Profit is not the proper end and aim of management. It is what makes all the proper ends and aims possible.

A minor but pervasive frustration that seems to be unique to management as a profession is the rapid obsolescence of its jargon. As soon as a new management concept emerges, it becomes popularized as a buzzword, generalized, overused, and misused until its underlying substance has been blunted past recognition.

People, materials, facilities, money, and time are the resources available to us for conducting our business. By applying our skills, we turn these resources into useful products and services. If we do a good job, customers pay us more for our products than the sum of our costs in producing and distributing them. This difference, our profit, represents the value we add to the resources we utilize.

Failures in business are caused by self-centeredness, lack of righteousness, ignorance of the sacred mission of business, treating business as a short-sighted profit-making endeavor, and clinging to outmoded practices.

All big ideas share at least one of three business objectives: improved efficiency, greater effectiveness, or innovations in products or processes. In a way, it's an exhaustive set of possibilities. You do things right, you do the right thing, or you do something new.

It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance--especially not to the future of the business and to its success...What the customer thinks he is buying, what he considers value, is decisive--it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him. And what is value for the customer is, as we shall see, anything but obvious.

Organizations do four things - they find, they keep, they tranform and they distribute. Many concentrate on one thing or another, although virtually all organizations do all four. And they do them in all kinds of ways (sometimes in linear sequences, called chains, often around central cores, called hubs, and increasingly in interactive networks, called webs). Which one is used makes a big difference in how we actually "see" an organization.

The modern organization is a destabilizer. It must be organized for innovation and innovation, as the great Austro-American economist Joseph Schumpeter said, is "creative destruction." And it must be organized for the systematic abandonment of whatever is established, customary, familiar, and comfortable, whether that is a product, service, or process; a set of skills; human and social relationships; or the organization itself. In short, it must be organized for constant change. The organization's function is to put knowledge to work--on tools, products, and processes; on the design of work; on knowledge itself. It is the nature of knowledge that it changes fast and that today's certainties always become tomorrow's absurdities...

Unlike "community," "society," or "family," organizations are purposefully designed and always specialized. Community and society are defined by the bonds that hold their members together, whether they be language, culture, history, or locality. An organization is defined by its task.

There are at least a dozen major design variables in a business. How you go to market, which competencies you use, how you put together your value web, what is your core mission, where do you look for differentiation, and so on. And most people Don't see those as design variables after a while. They just start accepting them for what they are. ...I'm trying to get people to think about the entire business concept as being malleable and open to redesign.

I believe that business concepts can be changed all at once in a big way and I believe they can be changed more slowly over time. But I think the challenge for organizations is to recognize that all of those design variables need to be open to question all the time. Because if they're not, someone else is going to come along and take some dimension of that that you never regarded as important, and they're going to use it in a very interesting way.

Business must be run at a profit, else it will die. But when anyone tries to run a business solely for profit... then the business must die as well, for it no longer has a reason for existence.

Saying that a company's purpose is to maximize profits is like saying that man exists in order to breathe. The fact that a man cannot live without breathing is one thing, but the ultimate purpose to which all man's energies must be directed is quite another. Similarly, it is one thing to say that a company cannot survive without a certain minimum of profits, and quite another to say that the purpose of any company is to maximize profits.

I think the idea is that one has, among other responsibilities, the responsibility to try to increase shareholder value. But when you say "maximize," you're now saying it's my priority at the cost of all others. And that's what I will not acknowledge -- any more than I would go the other way and say my purpose is to maximize the happiness of my employees. I don't think that's fair either. There are shareholders and stakeholders beyond employees.

I think that what is critical to me is that they be balanced. Whenever any single stakeholder says "All I care about is what's in it for me," it is essentially destructive of the spirit, and ultimately I think it is probably self-destructive in terms of not being the kind of thing that generates trust and sustainability.

The game of value capture is no longer won by finding and protecting a defensible position: It's won by developing a business system that's quicker and better at using information, and adapting the system as the industry evolves.

Although I invented the term "profit center" 40 years ago - one of my lesser contributions - a subsidiary of a division is not a profit center, but a cost center. The only profit center is the customer. Until the customer has paid his bill, there are only costs, and until the customer has come back with a repeat order there is no customer.

Corporations are instruments designed to organize people and resources. Even though people assume corporations are primarily economic instruments, the purposes of the corporation actually get defined and worked out differently in different countries and in different historical periods. Inherent in the corporate form itself is not a single purpose. Rather, it is up to members of society to determine the purposes of the corporation. That purpose may well evolve over time.

The 20th-century company was characterized by a separation of conceptualization and execution; a small group of people-the "brains"-developed a plan, and a large group of people-the hired "hands"-carried it out. That distinction is obsolete in the information economy.

The media have been mining human attention - the ultimate finite resource - for centuries. Traditionally, they have done so in two ways: charging for access and selling impressions. Charging for access is straightforward. It involves offering people something fun or valuable enough to do with their spare attention that they'll pay for it. Selling impressions involves carving out small slices of the attention that a media property draws and subletting them to sponsors...Between these standard points on the spectrum lie many mutant models.

In almost all other cases, there is no direct link between demand created in the traditional offline media and the ful-fillment of that demand. This structural disconnect has huge ramifications. Today's mass media are the world economy's dominant agents of demand generation (with the likely exception of our biological drives). They make us aware of goods and services, and tell us where to get them. They reign as our arbiters of taste, fashion, and relevance. Put simply, they make us want to buy. But when offline media are involved, demand cannot be fulfilled within the context of its creation. I may fall in love with the new Beastie Boys song on my way to work. Hearing it may get me primed and ready to buy the new Beastie Boys album. But before I can do that, I must shift contexts entirely. I have to wrap things up with the radio, then find my way to a record store, or go online and track down that CD.

Two things inevitably result from this gap. First, demand leaks from the system. However excited I am about the Beastie Boys this morning, it could be weeks before I'm next in a music store. By then I may only faintly recall that I was recently dying to buy something or other. As a result, I may walk out of the store with something that will thrill me less, or perhaps with nothing at all. Second, even very influential agents of demand generation have trouble getting a cut of the commerce flows they catalyze. A respected reviewer's nod could help bring a film millions in ticket revenue. But no slice of that pie will find its way to the reviewer, the publisher, or the producer.

Interactive and highly auditable, the Internet is the first mass medium to bridge the disconnect that has long existed between the two sides of the demand coin.

Either Do Something Very Beautiful or Very Useful
- former mission on the walls of Bell Labs (pre-divestiture)

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

A society that has no rules is abhorrent, but a society that only stays within the letter of the law is not much better.

You have to understand the doctrine to know when to break the rules.

We've long believed that when the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight. The only question is when.

There is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.

Creating value that can be captured is the essence of business.

My notion is that an organization is really a factory for producing new ideas and for linking those ideas with resources - human resources, financial resources, knowledge resources, infrastructure resources - in an effort to create value.