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 :-).