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Overcoming Trump’s Fear-Driven Capitalism, Part 2: Purpose & Vision



Photo credits: “Fear“: http://tinyurl.com/y8gtw3wj. „Eye“: http://tinyurl.com/y8gb8h4b

Photo credits: “Fear“: http://tinyurl.com/y8gtw3wj. „Eye“: http://tinyurl.com/y8gb8h4b

Trump’s economic policies are starkly different from his predecessors and deviates from mainstream economics and political thinking.  Take, for example, his massive tax cuts for the corporate world or his initiated trade wars.  Just by looking at recent economic numbers and the booming stock market his policies seem to pay off and open a new era of economic prosperity.  But do they really?

Long-term market performance indices and forecasts tell a different story.  Shareholder buybacks and alike contribute nothing to building a solid foundation for future business success.  They yield short-term benefits and the party is on.  But, for how long?  Where does it lead to?  Has big money finally succeeded and overtaken economic and political thinking?  How sustainable is this short-term growth? Who benefits, who loses?  And, last but not least, what kind of answers does it provide to today’s global challenges that are becoming more and more volatile, uncertain, complex and ambiguous?  What if Trump’s favored form of capitalism leads to a dead end?!

As explained in a previous post, I am more than skeptical about the outlook of traditional capitalism.

Fact is that traditional capitalism does not answer today’s challenges in a VUCA (volatile, uncertain, complex, ambiguous) world, widens the gap between rich and poor, exploits and threatens to destroy our environment and thus our own planet.  What we need is a different, a new business paradigm that not only helps find solutions to today’s problems but can also serve as guidance to sustainable business in the 21stcentury.

In this article I explain why and how purpose-driven human business can make a huge difference.  It differs significantly from the classical business paradigm.  At the same time it has built-in bridges every business can cross to build a sustainable future.

Maximizing Shareholder Value: Engine for Growth?

There is one and only one responsibility of business: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.

– Milton Friedman

No doubt, Milton Friedman and shareholder value theory has shaped Western business since the 1970s.  It has led to tremendous wealth of companies as well as societies, even though the fruits of this growth have not been distributed equally.

And, Milton is still very much alive as Steve Denning points out in a Forbes article.  He explains that “in 1990, an article in HBRby Michael Jensen and Kevin Murphy, gave shareholder value thinking a new push. The article, “CEO Incentives—It’s Not How Much You Pay, But How” suggested that CEOs were being paid like bureaucrats. Instead, they should be paid with significant amounts of stock so that their interests would be aligned with stockholders. Thereafter, the use of the phrase ‘maximize shareholder value’ exploded and CEOs became very entrepreneurial — but in their own cause,not necessarily their firm’s cause.”

Denning continues stating that “by 2017, shareholder value thinking was everywhere. Joseph Bower andLynn S. Paine reported in Harvard Business Reviewthat shareholder value thinking “is now pervasive in the financial community and much of the business world.” It had led to a set of behaviors by many actors on a wide range of topics, “from performance measurement and executive compensation to shareholder rights, the role of directors, and corporate responsibility.”

Acknowledging shareholder value thinking is prevalent in today’s business world, and a booming stock exchange market, what’s so wrong about it?!  Why change a winning formula?!

On the face of it, shareholder value is the dumbest idea in the world.
– Jack Welch

Jack Welch, former CEO of General Electric, had been heralded as one of THE proponent of maximizing shareholder value.  This is in contrast to what he has been preaching since he left GE, stating „On the face of it, shareholder value is the dumbest idea in the world.“ Welch also pointed out several times that „shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.“

So far so good.  But what about business performance in the market place?

According to the 2009 Shift Index of Deloitte’s Center for the Edge there is conclusive proof of failure of traditional management.  Accordingly

  • The rate of return on assets has fallen by 75% since 1965
  • The life expectancy of Fortune 500 firms is down to 15 years, and is heading towards 5 years.
  • Only 1 in 5 workers fully engaged

Preserving the performance of a status quo may be laudable.  Yet, it doesn’t secure lasting, sustainable business.  The opposite is true.  Mariana Mazzucato  explains that „shareholder value theory – the destructive idea that companies should be run solely for the benefit of shareholders – has led to financialized businesses that do not invest in the areas that will lead to future growth or the invention of useful new products.“

In short, traditional businesses infiltrated by shareholder value theory not only ignores long-term perspectives, they also risk their own future existence.  Myopia at its best.

Stuck in the past

In face of this evidence why do so many companies still stick to a business paradigm of the past?

There are lots of reasons for clinging to this pastime.  Let’s have a look at two of them:

  1. For one, it is convenient.  Governance in most businesses still built on the old business paradigm, along with complicated incentive system for individual and company performance at the stock market.  Changing these processes and culture takes ages.  Why change it given that those who would have to make the call for a change personally benefit from the old system?
    Linking maximizing shareholder ‘value’ to personal compensation blinds managers from the real world – and most of them don’t even realize it because they were born blind or lost eyesight early in their childhood (or education). From this perspective, they live out their DNA. I guess, you can’t even blame them for their upbringing shaped their belief system. They were indoctrinated.
  2. A second reason for favoring existing belief systems is that proponents of the status quo simply don’t see any real alternative at hand.  Thinking in complicated, elaborate governance structures and processes implies that there needs to be an even more complicated system? There is simply no time to address this, even less so, coming up with new ideas that improve existing processes.

As long as this reasoning prevails, it is difficult to change anything until it may be too late.  Alas, it is not that complicated at all.  Let’s have a look at the opposite of the traditional business paradigm of short-term profits and shareholder value theory.  It’s called purpose-driven business.

MVP’s for doing business in the 21stcentury

A purpose-driven business follows a compass that gives a clear direction for the future of the business.  The compass also indicates where the business is coming from, i.e., why it is business in the first place.   Both, the motivation and the vision of a business constitute the credo of its practice. I call this the MVP of a purpose-driven business whereas stands for motivation, for visionand for practice.

For example, Johnson & Johnson’s company credo is engraved in granite at the entry to company headquarters, which makes crystal clear that customers are first, then employees, and shareholders absolutely last.

Another example is Procter & Gamble which declares in its purpose statement: ‘We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.’

On this token, a business that has forgotten or neglects its motivation or vision for short-term gains, such as maximizing daily stock prices, may just as well be digging its own grave in the long-run.  It is anything but a purpose-driven business.

Human business is purpose-driven business

Facing the increasing number of challenges in our volatile, uncertain, complex and ambiguous (VUCA) world, Human Business addresses today’s challenges.  It focuses on serving and delighting its customers, workforce, business, and society.  And it does so holistically and puts us as humans in its center.  That is, it constantly seeks ways and means to generate and add sustainable value to its customers, workforce, business, and society.  From this perspective human business follows three elementary principles:

  1. Delight your customer(s)
  2. Take care of your employees
  3. Build sustainable business value

(1) Delight your customer(s)

Having a customer focus is not new.  Peter Drucker, father of management thinker, explains that

There is only one valid definition of a business purpose: to create a customer.”

Alas, delighting a customer goes beyond creating or satisfying a customer. Delighting a customer implies that a business has a deep understanding of the needs, expectations and wishes of its customers and strives to fulfill and exceed them.  It seeks to build customers for life.  It reaches out to its customers, communicates with them, walks in their shoes and shows a sincere interest in them.  There are no quick fixes for this approach.  It is an attitude and belief system.

(2) Take care of your employees

Employees are not resources like products.  They are human beings and want to be treated as such.  A human business understands and practices this.  It shows

a sincere interest in the needs of their employees. It starts with a safe, secure and environmentally friendly work environment.  For employees to follow a direction you have to set it, share it and let your employees contribute to it. Let them become a part of it.

Dov Seidman states that „working with passion is an engine that is unbelievable. A person with drive and passion does three times the job of another person. But it is not so much the quantity of the job; that is not the point. The point is that they draw crowds; they have followers; they push, and lead, and so achieve much more.“ (Dov Seidman (2011). “How: Why How We Do Anything Means Everything”, p.295, John Wiley & Sons)

(3) Build sustainable business value

Shareholder value is not identical to business value.  Business value comprises short-, mid- and long-term business concerns, interests and investments.  Business value is made up of a number of factors: the overall business performance and outlook, customer satisfaction ratings, market position, innovation performance, the skillset and turnover rate of the workforce, the attractiveness of the company as an employer of choice and many other factors.

Whereas the daily stock price is heavily influenced by quarterly results and a relative short time horizon into the future, business value is more than quarterly results.  Jeff Bezos clarifies why holding a long-term perspective is so important:  “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavours that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn. We say we’re stubborn on vision and flexible on details.” (Source: “Jeff Bezos Owns the Web in More Ways Than You Think”. Interview with Steven Levy, www.wired.com. November 13, 2011.)

Last but not least, business value doesn’t only look at business numbers but includes corporate social responsibility, too. Klaus Schwab, founder and head of the World Economic Forum, explains that “corporate social responsibility is measured in terms of businesses improving conditions for their employees, shareholders, communities, and environment. But moral responsibility goes further, reflecting the need for corporations to address fundamental ethical issues such as inclusion, dignity, and equality.”

Human business as a compass for organizational excellence

Klaus Schwab’s wide view on business value summarizes what it means when we say that human business is holistic and human-centered and focuses on generating and adding sustainable value to its customers, workforce, business, and society. It serves as a business compass that helps optimize daily operationsand build and sustain organizational excellence.

Walking the Talk. Building a Human Economy

Art of New BusinessAt Motivate2B and The Art of New Business we are witnessing businesses that have made the transition to a human business.  And, we too, follow the principles of human business by ourselves. What else can we do?!  We walk the talk and invite you to do the same.  Please join us and share your stories.

Posted in: Agile, Future of Work, Human Business, Leadership, Sustainability, Uncategorized, WEF

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Planning is Fear. Instead, Work with Life and Joy.


I have worked in professional project management for quite a number of years. Over the last years, I have moved away from classical project management and one of its core activities: planning. There are a number of reasons for this. First of all, I believe that classical planning is rooted in fear for volatility, uncertainty, complexity and ambiguity. Or, planning is afraid of reality and life where volatility, uncertainty, complexity and ambiguity are central elements.  Hence, classical planning is misguided and consequently often a waste of time and energy. Let me explain.

The myopia of classical planning

Foto © by A. Dreher | Pixelio.de

Photo © by A. Dreher | Pixelio.de

In classical project management we are expected to have a solid, validated project plan that lists major milestones, work packages and activities. Ideally, all work packages are linked with each other so that it becomes possible to predict the final delivery date of the project.
I have drafted numerous such project plans. And actually I enjoyed it for the most part. It gave me a sense of control and security. And the final plans looked great on paper. Alas, there were and are some major flaws with this: A plan is first of all a piece of paper. That’s it. No more, no less. Yes, of course, it can denote the important phases of a project and create the false impression that everything is under control. People tend to believe that a plan gives them security and certainty, reduces risks, prevents surprises and much more. Unfortunately, this is misguided and distracting from reality. Fact is that most project plans change the minute you “finish” them. President Eisenhower once said that a plan is worth nothing, planning is key. Well, I agree to some extent and add that planning is worth nothing if you don’t understand what’s behind it. I call it agile ‘planning’.

What’s behind agile ‘planning’?

If you start planning because you want to overcome volatility, uncertainty, complexity, and ambiguity, STOP right there. Planning will not help you achieve this. Volatility, uncertainty, complexity, and ambiguity (VUCA) have nothing to do with planning. They are rooted in reality whereas planning is just a tool.

If you want to get a grasp on volatility, uncertainty, complexity, and ambiguity understand their nature, what causes them. And find out why they bother you in the first place. Given that they are core elements and characteristics of reality you may as well ask yourself what bothers you about reality. In other words, find out what bothers you, period. What’s your problem? Or, if you like to phrase it more positively, what motivates you?

Contrast this to your vision of an ideal situation and see the gap between the problem (or motivation) and your vision. If this gap really bothers you, causes some form of pain, think about concrete steps how to get from point A to point B. This is what you could call agile ‘planning’. It is different from classical planning as it addresses the groundwork or foundation of our activities.
Planning without acknowledging and accepting your motivation and vision is just a shallow distraction from reality and a futile activity as it ignores reality, your reality.

Agile ‘planning’ can be joy

Photo © by Jörg Kleinschmidt | pixelio.de

An agile approach to ‘planning’ does not erase volatility, uncertainty, complexity, and ambiguity. This is not its purpose. It accepts them as a matter of fact. And it embraces them and explores ways and means to work with them to get closer to your vision or at least your interim goals. This is the opposite of fear. It is working and playing with joy. Doing so introduces lightness, creativity and inspiration to your “planning”. It sparks life into your planning process.  You don’t generate a product or service in one bug shot but you develop and deliver it in small, iterative increments. Just as you don’t reach your vision in one big step but in several smaller steps, one at a time.
Contrast this with classical planning that is guided by fear and the urge for control and certainty. Life and reality are not static, lifeless machines that can be easily replicated. Life is ever changing, complex, uncertain, and ambiguous. Corollary, agile ‘planning’ ought to reflect life. It can become a game, a dance, an art and thus an element of the art of new business.

Posted in: Agile, Centeredness, Creative Economy, Human, Sustainability, Tools

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Volkswagen’s greed and myopia is just the tip of the iceberg


Volkswagen has shown how greedy and myopic traditional management in corporations is: short-term projects (shareholder interests, EBIT) are more important (or, shall we say the only thing that really matters to them) than delighting customers and our environment.
Volkswagen management claims that they will resolve the issues and regain our confidence. Really?! I seriously doubt it, for how credible is it when they claim that they change their mindset overnight?! Volkswagen has annihilated the trust of its customers and the public. Not too surprising, top management and whoever ordered the betrayal may just be viewed as a bunch of liars and possibly criminals and should be treated as such.

What could Volkswagen do?

  1. First of all, acknowledge that it cannot “fix” an internal, systemic and structural problem overnight.
  2. Second, listen to your customers and the public and our needs and those of the next generation (talking about environment concerns).
  3. Third, work on a credible and sustainable strategy how to regain our trust, acknowledging that this will take years if not decades.

Volkswagen’s Outlook?

One thing is for sure, the future of Volkswagen is uncertain. Shame on those managers who caused this. Instead of insisting on their bonuses, they should waive them and give to a fund to save work places who those who don’t get fat bonuses.
Alas, there is a good thing about Volkswagen and actually this is something we should be grateful for: We have been made aware that as consumers we have choices. Nobody forces us to buy Volkswagen. And, a crisis for Volkswagen is a chance for innovation. It is up to Volkswagen, whether or not it wants to be part of this future. There is a chance, yes, and it starts with listening and learning. Good luck!

Read Steve Denning’s analysis of Volkswagen’s crisis here.

Posted in: Creative Economy, Project failure, Sustainability

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