Wednesday, June 24, 2015

Capitalism and the New Paradigm: A Presentation and an Invitation.

Almost all posts at this blog site address the concept of organizational excellence - how to get there and how to stay there. Previous posts have approached the subject from different perspectives, from different parts of the room. This post summarizes the concept, presents the key elements and connects them, resulting in a harmonized integrated paradigm - one that is actionable.
Others have tried and are trying. The last 45 - 50 years have been grounded in the "profit, the more the better "paradigm and the World is the worse for it.
This new paradigm requires only courageous leaders and all people to have the hearts of servants to take it, own it and put it into action.
My bet is that there is at least one corporate leader out there, perhaps more, who will rise to the opportunity. We shall see. Even top academicians, when addressing this subject and knowing that the paradigm offered here is the way to move forward are still held hostage by the profit paradigm. It is almost a viral condition that in a nutshell rests on this old saying: "we have always done it this way," or this one, "changing cultures takes years, let's take baby steps first." Oh the tragedy, the local and global opportunity costs that are caused by this timidity.
This long post addresses the metaphysical and philosophical aspects of the concept as well as the practical and wrap-around existential aspects. We cover the waterfront.
So, please read, think and respond. You will be glad you did.                      
A Note: This article presents a concept and approach to pursuit of long term value creation and organizational excellence. The concept presented here is original; that is the dots are all connected in this way for the first time here – as an integrated paradigm. Some ideas and research results in the article are taken from the work of others, though, as presented in books, articles and the like. The sources are available upon request.
 Why Is An Idea Like This Relevant? 
1. Every person and every organization should do their very best to provide maximum value to others over their lifetime. Why? A. Because it is the right thing to do and B. Because it is in their own self-interest.
2.    How and why to do it are ultimate questions. Answers over the centuries have been many. For corporations, especially publicly held for profit corporations, the answers to the “how” and “why” questions have been to earn a profit, the more the better, with capitalism as the economic system of highest choice. That is, provide value to others in order to make a profit for me.
3.    This profit answer has caused a falling short, a sub-optimization, a lower than A+ grade – even an F grade in some cases – in local and global economies and the global aggregate economy.
4.    The idea offered here provides the description of the paradigm that can bring each and all to that A+ grade over the long term….and national sovereignties will be helped not harmed under this 21st century (and beyond) new paradigm. And, profit (value) will be maximized as an outcome, not as a purpose.This article uses the word “paradigm” so much that a definition or description of what we mean by paradigm might be helpful:
 Paradigm – A theory or a group of ideas about how something should be done, made or thought about….a model or pattern for something that may be copied….SYNONYMS – mold, standard, ideal, paragon, touchstone.
The following idea about capitalism qualifies as a new theory or an ideal that is revolutionary. Many proposals have been offered, especially over the last 20+ years, about how to improve capitalism.  Bad leadership of some companies that was on display in the 1990s and into the turn of the century and the near meltdown of the U.S. and even global economies in 2007-'08 helped stimulate these new ideas about improving capitalism, but some were offered even earlier.
We suggest our idea as another and even the best paradigm change for how to raise capitalism to its highest level, how to employ capitalism as the best catalyst for both wealth creation and total societal well-being over the long run. And, we believe capitalism flourishes most when connected to a legitimate democratic political system (more on that at another time).
We only summarize our idea here. Making it work takes detailed knowledge of and enthusiastic behavior about acting this description out. It will be easier done than said, though, which is the elegant blessing – it fits the best of human nature.

First, The Existing Paradigm:
 It can fairly be said that the existing dominant concept (paradigm) in capitalist economies is that it is about profit, the more the better.
In this way, this argument goes, corporations will make their best contribution to society. This concept can be said to have been most forcefully and successfully articulated by Professor Milton Friedman of the University of Chicago. It has been followed for more than 40 years. Wall Street is enchanted with it.
 The value created over these 40+ years and even over the last two centuries has unfortunately masked the fact that capitalist economies – even though they trump all other economic systems - have been chronically underachieving compared to their highest potential.
Let’s be perfectly clear: The U.S. economy and all economies for that matter are and have been underachievers when compared to the potential this new paradigm unveils, no matter how good they have done over the years. Sad but true, the following paradigm or mindfulness and behavior guide should not be new – but it is.

Second, The Proposed New Paradigm – the essential mindset for capitalism going forward:
 Self-interest value maximization is a direct function of optimization of the value provided by an organization (and a person) to each of that organization's (and person’s) primary stakeholder groups – each relative to the others.
Here is the same idea expressed as a formula:
IVM= f (S1VO, S2VO, …SNVO).

That is, a business will maximize its own long-term value when it devotes its time, talent and treasure to optimizing the value it provides to each of its primary stakeholder groups.

What is meant by primary stakeholder groups?
A primary stakeholder group is a person or group affected by an organization or person. Taken to an irrational or illogical extreme, every action of every organization or person affects every other person and organization. This description always strikes me as one used by those who might want to avoid the real meaning and implications of the stakeholder concept.
I prefer thinking about primary stakeholder groups as those affected by a person or organization in a way that is significant, one that really matters. So, groups and persons are primary stakeholders of any other group or person if they are significantly affected by them over their lives.
 Most companies (organizations) and persons have a truly finite number of primary stakeholder groups -about six for almost every organization and person:
      1. The Primary Stakeholder Groups of Any Organization (or Person) are:
a. Customers, b. Employees, c. Investors, d. Suppliers, e. Communities in which it has a presence and f. Society at large (the general public interest).
      2. Each of these groups has four or five things they value most, and the following listings are solidly representative, though improvable (have at it :-)):
           a. Customers – 1. High quality, 2. Reasonable prices, 3. Kindness, 4. Companies that treat their employees well and 5. Companies that are good citizens.
           b. Employees -1. Opportunity, 2. Fair compensation, 3. Security, 4. Challenge to achieve as individuals and teams/groups and 5. Company conducts itself as a good neighbor, a good citizen.
           c. Investors 1. Best value creation from their funds over the long term, 2. Positive company participation in communities, 3. Great company treatment of employees, 4. Great company standing in society (loved), 5. Gold standard leadership in the company and 6. Full participation in society.
           d. Communities in which it has a presence – 1. Good citizen in local communities, 2. Long term participative partner in community well-being, 3. Great company treatment of its employees, 4. Full company involvement in environmental and societal stewardship for the long term and 5. Openness.
            e. Suppliers – 1. Fair dealing, 2. Long term partnership opportunity mutually earned, 3. Great treatment of employees, 4. Positive citizenship conduct of company and 5. Enjoyable to work with.
             f. Society (The Public Interest) – 1. Great local and global citizen, participative and engaged, 2. Great social and environmental steward, long term, 3. Willing partner and participant with others (including governments) in serving the public interest and 4. Excellent treatment of its employees, suppliers and neighbors.
An outcome of this paradigm, in fact a necessary outcome, will be the maximization of profit – value creation over the long term - measured in appropriate financial terms as well as the other value measures a company holds dear.This is truly the breakthrough "big idea."

Is that all there is to it?

No. There are a few additional things that are an essential part of this mindset. Here is the additional group of ideas that are each part of this new mindset – this new paradigm. They are:
1. The basic unalienable rights of people around the world are treasured:  Life, Liberty, the Pursuit of Happiness and Property (one’s own aptitudes about which one is proud and excellent at – loves to act out),
 2. Those virtues that are shared as precious by all peoples around the world:
(a). Wisdom and Knowledge – Curiosity, Love of Learning, Judgment, Ingenuity, Social Intelligence and Perspective
 (b).Courage – Valor, Perseverance and Integrity.
 (c).Humanity and Love – Kindness and Loving.
(d).Justice – Citizenship, Fairness and Leadership.
(e).Temperance – Self-control, Prudence and Humility.
(f).Transcendence – Appreciation of Beauty, Gratitude, Hope, Spirituality, Forgiveness, Humor, and Zest.
3. Gold standard leadership characteristics are employed  and lived:
(a). Establish Direction – Vision.
(b). Humility and Professional Will – Modest and Fearless.
(c.). Inclusive, Enabling, Inspirational, a Listener.
(d). Stakeholder Focused – in a Maniacally Profound Way.
(e). Heart of a Servant.
(d). Ethical, Courageous and Just, and
(f). Fun.

 4. Gold standard cultural characteristics are in place and second nature:
(a). Adaptive, with a Core Ideology (Purpose & Values).
(b). Risk taking, trusting, proactive.
(c). One in which all are heard and the truth is heard.
(d). Reflective, humble, anticipatory & involved.
(e). Rational & respectful, a conscientious mindset.
(f). Quietly confident, unassuming while maniacally pursuing the organization’s vision & mission with prudence, perseverance, humor and zest.
(g). Disciplined People, Thoughts and Actions in a Fun and Dynamic Environment.
(h). Open, Supportive and Enthusiastic.
(i). Happy, in a Stakeholder-Centered (H3) Way, and
(j). Fun.
          5. The normal blocking and tackling of organizations will be robustly carried out because all will be in their correct ‘seats on the bus’ - Effectiveness, Efficiency, Productivity, Creativity and Innovation, AND
6. Ethical behavior always.

Multi-Year Planning And Doing: The Main Action Vehicle For Our Paradigm.
Strategic plans are often spoken of in a negative way. The criticisms include being too slow, irrelevant before the ink is dry on the document, esoteric and a waste of time. They are characterized as being (and often are) placed on a shelf collecting dust. It has also been said that “plans are worthless but planning is essential.”
The truth is quite the contrary. Plans and adaptive planning go hand in glove. In fact, actionable multi-year adaptive, adaptable plans, or playbooks, are the essential vehicle through which this new mindset-based paradigm happens. The actionable plan is the dynamic vehicle through which it all springs to life – and continues to be vibrant. Again, let’s be clear: An adaptable, adaptive plan is the very definition of planning, which in turn keeps us on the maximum value creation trajectory over time, and it fulfills, it is fun.

A Final Thought.
All too often over the years, the easy way out is to do pretty good - to beat the competition. Excellence is therefore too often not pursued. Of course breakthrough innovations have been made and do happen, but mostly they precede organizational behavior and flow from the passion of true innovators before the fact.  The blissfully good news is that the full life well-lived – the happy life - and the highest value creation for each and all organizations flows from, and only from, adopting and acting out this paradigm, the 21st century essential dominant mindset presented here. Innovation keeps happening because it is fulfilling, it is fun and it is servant-based. And, this applies to life at work, at home and at leisure – to all aspects of life.

Embracing and adopting this paradigm will take a little courage and a true long term picture of the possible for the future. Only a handful of companies appear to understand this concept now, as seen through their behavior.
Well intentioned and respected academics and corporate leaders have come along with ideas that purport to offer something like this new paradigm, but they all fall short. Most of them appear to be unable to let go of the profit-centered (and short term, inward-focused and win-lose) old paradigm. Adam Smith would be absolutely disgusted with this profit-centrism, this old mindset. Conversely, he would be absolutely enthused with this new paradigm. The Dalai Lama would too.
Such labels as disruptive, transformational, seminal, revolutionary and paradigm shift/change will be most completely satisfied when our idea here becomes the organic and universal way of behaving by all corporations – all organizations.
And, Adam Smith would rejoice.

And, the world will be a better place – for all.

Wednesday, February 25, 2015

How Businesses and All Organizations Can Best Create Maximum Value In The Future.

Sometimes it is worthwhile to step back, look at how business has been conducted over the years, look at the far future horizon and think about how to change the conduct of business now so that the value being created for all in that future time is as great as possible.
This article suggests a wide-angle lense approach to creating that future. It also says narrow-minded, short term and inward-focused business conduct should be abandoned - even though some good value has been created over the years. It is yesterday's best paradigm, and we offer the best future way of thinking and behaving - the new paradigm.
This article also offers a comment about how some leading thinkers are currently addressing value creation. The way they are advising the local and global business world, while indeed understandable, is prolonging this "yesterday's paradigm" problem.
The paradigm problem is that profit - the more the better - has been taught and accepted by most for years as the primary or only purpose of business.
 The late Professor Milton Friedman of the University of Chicago, and others, presented this idea in the 1960s. Professor Friedman himself presented it famously in the New York Times in September, 1970 and continued to preach it up to the turn of the century. This profit fixation has been taught in business schools and, even though some companies and some globally known CEOs say that profit as a purpose is dumb, their behavior says just the opposite. 
And, the investment banking and Wall Street community largely still clings to this profit-focused paradigm flaw.
Profit-Focused Paradigm Flaw?
Precisely. Even in these times of concepts like sustainability, conscious capitalism, creating shared value and other proposals, bringing value to other primary stakeholders (customers of course, and employees, suppliers, communities where the business is and the general public interest) is still used as means to an end – the end of creating value only for shareholders.
As long as boards and leaders use outward and long term focus as instrumental, they will fail the shareholders (and the organization’s other primary stakeholder groups) over the long run, by fostering creation of less value than the companies have the potential to create.
What Is The Answer?
The answer is to adopt a mindset (a new paradigm) that is: a. Dominantly long term, (board room to boiler room), b. Primary stakeholder-focused (customers, employees, investors, suppliers, communities in which the companies have a presence and the general public interest), and c. Value-optimizing for each primary stakeholder group, relative to each of the others.
More detail about this essential 21st century dominant mindset can be found in previous posts at this site . Importantly here though, we can summarize:
The highest nature of people, applied to their role as markets, is such that where and when they see companies conducting themselves in accordance with this new paradigm, embracing the six or seven globally ubiquitous virtues people share (peoples from all around the world), treasuring the three or four universally possessed unalienable rights of people and fully acting out their fiduciary responsibilities toward each of their primary stakeholder groups (not just their shareholders), people (markets) will virtually always vote with their hearts, minds and feet and move toward, lean into and buy from such companies.
Transformative Concepts, Seminal Concepts and Disruptive Concepts or Technologies.
For a concept to be transformative or seminal - or disruptive - on any subject or area of life in which an existing paradigm has been dominant, and in this case almost idolized, for so long, it must break away from the core of the old paradigm – in this case profit-centrism and short-termism – and present an actionable and entirely new paradigm. 
We do that here. To understand it fully, to flesh out the summary above please go to the two previous posts at this site - October 20, 2014 and July 15, 2014.
 All companies and organizations, including governments, that do change, embrace and make this new paradigm their own will no longer fall short (sub-optimize) but rather will optimize. And, the long term result will include, as an outcome, creation of the highest level of wealth over the long run – for society and themselves. This is what Adam Smith was trying to teach 250 years ago. Very few have made him proud since, but this new paradigm in action would make him proud.
This note has not discussed the string of “my bads” of the last 20 plus years, like the 2007-’08 great recession, the Enron behavior, etc., because we need not. Rather, we offer the going forward mindset (paradigm) that will make the likelihood of such “my bads” go toward zero in the future.
Agree or disagree? Call us and we can wrestle it to the ground :-).