We have to think about new narratives when it comes to making business in the future. Business models, structures, stakeholder etc. will all change – so need the businesses.
Our current business narratives are built on top of narratives that have been around for many centuries. We teach the way of “doing business” in universities and even TV, News, etc. emphasize in many ways the old narrative. But what is changing? Where is Future Business heading? Is the old narrative the best way to go?
Another interesting read: Laying the foundations to our future – Let’s learn and recreate
When we see some news coverage, when we see public outrage on exports/import of goods, when we see so-called “shitstorms” when companies are dealing with public outrage, then we already see that the world is not as it was told in the last decade. Something is changing.
So first look at what a narrative is, then what the current narratives are and why these basic assumptions might not work for the coming century.
First – What is a Narrative?
First of all, we all need to understand what a narrative is. In the end, it is the perception of the system how it should be. So e.g. not so long time ago there was the narrative that women shouldn’t be voting, working, etc. and just stay at home as this was the perceived opinion back then. Now the times have changed and we also changed the narrative that surrounds women. Now they are independent, well educated, politically motivated and also fathers stay at home.
These narratives also can be found in other aspects of our life, we automatically assume them as “It has always been like this” and we all agree as a society on these principles.
But now for companies, the basic narratives are changing and I will show you how.
Understanding the old business narratives
To really understand what is changing, we need to elaborate on the current situation. The current business model was built in the era of industrialization and mass factoring. Basic principles stayed the same for quite a long time as everything was growing and the economy was thriving.
So, there are some of the basic perceptions of how companies are acting and what comes to their mind in the “old way”
- The most important goal for a business is economics – Profits and making money
- Shareholders are the only group where the business has responsibilities to
- External factors are irrelevant – unlimited resources is the base for all actions
- Capitalism only works for money – people are self-optimizing and only see monetary gains as the most important goal
- To achieve this it is ok to cut corners, cheat or “optimize”
- Believe that competitiveness will lead to the greatest good due to the “invisible hand”
Of course, this list is not exhaustive and we can add some more points to it, but I will limit it here to the 6 assumptions as they see the most relevant for me.
Future Business – Changing the old narrative
As mentioned before, the news coverage around Fridays for Future, ecological impact, social responsibility, and other topics are surging and putting most of the business narratives to an end or even endangering the companies who still follow them.
But let’s go into it one by one to understand what is changing and why there needs to be a different way of doing business in the future.
1. Business is not just about economics
We tend to see a company only as a money-printing machine. If it is not generating enough money, the basic assumptions are not met. The sole purpose of a company nowadays is to ensure to maximize profits for shareholders.
But reality shows that businesses have a broad spectrum of responsibilities and a broad spectrum of stakeholders they are responsible for. So businesses are a big part of our society and not isolated. Certainly, it is important to be profitable and generate money. But purpose and stakeholder management will be way more important factors than previously believed.
2. Business and ethics are not separate
As shown before, it gets harder to draw the lines where businesses are starting and where they are ending. The almost endless connections to the outer world give them also a sense of ethics.
We tended to see business ethics as a counterpart to business management. Ethics were there to cut profits and weaken the company with morals. But with Generation Y and Z emerging, we see that business ethics is a big part of a successful value proposition of a company. But not only for greenwashing and making a good PR-story.
Employees are looking for a company with ethics to work for, customers want ethically produced services and goods and even the suppliers are looking into ethical companies.
3. Humans are not solely driven by money incentives
I already mentioned it in the 2nd point of this list. People tend to strive more for a purpose in life, a real meaning they can relate to and for which they stand up and go the extra mile. Incentivizing systems in the old times only dealt with the “carrot” and the “stick” which lead to underperforming employees and a solely KPI drove focus. People lost their passion for the job and only did what the stick or the carrot demanded without thinking outside the box.
This paradigm shift is especially happening in the tech world. Most companies got rid of the old industry perspectives (still very present in automotive, banking, insurance, etc.) and switched to a much more inclusive world where purpose, vision, and a common goal are more important than the bonus scheme connected to the salary. And it worked out, productivity got higher, employee satisfaction was better and even the fluctuations were lower as people started to live with and in the company.
This is also true for customers. They are willing to pay more if the purpose is good if the story is inclusive and also if the company has a better reputation. Another factor where companies need to realign their thoughts as money is only a hygiene factor and no motivator. (see Herzberg Two-Factor Theory)
4. Globalization shifted our perspectives in many ways
Globalization isn’t a new topic and the only thing changed is the speed we can travel the world. Ideas travel around the world within seconds, global interconnecting supply-chains and trade make up more than 60% of global GDP (up from 40% in 1980), and also societies around the globe are growing together.
This connected with the exponential growth of technology also leads to a different perception of the world. Global awareness is bigger, news travel faster, the other world is not far away and new possibilities emerge from globalization. But also, in some societies, we will have troubles with the old western business narrative. Chinese family-owned businesses are working on a totally different narrative than Arabic, African, or South American businesses. So, openness and a common shared value might also impact the globalization efforts of companies and their value streams.
Globalization doesn’t only mean to source from China, Bangladesh, or somewhere else. It means that we slowly start to realize that the world is an interconnected system and unethical companies will also face public rage if they are exploiting other countries, evading taxes, or even cheating systems. This will bring a shift from optimizing sourcing to optimizing the companies` social footprint.
Human beings are complicated and sometimes irrational. But we need to use those ideas to think about how we can set up a business that is future proof, has its social responsibility, sees also stakeholders around the company as important “investors” to build a narrative on which companies can build on in the future. With a globalized world and Generations Y and Z emerging we will see many cultures growing together, the question for a purpose will arise more and old shareholder and money-driven companies will be more and more under fire for not fulfilling their duty as a key member of all the societies around the world.
So let us think about a future where businesses see their role as a part of our society and also act accordingly.
Let’s #bethechange and think about how we can make our society better AND have a sustainable business model.