Yesterday, I asked Siri: \u201cWhat is the purpose of a corporation?\u201d<\/p>\n\n\n\n
A tricky question, right? But wow. Within seconds, Siri came back with a list of possible answers. It appears that this question caused lots of excitement last week.<\/p>\n\n\n\n
On August 19, the Business Roundtable, an association of chief executive officers of leading companies in the United States, changed their view that corporations mainly exist to serve their investors. In a new statement, corporate leaders made it clear that the purpose of a corporation is to create value for everyone <\/em>who is somehow involved in the business.<\/p>\n\n\n\n This statement triggered a lot of \u201ctalk\u201d online (Twitter, blogs, newspaper articles, etc.).<\/p>\n\n\n\n What surprised me though was the negative response. \u201cThe statement is just window-dressing. A cheap and easy way to address anti-corporate sentiment.\u201d \u201cBusiness leaders are using the statement as a defense mechanism against activist investors.\u201d The statement is a Dr. Evil-type scheme to take over the corporate world.\u201d<\/p>\n\n\n\n But when I read the statement, I thought it was nothing more than the first step in acknowledging the end of the corporation. Corporate leaders were pointing out something that I have been witnessing over the last decade (based on my own personal experience in a multinational company).<\/p>\n\n\n\n The corporation, as we know it, is being disrupted and something very different is emerging.<\/p>\n\n\n\n In the age of the maturing internet, more than 3 billion powerful smartphones and emerging technologies (such as artificial intelligence, robots, and sensors), it isn\u2019t realistic to think that businesses should still operate as static corporate hierarchies that were first designed in the seventeenth century.<\/p>\n\n\n\n We are living in the greatest time in history<\/strong><\/p>\n\n\n\n Digital technologies are turning the world upside down.<\/strong><\/p>\n\n\n\n Think about it. Digital technologies have changed consumer behavior. Consumers don\u2019t appreciate mass production anymore. Brand loyalty is increasingly fragile.<\/p>\n\n\n\n Digital technologies have made consumers way more knowledgeable and sophisticated. They will only stay if \u201cproducts\u201d offer them a meaningful and personalized experience. They expect data and data analytics to deliver more advanced services and \u201cuser feedback.\u201d Social media has given them the \u201cvoice\u201d to express their views and educate themselves about a business\u2019 performance.<\/strong><\/p>\n\n\n\n The same can be said about employees. People are no longer satisfied with the prospects of becoming anonymous cogs in a hierarchical corporate machine. They are looking to maximize their personal potential. They want to do things that they care passionately about.<\/strong><\/p>\n\n\n\n The digital transformation has created an unprecedented degree of choice. There are endless possibilities. Employees don\u2019t stay because it is hard to walk away. They stay if they have the opportunity to engage in a meaningful life project through \u201cwork.\u201d The younger generation that started to work at my company all left as soon as the job didn\u2019t offer them that sense of fulfilment anymore. \u201cLast-in first-out\u201d has become the new normal.<\/strong><\/p>\n\n\n\n Finally, digital technologies are empowering investors as well. Artificial intelligence tools that analyze website traffic and social media engagement offer institutional and other professional investors a better understanding of a company\u2019s growth opportunities and prospects. Smart analysis of earnings transcripts helps investors capture and assess management sentiment.<\/p>\n\n\n\n One strategy that will work<\/strong><\/p>\n\n\n\n Forward-thinking business leaders understand that they have to \u201ccreate value for all stakeholders.\u201d It is not so much about keeping them all happy. It\u2019s about creating an environment \u2014 or an ecosystem \u2014 in which they feel valued.<\/strong> Successful business leaders don\u2019t know, show, and control (as if they are \u201cthe smartest guys in the room\u201d). Instead, they provide the context for communication, collaboration, and co-creation.<\/p>\n\n\n\n This was an impossible task in the 20th century. But with the exponential growth of technology, involving stakeholders and gathering feedback from them has never been easier. To remain relevant, every business must become a tech business.<\/strong><\/p>\n\n\n\n But there is another quick way to get instantaneous and consequential input: having an open and inclusive dialogue with stakeholders, using digital and social media platforms. To remain relevant, every business must also become a media business.<\/strong><\/p>\n\n\n\n I see examples everywhere.<\/p>\n\n\n\n Philips, a Dutch multinational in healthcare, has shifted its annual report from a dry, legalistic report that no one reads into an interactive content experience for the company\u2019s broader stakeholder community, using various communication strategies and online platforms.<\/p>\n\n\n\n Microsoft has appointed a Chief Storyteller to help stakeholders (including society) understand who they are, what they do, and why they exist. The move certainly helped Microsoft rediscovering its \u201csoul.\u201d<\/p>\n\n\n\n Other examples that increased stakeholder engagement and offered companies a window into different stakeholders\u2019 perspectives are: (1) Jeff Bezos\u2019 yearly letter to the shareholders; (2) \u201cMillennial\u201d representation on the board of Starbucks; (3) the appointment of a social media influencer on the board of AirAsia to make the board more susceptible to the new generation stakeholders; and (4) the use of Twitter as a business\/communication tool by Anand Mahindra, executive chairman of Mahindra and Mahindra.<\/p>\n\n\n\n The emergence of ecosystems<\/strong><\/p>\n\n\n\n Across all sectors of the economy, we can see changes in how businesses are structured. Smart business leaders understand that they need to reinvent themselves.<\/strong><\/p>\n\n\n\n The \u201ccorporate\u201d CEOs of the Business Roundtable understand that this pressure is real, and it is existential. If they don\u2019t adapt, their businesses will die. And even if they can\u2019t articulate a clear vision of the future, they do know that the purpose of the corporation is evolving.<\/p>\n\n\n\n I don\u2019t think we should dismiss this trend as some cosmetic PR exercise or evil plot. I just think it reflects their struggle to adapt to a rapidly changing environment.<\/p>\n\n\n\n Digital technologies have created a new culture of transparency, engagement and choice. The secretive, closed and controlled world of corporations, which was so effective in delivering economic and social development, is now out of touch with the values of a digital world.<\/p>\n\n\n\n Businesses are increasingly organized as open, inclusive ecosystems. They no longer operate as distinct corporate entities with a few joint venture and alliances. Instead, they tap into much wider communities and networks to grow and sustain their businesses.<\/p>\n\n\n\n Perhaps, it won\u2019t be long before Siri links to articles on \u201cbusiness organizations\u201d when asked the question: \u201cwhat is an ecosystem?\u201d<\/p>\n\n\n\nSource:<\/h2>\n\n\n\n