Rethinking The Purpose of Modern Business

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In Rethinking
Marketing: From Marketing Products to Cultivating Customers
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
is no longer singing the “maximize shareholder value”

This is the age of consumer
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

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

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
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.”