The Two Entrepreneurial Functions

Any business enterprise has two basic functions because its purpose is to create a customer and they are marketing and innovation. They are the entrepreneurial functions.

Marketing is a distinguished 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. A Church or an Army or a School or a State does not do any marketing of a product or service. Any organization that fulfils itself through marketing a product or a service is business. Any organization in which marketing is either absent or not relevant is not a business and should never be run as if it were one.

The first man to see marketing clearly as the unique and central function of the business enterprise and the creation of a customer as the specific job of management was Cyrus McCormick. The history books mention only that he invented a mechanical harvester. But he also invented the basic tools of modern marketing: marketing research and market analysis, the concept of market standing, modern pricing policies, the modern service salesman parts and service supply to the customers and installment credit. He is truly the father of business management. And he had done all this by 1850. It was not until fifty years later that he was widely imitated even in his own country.

The economic revolution of the American economy since 1900 has in large part been a marketing revolution caused by the assumption of responsibility for creative, aggressive, pioneering marketing by American management. Fifty years ago, the typical attitude of the American businessman toward marketing was still: The sales department will sell whatever the plant produces. Today it is increasingly the job of a business to produce what the market needs. But economists and government officials are just beginning to understand this.

In Europe there was no understanding that marketing is the specific business function until a few decades ago which was a major reason for the stagnation of the European economies at that time. Reaching full realization of the importance of marketing requires overcoming a deep rooted social prejudice against “selling” as ignoble and parasitical and in favor of “production” as gentlemanly with its resultant theoretical fallacy of considering production as the main and determining functions of a business.

A good example of this historical attitude toward marketing are those big Italian companies which have no domestic sales managers even though the home market accounts for 70% of their business.