Following on from my previous blog a number of people have asked me what a flourishing enterprise might look like in practice, how they would incorporate change into their business and get shareholder backing. In this blog I will try to answer those questions.
Within the flourishing enterprise model of strategic change there are three key areas of value-creation; market changes, innovation and capabilities for flourishing. All three are critical and no company can flourish without real effort in each domain, and none can be done by a company on their own. A great deal of innovation is required within companies, much of which needs to be open and collaborative. Aristotle said that no individual could flourish without being an active participant in the flourishing of society and community, no company can succeed without being an active participant in societal and market changes.
Market changes: Capitalism 2.0
To create value we need a radical update to the macro-economics of capitalism 1.0. Within the flourishing enterprise process there are a series of areas where companies need to advocate progressive public policy. We need; much more radical, science-based (not politics-based) absolute caps on resource throughput and emissions, a radical shift in tax from pay as you earn to pay as you burn, radical changes to the national and international finance sectors and new national accounting standards that incorporate wellbeing. In all these and other areas there are numerous examples of solid proposals and experiments already under way which companies can join in with. The first step will be to map current public policy activity against CSR espousals and I have helped develop the Janus principles and process to help companies do this.
Innovation: be strategic
Companies must place wellbeing at the heart of innovation. My process helps companies map, measure, manage and maximise how much wellbeing they are delivering per unit. Through a four-stage process of immersion, ignition, invention and illustration this change process helps companies understand how to maximise the wellbeing-services they deliver, evolve new business models (such as product-to-service shifts) and become more porous; hybrid-value businesses acting in collaboration with society.
If companies do not make these shifts then the rise of things like collaborative consumption will create and fill new market spaces which could fatally threaten current incumbents. A great example of this sort of community-led enterprise is a local Industrial and Provident Society I am involved in called Bath Community Energy. BCE has plans for £5mplus of renewable energy generation and I’m convinced that enterprises like BCE are an important part of the future. UK co-ops now represent £33bn and have grown 21% since the 2008 credit crunch. This rise is testament to the fact that more and more people see this as an important part of capitalism 2.0. In the US 930 electric co-operatives are the sole source of electricity for 42 million people in 47 states. That’s nearly 12% of the nation’s population. They control $100 billion in assets and $31 billion in member equity.
Current energy and other sector companies could learn a lot by supporting, nurturing and partnering these sorts of enterprises. They are going to flourish in any case so better to be on the inside of this new movement than on the outside. And companies need to watch out for threats from outside their sector. In the radical shifts needed, it will be easier for companies to move into new sectors in a radical way than to cannibalise their own markets. Might companies like M&S and Virgin find it easier to deliver a true ESCO energy service or high-wellbeing, low-input slow-moving-consumer-services than say EON or Unilever?
Capabilities for flourishing
The third domain of value-creation is that of changes to the culture of consumerism which Tim Jackson has talked of when he says “We spend money we don’t have, on things we don’t need, to make impressions that don’t last, on people we don’t care about.” At a societal level this is perhaps the most crucial of the three shifts. Techno-fix and efficiency are important but far more important are a societal shift towards sufficiency, intrinsic values and authentic bounded wellbeing.
Companies need to actively support rather than detract from what Nobel Laureate Professor Amartya Sen calls capabilities for flourishing in society. And realising these capabilities needs to be bounded by the carrying capacity of our one and only planet. This will involve integrating a beyond-consumerism perspective into everything companies do. Lessons from the flourish process help companies understand how their business can evolve to create value from a shift from seeing products and stuff as benefits to seeing production as a cost of delivering societal wellbeing. A crucial distinction is made here between extrinsically orientated advertising created wants and real, intrinsic wellbeing. As the World Economic Forum has said, companies need to shift to a state where “we are no longer selling ‘stuff’; we are enhancing people’s wellbeing overall.”
What about shareholders?
How will shareholders react to companies that start on the above journey? To many, the financial markets are currently at the heart of the problems we face. Their short-termism blocks many of the changes we need. And, those of us lucky enough to have investments (say in pensions), are often absentee-owners with little vested-interest in the effects of our investments and whose fiduciaries take little or no active care over directing investments towards anything but short-term profit.
There is now the start of a push-back against short-termism. Unilever’s CEO Paul Polman has famously said “I do not work for the shareholder, I work for the customer”. And Unilever now no longer report on a quarterly basis. This is said to have cost Unilever 6% of their share-value. But it has done something to signal a shift in the power dynamic between long and short-term business drivers. And Jack Welch, poster-child of the shareholder-value movement, has now said that “shareholder value is the dumbest idea in the world.”
But aside from these rare comments most business leaders are understandably wary of rocking the boat and pushing back against the short-termism of the markets. This has to change. In the transition to a sustainable wellbeing economy company leaders and the more progressive and long-term fiduciaries like pensions and insurance funds need to lobby for change in the markets. And companies need to work hard and creatively to attract new forms of investment and ownership models. Flourishing enterprises may need to look more like community and employee owned mutuals, B-Corps and co-ops than companies as we see the now.
In the long-term, once we have passed through the transition to a beyond-growth wellbeing economy, the role of investment will be very different. According to economists like Professor Herman Daly finance is one sector which would massively contract in such an economy. And Daly knows a thing or two about the finance sector having been senior economist at the World Bank for many years. Daly has said “In a sustainable economy the financial sector would shrink, because low interest and growth rates could not support the enormous superstructure of financial transactions-based largely on debt and expectations of future economic growth which sits uneasily atop the physical economy. In a sustainable economy, investment would be mainly for replacement and qualitative improvement, instead of for speculation on quantitative expansion, and would occur less often. This of course has huge implications for finance sector companies.”
Yes we can
A wellbeing perspective represents an opportunity to frame things as a “yes we can” rather than a “don’t do this don’t do that” sustainability narrative. Nietzsche taught that human history moves in three stages of Camel, Lion and Child; The Camel just sits there and moans. We did that for four millennia. The Lion says “no”. We have said no to poverty, plague and ignorance; western politics, since perhaps 1776, has lived as the Lion. Finally, the Child asks “To what can we say yes?” As Professor Marty Seligman says in his new book Flourish, we can all say “yes” to more wellbeing, positive emotions, engagement, better relationships, more meaning and positive accomplishment. We need to frame things in this way and find out how this does not have to cost us the earth.
Being the change
The shift to an ecological wellbeing economics is fundamentally a Yes story. Its about a new vision of society based on wellbeing as prosperity. More and more people are questioning whether we have to desperately hang on to our growth-obsession and capitalism 1.0 and are imagining a new economics with people and planet not money, profit and growth at its heart. Even in hyper-consumerist America, 26% citizens are described as Cultural Creatives who, as Eckesley says “are disenchanted with ‘owning more stuff’, materialism, greed, me-firstism, status display, glaring social inequalities of race and class, society’s failure to care for elders, women and children, and the hedonism and cynicism that passes for realism in modern society”
More and more of us are realising that what really matters is that we all have fulfilling work and the basic and spiritual nourishment to live flourishing lives. Companies would do well to tune in to these debates. Better to be involved in shaping the future than it shaping you.
In blogs to follow I will examine what this might mean for specific sectors, companies and products.