Rethinking The Purpose of Modern Business

In Rethinking Marketing: From Marketing Products to Cultivating Customers my co-authors and I wrote about how companies must make products and brands subservient to long-term customer relationships.  We also made the point that for ongoing customer value innovation to become a part of the DNA of the organization, it is important that the company move from an internally focused concept of customer value creation, to a more open, collaborative model of co-creating value with customers and other key stakeholders.

In much the same way, I'm more convinced than ever that we must rethink the purpose of modern businesses.  As the global financial crisis has so bluntly shown us, "maximizing shareholder value" is no longer a sustainable purpose for business.  We doubt it ever was.  But back then, Jack Welch was preaching the gospel and companies were lapping it up.  Interestingly, even Jack Welch is no longer singing the "maximize shareholder value" song. This is the age of consumer capitalism and the triple bottom line.  The new gospel is people, planet, and then profits.  Near term thinking that just does good for the company without consideration for the environment, or the social social systems that a company operates in, is not a responsible option!    

So where should we look for new role models? 

Across the border to the north, and across the Atlantic to the sub-continent.

 

Recently I read an article describing Ratan Tata's visit to Canada to deliver the first Thomas Bata Lecture on Responsible Capitalism.

The late Thomas Bata and Ratan Tata, and their corporations have a lot in common.  They epitomize socially-conscious leadership. 

The Tata story has been well covered in this article, which sums up the vision as follows:

Since its founding in 1868, Tata has operated on the premise that a company thrives on social capital (the value created from investing in good community and human relationships) in the same way that it relies on hard assets for sustainable growth. With every generation, Tata's executives and managers say, they have nurtured and improved their capability for "stakeholder management": basing investments and operating decisions on the needs and interests of all who will be affected. For Tata, this means shareholders, employees, customers, and the people of the countries where Tata operates -- historically India, but potentially anywhere.

These are not platitudes. Tata has won the goodwill of the people not by talk, but through action. Key decisions are based on the impact on society.  The company's humanitarian actions, for both employees and non-employees, following the dastardly November 2008 terrorist attacks on the Taj hotel are well documented, and have won raging applause from even the most anodized critics of business. 

People first, business second.  Both Bata and Tata teach us that it is possible to be a global powerhouse without sacrificing one's soul.  It is not necessary to separate social good from business well being, as so many companies do.

Dartmouth's Professor Vijay Govindarajan explains the Tata Nano as a social innovation:

Through his actions in the Tata Nano project, Ratan Tata has demonstrated that capitalism can have a soul--the profit mission and the social mission do not conflict and can, in fact, be pursued simultaneously. 

Increasingly, we are going to see businesses doing well by doing good, a philosophy that guides thinking and decision making at Unilever. In a recent discussion, Harish Manwani - President Asia, Africa, Eastern and Central European Regions at Unilever - shared that for Unilever value co-creation was not just collaborating with customers, it is collaborating with the interlinked ecosystems that the company operates in.  According to him, this passion and commitment to doing well by doing good, is the reason why the Dow Jones Sustainability Index has rated Unilever as the best company in its category for ten years running. I intend featuring more of the Unilever social responsibility story in my forthcoming blogs.

Social good and company well being can co-exist, as the examples of Bata, Tata, and Unilever demonstrate.  They should not be divorced from each other any longer. The people and the social systems they live in are both customers of the company.  The paramount purpose of modern businesses should be more than just "Do No Harm."  Rather it must be "Do Long Term Good for All."