Corporation.

Non-Profit.

Community.

Business.

Cause.

Platform.

Government.

The clearly defined borders that have traditionally enveloped the institutions above are blurring and we’re trying to make sense of it all. The music industry is still trying to figure out what happened. Broadcast media, newspapers, and publishing are in the midst of a dramatic reshuffling. Governments are trying to figure out what organizations like WikiLeaks really mean, and how to deal with them. Groupon and ZipCar and countless manifestations of various crowdsourcing and sharing models are flipping previously well defined economic models on their head. Chief Marketing Officers are coming to grips with the fact that their brand is truly in the hands of the market. I’ve seen projections of Facebook becoming the equivalent of its own nation in 5-7 years. There are at least two experiments of new countries; one is developing off the coast of California, and a there is a floating island making its way around Europe. Occupy Wall Street has morphed into a global distributed movement dissatisfied with the status quo.

We like definitions because they help us make sense of the world. But we’re seeing a rise in new constructs and entities and they don’t quite fit into the boxes and definitions that have helped us manage and make sense of the world around us for decades. Debates cascade and echo across multiple domains, all sounding strangely similar as leaders and industry analysts in their respective verticals try their best to accurately frame the issues upon us.

Is this simply evolution as it has always been? Is this a paradigm shift? Is this the modern version of the Dutch Tulips mania, or just a new flavor of new and improved snake oil?

Ultimately, IS THIS (whatever this is) WORTH OUR TIME AND ATTENTION?

As I watch and interact with people across different domains of my life, I see lots of different responses to what’s happening right now. Some are oblivious. Check that, many are oblivious. Some are panicked. Some don’t care. Some are focused on one narrow aspect of the bigger picture. Some are simply trying to put food on the table, pay their mortgage, and get their kids to soccer practice on time. Amongst the digerati, there are plenty waving pom-poms, singing social kumbaya, and congratulating themselves with digital ego metrics and accolades.

But, perhaps the most common scenario is that many of us have a hint of what’s happening, trying to make sense of newsbyte fragments flying past in the activity stream, but aren’t quite sure what to do, how to respond, or ultimately what any of this means for us, and the generations behind us.

What’s really going on?

Institutions are, in fact, being rewired before our very eyes. Industries and niches within them are being born, and/or being recast. While it’s easy (and important) to discuss the financial crisis of 2008, the de-leveraging of excessive debt, and high unemployment, set against the backdrop of a rapidly emerging environment of social, mobile, and cloud technologies, it’s equally or more important to recognize the additional and perhaps more foundational long terms shifts happening beneath the surface.

A team of folks at Deloitte Center for the Edge in their 2011 Shift Index highlight the sobering fact that:

“...asset profitability (Return On Assets) has shown a downward trend over the past four decades; a trend illustrating a steady decline in firm performance that not many have even noticed, much less investigated. Indeed, there continues to be a profound cognitive dissonance around this point: on one hand, we all acknowledge experiencing increasing stress as performance pressures mount; on the other hand, we seem unwilling to accept that all of our efforts continue to produce deteriorating results

…we expect, over time, that performance will improve as firms begin to figure out how to participate in and harness knowledge flows. Doing so will require significant institutional innovations, not just changes in practices, resulting in value creation through increasing returns performance improvement.”

NY Times Columnist Thomas L. Friedman stated something similar in 2010:

We are shifting from a world where the key source of strategic advantage was in protecting and extracting value from a given set of knowledge stocks — the sum total of what we know at any point in time, which is now depreciating at an accelerating paceinto a world in which the focus of value creation is effective participation in knowledge flows

Reconsidering what we thought we knew

Not only are institutions being redefined, but even age old terms like Employee, Profit, Currency, and Capital are being reconsidered, revised, and expanded.

The digitization of everything, increased connectedness, and media innovations, by which ideas are communicated, challenged, and iterated upon are changing the fabric of our world, and how it works. Some of these changes are incremental. Some are dramatically disruptive and will change our world in ways we can’t yet comprehend.

The factors above are also paving the way for new methods of measurement. Triple bottom line measurement continues to gain traction, where corporate success is measured not just on economic profit, but also on ecological and societal impact. The switch from accountability and focus on short term shareholder profit to long term stakeholder benefit will likely continue to also reshape the “mashup institutions” of our future. A new entity type, representative of these shifts, has recently been created. B Corporations use “the power of business to solve social and environmental problems”.

Answering the pressing questions

While senior executive teams wrestle with the present mandates and realities of operating in a slowly fading industrial economy, there are a number of questions that leaders should be asking to guide existing organizations, and/or create new relevant organizations for the future.

I’ve started the list below – what else would you add?

- Who are the stakeholders who we can and do impact (in addition to shareholders)?
– How do we (co-)create value for each stakeholder group?
– What value can we realize in exchange for the value “we” create?
– What are the (new) mechanics and measurements associated with these value exchange scenarios?
– How do we gain access to new information, human, and capital resources?
– How do we harness these new resources, in combination with our existing resources to further create value for our various stakeholder groups?
– How do we structure our organization to be more adaptive and responsive to market needs in (near) real time?
– How would we perform if we were to evaluate ourselves based on Triple Bottom Line Measurement?

I suspect that for some organizations, the end result of a deep series of questions may ultimately result in the strategic creation of a new hybrid organization that straddles the boundaries of industrial age institutions…and they won’t be alone on their journey. The scope of implications on the mid-market are not different than the enterprise or small businesses. The societal changes described and the pressing questions above are equally relevant to organizations of all sizes.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet.

Comments

  1. says

    Hmmm…

    This is quite interesting. I will second your perception in the change in the organization – what was a “company” back in they heydays of 2-3-4 years ago is no longer the same, nor what we consider today an “enterprise” will be in a few years. Technology, in addition to the points you noted, will take care of that, that’s for certain.

    Alas, just because there is a B-style corporation and organizations are being judged on societal and environmental aspects in addition to new-world-of-work business performance, does it mean that the traditional business and its ultimate goal (design-build-market-sell-service “something”) is going away?

    Is it no longer about making money the ultimate goal, not the shiny-object goal of the day — the ultimate goal, of business?

    are we past the DBMSS (see above) model of doing biz? Not asking if we are finding diff ways to do those steps, of course we are – we are always evolving — but has the core of what a business needs to accomplish changed?

    Interesting post, very nicely written – btw.

    • says

      Esteban, thank you for taking the time to read and comment.

      “Is it no longer about making money the ultimate goal, not the shiny-object goal of the day — the ultimate goal, of business?”

      Great question. Fundamental, in fact.

      I’m going to step way away from the current for just a moment. Thanks for taking the mental detour with me.

      I believe that the reason we are focused on money is because it is the only currency that is tangibly exchangeable at the moment. To your point, for most people (and organizations), it drives behavior. It’s how the world has worked for several hundred years. There’s a long millennia story here that meanders from barter to gold standards to fiat currency, and back and forth between them.

      With our transition to a more digital environment, however, I believe there is at least potential for alternative currencies to emerge. Currencies which may be earned for doing things that previously we’ve placed in the box of intangibles, rewarding behaviors outside the realm of the limits of monetary exchange.

      What’s the value of a referral? What’s the value of a mention? What’s the value of an introduction? What’s the value of saving someone’s life? What’s the value of…? All the stuff that happens in our life that happens outside of monetary exchange that we assign a personal value to… What if there was an alternate form (or multiple alternate forms) of measurement? If we can measure, and we can assign a value, and more and more of our lives are digital…then…

      Current ideas that come to mind are as follows: Quora seems to be experimenting with a system where a system of credits where you “earn credits when people vote up your answers or follow your questions”, and you can redeem those credits for promotion, asking questions, or asking for someone to answer. Wahooly is an early experiment where value provided to startups are exchanged for ownership. There is even something called the MetaCurrency project, where they seem to be exploring the limits of money as currency, and the alternatives that may exist. Facebook credits are interesting as they are currently heavily used in gaming, but I could see those behaviors extending into some real life activities as well.

      We’re early, no doubt, but I believe that if we take a step back and examine the current monetary system and how deeply dependent our institutions are, and how potentially broken and antiquated it is, the pathways are beginning to open to all sorts of alternative currencies to emerge that actually have the potential to assign proper value to value creating behavior that previously has been unmeasurable and unexchangeable.

      Applying these concepts to a business, as long as the business is creating value and earning currency (which may transcend the limits of current monetary currency), it will be in the business’ best interest to consider and do those things that increase its currency profitability.

      • says

        Hi Brian

        A genuinely interesting comment.

        Alternative currencies are not new. They have been used for centuries in response to a variety of pressures. Real or imaginary. Ultimately, a currency must form a stable basis for exchange, in the real world and in all others you may inhabit.

        Facebook may force gamers to use their own currency, Facebook Credits, but it does that so it can take a massive cut on any in-game transactions (rumoured to be around 30%). What a great business model. You have to use my currency and I take 30% of every transaction. Only a fool, someone who doesn’t understand monetary inflation or someone without an alternative would pay a 30% tax on each transaction. Or by implication, play games on Facebook. And let’s not even start to talk about the rapid devaluation of most alternative currencies. Something known as the schwundgeld problem.

        People prefer to pay in universal, tradable, stable currencies like the US Dollar, British Pound, Swiss Franc or Euro. They know that the purchasing power of a US Dollar is pretty similar wherever it is used as a form of payment (adjusted for PPP and exchange rates). Of course, if you don’t have any US Dollars, you can always try paying for your transactions in an alternative currency, whether that be turnips, time-banked hours or even Facebook Credits. Good luck with that at your local Walmart.

        Graham Hill
        Customer-centric Entrpreneur
        @grahamhill

  2. says

    Two very good questions from Graham Hill on Twitter:

    (1) Who says we have to deliver value to other stakeholders?

    Graham, as you know, the Board determines what should be done. But, really, ultimately the market does. Here’s an interesting article from this morning that highlights “energy efficiency, consumer concerns about environmental impacts and shifting investor perceptions of corporate transparency all playing a role”

    Trio Of Trends Drives Corporate Sustainability Efforts

    What’s the fastest growing industry? (according to recent LinkedIn analytics): Renewables & Environment

    What’s the most viral video of all time? The one just released by Invisible Children about Joseph Kony.

    Why have we all been talking about the social customer for the last few years? Because the balance of power is shifting to the crowd. And the crowd is increasingly more intelligent, more aware, more frustrated, more empowered, and acting in their collective interest.

    Deliver value to other stakeholders because they matter, and because they have the capability to hyper-reward or destroy you.

    (2) Is the triple bottom line really all that important?

    Again, the market will ultimately determine this. but there is increasing frustration with corporate entities. Awareness is building that, driven purely by corporate profits, there are significant detrimental impacts to people and natural resources for the corporate gain.

    Umair Haque makes a case in his book that the cost of a $3 cheeseburger is actually close to $30.

    “To be able to price that burger at $3 instead of $30 requires that we essentially borrow $27 in value from the environment, society and future generations… ”

    Obviously government institutions, environmental watchdogs, and the populace at large will continue to need to push the envelope if these things are really going to need to be addressed. However, the trajectory seems to be moving that way, and technology is making the capability to measure and account for triple bottom line impact easier than ever before.

    • says

      Hi Brian

      Interesting comments. But they raise more questions than they answer.

      STAKEHOLDER CAPITALISM

      I read your answer in response to my question about why should we deliver value to other stakeholders. But you didn’t answer the question; Why SHOULD we care about anybody other than shareholders, customers and partners.

      Sure, most people care about the environment, about injustice and even about society, but they care much more about themselves, and their immediate friends and family. And that drives most of their purchasing behaviour. That doesn’t mean they won’t selectively buy from ‘good’ companies, but not if it really hurts them in their wallet.

      Companies would do well to just focus on shareholders, customers and partners first and on other groups that influence these three groups directly second. And the rest? That’s not the companies’ problem. So they should leave it to others better qualified to deal with it, like governments or international institutions.

      THE TRIPLE BOTTOM LINE

      This is just an expansion on the stakeholder capitalism issue.

      Companies have to compete in global markets, often with companies in countries that have distinct cost advantages. The triple bottom line is a nice idea, but what happens if pandering to it puts you at a distinct disadvantage to your number one Chinese competitor? Or puts you out of business? Who is going to buy a burger for $30? Not me. And I suggest, not you either.

      All the discussion about other stakeholders, the environment and other externalities is all well and good. But companies don’t need to put their money it delivers the best returns for shareholders, customers and partners. Instead, they should invest it in understanding what influences the creation of value for the ‘golden three’ and what they can do to increase it. Everything else is incidental.

      The business of business is business. Or didn’t you get the memo?

      Graham Hill
      Customer-centric Entrpreneur
      @grahamhill

Trackbacks

  1. [...] Orange County startup, Treehouse Tykes, a finalist in the Internet E-Commerce category blends a few growing trends together: flash sales, and donations to social good causes and organizations with aims at improving the communities of their community members. It leverages a growing and innovative model to other fast growing Orange County startups and hybrid organizations Sevenly, 31 Bits, Krochet Kids, and International Princess Project (Disclaimer: I am on the board of IPP). All provide more evident clues that the trend of hybrid organizations is growing as many of our traditional institutions are being rewired. [...]

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