot of sales people will convince you that you need a product, when you do not. The word demonstrating requires proof.And to be fair, I don’t think you need to even innovate. Take an old idea and do it well and it can easily work. Any given successful restaurant doesn’t necessarily do it any different from the last. It just does it well.

  2. I think startups are not “just business”, they change the world. I would agree on gaining customers for traditional business, a startup should be defined as a group of people that will try to change the world making somthing special that people “love”. Everything else, is just a business, for the good and the bad.

  3. I disagree as well. I don’t think there’s a difference between a startup and a business. “Startup” is just another word for a brand new business.A business has two goals: make something and sell something. If it doesn’t do both of these, it will fail.If a business makes something at $10 and can only sell it for $5, it will also fail. A business needs to make a profit to grow.There isn’t anything wrong with going into something without the sole goal of making money. Making a dent in the universe is admirable too, but it will sure be a lot harder to support yourself and everyone in the company if the business isn’t self sustaining.

  4. @jalegre — Apple change the world. They’re no quite a few years out of being a startup. I disagree with your view on startups, I think that people take that view with all businesses. A startup is an early stage business in my opinion not a separate kind of business.@Kevin — I think as a startup your goals are slightly different than when you’re an established difference. Thus why I was commenting that there is a difference.I think if you are trying to make a dent in the business and do not want to be too heavy on the profit, that’s where you should be a charity.

  5. There is certainly a difference between a startup and a business, like I said.A young business (startup) is trying to start that cash flow: sell their first product and make a profit.A business is trying to keep that first cash flow going and maybe develop and sell another product.

  6. @Zach – Thanks! Great to have you as a reader>”Therefore a product is the most vital part, a customer is needed secondly and the profit is the result of that equation.”I agree with you. To build the right product you have to start with the customer needs in mind. >”Sales is not the process of demonstrating. It’s the process of convincing. A lot of sales people will convince you that you need a product, when you do not. The word demonstrating requires proof.”My point is the right of kinds of products don’t need sales to be convincing because they suit the customers needs so well. “Any given successful restaurant doesn’t necessarily do it any different from the last. It just does it well.”> Good point. A Burger King next to a McDonald’s isn’t innovation.

  7. @jalegre I like your point. A key ingredient in the team that builds innovation is passion for the customer, the segment and making the company successful.

  8. @Kevin Agreed with you on your point below – this is why startups need to understand their customer bases well.

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