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The Two Entrepreneurial Functions: Marketing & Innovation

In this post I'd like to wrap up my comments on the Peter Drucker quote that I covered in two previous posts (The Purpose of a Business and Welcome).

Immediately following the section, The Purpose of a Business, where he establishes why "to create a customer" is the only valid definition of business purpose, Drucker next goes on to describe the two entrepreneurial functions he feels fulfill that purpose. I have included the quote (italicized), along with, for context, a substantial portion of the section in which it appears, below.

The Two Entrepreneurial Functions

Because it is its purpose to create a customer, any business enterprise has two - and only these two - basic functions: marketing and innovation. They are the entrepreneurial functions.

Marketing is the distinguishing, the unique function of the business. A business is set apart from all other human organizations by the fact that it markets a product or a service. Neither Church, nor Army, nor School, nor State does that. Any organization that fulfils itself through marketing a product or a service, is a business. Any organization in which marketing is either absent or incidental is not a business and should never be run as if it were one.

. . . Actually marketing is so basic that it is not just enough to have a strong sales department and to entrust marketing to it. Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer's point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise.

There is an amazing amount of insight about “marketing” packed into these few paragraphs!

  • The purpose of a business is to create a customer.
  • A business has only two basic functions: marketing and innovation.
  • Marketing distinguishes businesses from other types of organizations.
  • Marketing is much broader than selling.
  • Marketing is not a specialized activity.
  • Marketing encompasses the entire business.
  • Marketing is the whole business as seen from the customer’s point of view.
  • Marketing must be the concern and responsibility of the entire enterprise.

These are bedrock principles!

In future posts I will talk about how they can provide guidance in building a company where marketing truly drives superior business performance.

— R. Davis


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