Organisation

Future of Big Business

The future Corporations will be shape-shifters

A quarter of a century ago IBM was at the pinnacle of success, riding on their success of practically inventing general-purpose computing for business. They boasted of having helped put a man on the moon and counted many Nobel Laureates among their researchers. This evidently changed in 1993 when IBM posted $8 billion loss, which was the biggest in the history of corporate America. IBM had missed a number of key technology shifts and was being abandoned by customers for faster, more nimble competitors. One major business publication labelled IBM as a dinosaur while another declared that IBM’s era had passed.

Nowadays, it has become commonplace to see companies beating their competion hands down today and forced out of business tomorrow. The best companies of the future will become shape-shifters, “constantly restructuring themselves to adapt to changing circumstances and new opportunities.” Such companies already exist, including Google and Wikipedia. The shape shifters will be nimble to adapt and change one or all their all attributes–products, services, finances, physical plant, markets, customers, tactical and strategic goals at lightning speed, yet retain something enduring at their core. For instance, Google’s enduring value is to focus on core user and Wikipedia’s core value is freedom and accessibility.

IBM’s resurgence was made possible by their shift from commoditised IT business to a more balanced mix of high-value offerings of services and software businesses and IT commodity businesses. It also meant letting go of their low-growth, low-margin product lines and technologies like memory chips, technology components, printers, displays and personal computers. This was easier said than done, as those were technologies, products and even whole markets that IBM had invented and developed.

Apple was another darling of the computer business who was struggling to stay alive in the 1990s. It decided to recreate itself into a media distribution company, and went on to build iTunes, iPod and iPhone. They’ve redefined the music, movie and broader entertainment industry while also breathing new life into its core computer business.

Amazon was just one among many startups of the dotcom era trying to elevate itself above the clutter of web-based retailers. It rediscovered its roots as a distribution company and started selling processing power too giving birth to the cloud computing business. In turn, Amazon Web Services (AWS) has redefined the IT industry.

Our perspective

The Darwinian explanation to significance of adaptation isnot limited to species only. The principle of ‘Adapt or Perish’ is applicable to big businesses too. The 21st century already has a handful of examples to showcase. Google and Amazon are the leading examples of companies, which started with a niche offering and developed a full suite of web services and tools sensing the requirement of a changing technological ecosystem.

It will also be interesting to see how Nokia, a 150 year old company with a long history of successful change and innovation, failed to respond to change after a path-breaking start in mobility (and it seems to be readying itself for another run in mobility). From its humble beginning with one paper mill in 1865, Nokia has participated in many sectors over time: cables, paper products, tires, rubber boots, consumer and industrial electronics, plastics, chemicals, telecommunications infrastructure and more. Most recently, Nokia has been best known for its revolutionary wireless communication technologies, which have connected billions of people through networks and mobile phones. Nokia, considered the world’s 5th valuable company, was not nimble enough to adapt to shifts in markets and technologies and lost its dominant position in mobile phones to others before selling it out to Microsoft in 2013.

Corporations will succeed by solving social problems

Most organisations do not look far into the future as the pace of change for business is too rapid. Yet, some risks and opportunities are best invested now while full range of options and actions are more feasible at the corporate level. The longer the companies wait, the narrower the choices become due to increasing scale of investment as well as requisite experience and maturity.

The most inspiring and promising opportunity is to engage organisations in solving challenging global issues. Never before in history have corporations been so large, so wealthy, so powerful and so rich in human creativity and endeavour, which means they are uniquely placed, not just to build their own resilience and prosper, but also to leverage their core capabilities to address some of the world’s toughest social and environmental problems.

London Business School professor, Lynda Gratton says, “We’re seeing a real surge in interest in what corporations can do to solve big global problems — something that hints at a fundamental shift in the relationship between big businesses and the societies they inhabit.”

“An intersection is coming where society will expect corporations to fill the void in the face of government cuts, and, likewise, corporations will expect their societal influence to increase as their social capital becomes the force of change in communities, countries and even entire global industries,” said Jeffrey Puritt, president of TELUS International, a BPO reknowned for its CSR initiatives.

“More or less all business started out with a social purpose of some kind, so the future may look more like a rediscovery of the social purpose of business,” said Paul Bakus, president of corporate affairs at Nestlé. “What’s been lost in recent decades is the long term perspective, values-based behaviours grounded in respect, and interconnectivity between the needs of society and the innovative dynamism of business.”

Companies are realising that they can actively solve social problems while simultaneously delivering tangible bottom line results. This model goes beyond corporate social responsibility targets and aligning philanthropy with business objectives but requires synthesising social values and financial goals into corporate strategy.

When GE pins its growth on new energy saving products, Novartis brings medicine to millions of new customers in rural Indian villages, Walmart commits to eliminating waste and purchasing only sustainably caught fish, Pearson decides to test the efficacy of their educational products, and Nestle reduces the fat, salt and sugar content while increasing the nutritional value of their food products, these companies aren’t acting on good intentions alone. They are seeing bottom line returns that reward their shareholders from launching new products and markets, increasing productivity in their value chains, and strengthening the industry clusters in regions where they operate.

The new imperative for business leaders will be to embrace the idea that the viability of their businesses depends on solving the world’s most pressing societal issues.

Our perspective

Let us first agree on the common ground – governments are reneging on welfare state commitments for an increasingly larger proportion of beneficiaries (or thinning of benefits or casting the net too wide). In the developing world, it is even worse – more and taxes and levies despite very poor quality government services to the tax paying population, e.g. more roads are tolled by the day, surcharges for airports/parking/education/pollution/roads/health, etc are levied every fiscal. Somebody will have to fill the gap, and who better than the unique wealth-creating social entities called businesses!

If the idea of ‘social enterprises’ befuddled you a decade ago, then surely reading ‘Social stock exchanges’ might make you think ‘social’ and ‘stock exchanges’ occurring together as an erratum. Big businesses and capitalism in general have been associated with singular fixation on profit. However, it is about to change with performance of businesses to be measured by triumvirate of 3Ps – people, planet and profit. Corporations of the future will not live by the goal of maximising shareholder’s value but more egalitarian goal of maximising all stakeholders value, including mother earth, the atmosphere, people, animals and plants.

We already have a few social stock exchanges emerging in the past few years (Social Stock exchange in the UK, Social Venture Conexion in Canada, Impact Exchange in Singapore) and more will spring up in time to come, in almost every country. Corporations of the future will not engage in corporate social responsibility activities as a separate endeavour as the worth of these corporations will be measured solely by social impact. For instance, corporates will have to think about employing people and not just totally robotize themselves. There is need for worthy jobs for the human species to survive and thrive.

And neither will philanthropic billionaires be in the news for donating billions because, as in the words of Ricardo Semler, Chairman of Semco Partners, a Brazilian conglomerate best known for industrial democracy, “ …. well, if you’re giving back, you took too much.”

All it implies is that in the near future social enterprise will not be special category ‘business’, all businesses will have to work like social enterprises. In case you didn’t read much into it, we may re-emphasise that everything about businesses is set to change – planning, funding, manpower recruitment and training, compensation strategies, pricing, stock markets, etc.

Indeed, as only a peaceful and broadly prosperous society offers market for growth of businesses, likewise only a ‘business-like’ approach to social problems can solve them on a scale and in a sustainable way. Obviously, big businesses will see a symbiotic relationship with social challenges.

Gazing through the crystal ball

  1. Big businesses are no more ‘safe havens’ to seek jobs and build careers. All careers will require you to adopt and re adopt in ways uncomfortable for an overwhelming majority of us. Prepare your lifestyle to be adept at change.
  2. The pace of change at ‘Big business’ is also going to be ruthless as economic cycles are shortening and globally driven, i.e beyond any control of individual big businesses. Thus, many a times, business shocks can come fatally unexpectedly. One must be ready for big surprises and a run on a treadmill at all times to stay put.
  3. Big businesses will increasingly secure a network of small businesses to carry out their end to end business processes. Many of these small businesses will typically consist of former employees who would independently perform business function for the big corporation. The ‘employee status’ will be eventually lost. Prepare to be intrapreneur/entrepreneur; earn your salary and create your wealth too.
  4. Salary and perks for the vast majority of ‘employee stakeholders’ will get rationalised to better fit with the social and environmental agenda investments. Going forward, the salary difference among levels of employees will also narrow down.
  5. Business fundamentals are undergoing tectonic shift but the overwhelming majority of us continuing to seek career in big corporates aren’t really ready to accept these changes (and plan life and career choices accordingly). It’s always better to take the bitter pill while it’s still time.

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