I’ve been thinking for some time about how businesses (ours and others) are going to measure success in the next decade, as I’m seeing increasing interest among my peers in corporate social responsibility, in addition to the traditional focus on returning value to shareholders. The coronavirus pandemic has forced a big pause in business as usual and presented an opportunity for us all to re-evaluate our companies’ priorities.
I believe that three key focus areas are going to guide how businesses define what success means for them the coming decade: Human Experience, Societal Value and Technology as a Multiplier.
Our place in the world as individuals, communities and societies is, appropriately in my judgment, becoming a top priority for businesses. No longer can a business just focus on building a product or delivering a single service. Businesses don’t operate in a vacuum; businesses are comprised of people, and like each of us as individuals, they are a part of the society in which they exist and operate, and on which they depend.
Even hardware manufacturers that have traditionally focused on individual customers are now offering value-added services to customer communities as part of their growth strategies, beyond the things like installation, training, consulting, and other services they’ve offered in the past.
Being singularly focused – on individual customers, individual products or individual business priorities, such as shareholder value – will not continue to be a sustainable model. Increasingly, companies must develop society-focused value propositions to attract and retain a vibrant business ecosystem, from employees and customers, to suppliers, local communities and the society at large.
The idea of something called Stakeholder Capitalism was all the rage at the World Economic Forum in Davos this past January. The organizers released a new manifesto, which says a company’s purpose should be to “engage all its stakeholders in shared and sustained value creation.”
This portends a big shift in how businesses think and behave.
In the past, businesses measured success based on maximizing shareholder value and profits. A lot of good has come from this, but it has also had unintended consequences, like sweatshops, pollution, and a host of other things detrimental to society and the environment.
We know better today, and we can’t continue to ignore the damage being done. In the next decade, it is a moral imperative that business owners put just as much focus on making a positive difference in the world as meeting shareholder demands.
We are entering a new era. The World Economic Forum calls it “Stakeholder Capitalism.” This means businesses serve a number of interested parties, not just Shareholders. This doesn’t feel quite right to me. It feels like it falls a little short. It seems to me that what is really happening is we are focusing on the impact to humanity. Businesses are going to incorporate a focus around their contribution to what is good for humanity as a whole. The name “Stakeholder Capitalism” has a cold, corporate feel to it and seems to miss the point.
I prefer to call it the era of Humanistic Capitalism. The future is going to be much more about human values and where they fit in the business world, and how businesses shape their values and cultures to integrate this human value focus. Mark Carney, the former governor of the Bank of England, proposed in an interview with the Economist the possibility that “the gulf between what markets value and what people value will close.”
When we started Spur, we knew we wanted to scale by maximizing the capabilities of high potential, though inexperienced, people and develop a leadership growth engine driven by an on-the-job mentorship program. This led us to thinking about Spur as a teaching hospital. Besides giving us a great model for developing people as amazing consultants, this approach has delivered genuine human experiences that are at the heart of what makes Spur great – our people and the relationships we foster. It’s the genuine human experiences we deliver that I think truly distinguishes us.
We have always been focused on teaching, learning, growing and helping others. It’s one of the things I love most about consulting. It’s the ah-ha moments when someone suddenly understands something new, or when a client tells you they couldn’t have achieved what they have without your help.
It is personally satisfying, because it is first and foremost a genuine human experience.
While I see this shift happening in business now, we can’t lose sight of the fact that shareholders are still important, just no longer the only priority.
I believe there are four value pillars that are going to drive wholistic business health in the coming years. In addition to shareholders, they are customers, employees and community involvement.
Shareholders will always be important because profits and capital make everything else in business possible. Capital in the bank means investment in the growth of the business and its employees. In the next 10 years, the focus on customers will be around a more satisfying total experience, not just selling them a product or service, but understanding the things that are important to them, related to a company's products or services, and also connected to other things that the customer values, that may or may not have anything specifically to do with what we’re selling. Technology is going to be a multiplier.
Today’s digitally-enabled business environment is far more complicated than it was 20 or 30 years ago when I was getting into the working world. We move faster, think bigger and work differently. Technology continues and will probably always continue to revolutionize how, where and in what way we work.
However, technology and what it can do today, and what it’s going to be capable of in the future, alarms some folks. The alarms are worth paying attention to. People have fears around losing their jobs, data security and machines taking over the world à la The Terminator or The Matrix.
Technology has always taken away jobs. But they tend to be jobs that are ok to give up. When cars took over the roadways, we no longer needed people to clean horse manure out of the streets. That was a job that was ok to lose. It was replaced by jobs that catered to keeping our new mode of transportation and the streets they ran on in good working condition, in the end a net gain and better use of human capability and ingenuity. It’s far more complicated to repair a motor than to tend to horses and their manure.
Technology and AI, in particular, are going to take away menial types of jobs and tasks. I believe this is necessary and appropriate. This will give rise to jobs that require our humanness, jobs that require empathy, compassion, judgement and strategy. The value of being human will fuel a rise in our businesses, economies, and societies.
Businesses are also going to have to figure out how to better attract and retain employees, and that no longer is just about pay and health benefits. The time when employees stayed with a company for their entire careers has long since passed. Millennials and members of Gen Z care far more about feeling connected to the soul of the company they work for. They are asking questions like “How does my company demonstrate its commitment to care for me as a whole person, not just a cog in a wheel?” or “Does my employer care about the world outside our walls, and how do we demonstrate that care in our actions?”
People are looking for meaning in their work and a company they can be proud of. Employees want to say, “my company cares about our customers, our employees, our communities and our environmental impact.” It’s a concern for the greater good and I love it! At Spur, as an example, we have a dynamic set of ERGs, driven by our employees, that lend regular support to communities within our firm as well as the larger community outside our four walls. It’s one of the things I am proudest of at our firm.
And that connection of companies to the greater good is going to be critical. Companies are going to have to demonstrate their authentic dedication to bettering the communities and world we live in in order to attract and retain employees and customers. They will have to demonstrate their social impact, environmental sustainability, and ethical governance. A shining example of this is right in our own backyard. Back in January, Microsoft announced a plan to be carbon negative by 2030, and, continuing to put their money where their mouth is, they recently announced the second step in their sustainability initiative, the development of a “Planetary Computer” to gain a deeper understanding of the complex interaction of the myriad factors that affect the health of the world that we all live in. As part of this second step, they’ve also announced their intention to protect more land than they use by 2025. Today, Microsoft’s footprint worldwide is about 11,000 acres, or roughly three quarters the size of Manhattan.
To win the 2020s, businesses will have to authentically demonstrate a tangible commitment to all four of the pillars – Shareholders, Customers, Employees and Societal value. Whether you call it Stakeholder Capitalism or Humanistic Capitalism doesn’t really matter. What does matter is that what it means to be a successful business is changing, and it’s changing for the good. Personally, I can’t imagine running a company at a more exciting and meaningful time!