"Are we in the meth business...or the money business?" - Jesse Pinkman, Breaking Bad
Like basically every other American male, I recently watched the Breaking Bad series on Netflix. I won't waste much time summarizing the plot, but, suffice to say, a former chemistry teacher, Walter White, decides to start cooking and selling crystal meth, which gets him wrapped up in a whole world of crime. What makes his business so successful is the fact that he is something of a chemical prodigy and is able to manufacture crystal meth at a purity level that is unsurpassed by any other producers. His focus on purity borders on obsession, even causing him to destroy entire batches due to small anomalies. At the end of the day, however, isn't the purpose of the business to make money by selling meth? Isn't the crystal meth market in Albuquerque such that 95% purity, at lower cost, would be more economical than 99.1% purity? Also, does this behavior sound like any other prominent (non-fictional) business men or women?
In fact, there are numerous CEOs that seem to view profitability as a secondary concern to making great products. Marissa Mayer, CEO at Yahoo, is renown for her meticulous attention to detail when it comes to design, even drawing the ire of some of her former reports: "I had a recent debate over whether a border should be 3, 4 or 5 pixels
wide, and was asked to prove my case. I can’t operate in an environment
like that." (from Digital Trends) Jeff Bezos, CEO at Amazon, runs a business that has very high revenues and very thin margins. He is almost notorious for making very long-term decisions seeking to further gain revenue and customer trust at the expense of short-term profitability: "Percentage margins are not one of the things we are seeking to optimize." (from Business Week). Of course, any modern discussion of product would be incomplete without mentioning Steve Jobs. The PC market was highly competitive and with very low margins. Essentially, computers had become commodities sold 100% based on specs such as storage, processor, RAM, etc. Steve Jobs realized that the only way for Apple to succeed was to differentiate based on design. The design of both the hardware and software products became paramount at Apple, though this required significantly more capital investment than churning out bland-looking computers (remember that only 14 years elapsed between the first Macintosh, in 1984, and the original iMac, which was released in 1998).
So what is the purpose of business? Is it to make great products or is it to make money off of products? Clearly, in a business such as crystal meth distribution, there are very few people in the business for the innate love of providing customers with a valuable service. But in businesses like organic grocery stores, fitness centers, or musical instrument lessons, the pendulum may swing more towards offering great products to customers rather than profit maximization. In the long-term, these two goals are not in conflict and are actually complimentary, but this is certainly not the case in the short term. As Walter White finds out, his obsession with perfect quality in his meth generates a great deal of attention in his business. Fortunately, in legal businesses, this will not lead to the continual attempted murders that Walt must face from his competitors and business partners.
So, at the end of the day, are you in business to make perfect products or to make money? Determining the balance might be the most important decision a company makes.
