A New Business Model

The last few months have exposed the vulnerabilities of widely prevalent business models.

The de-facto model, thanks to Finance 101 is to maximize shareholder wealth.

Thus, even as global economies have shrunk, stock markets have risen.

The billionaire class has added to its wealth during the pandemic.

Meanwhile, millions have lost their jobs.

Hundreds of millions do not have enough to eat one meal a day.

Large organizations in the travel, tourism, and hospitality sectors have either collapsed or are on the verge of collapse. Established companies are seeking government bailouts.

The contradictions have brought to the surface everything that is wrong with the notion of shareholder wealth.

How can organizations that have been around for fifty, eighty, or a hundred years not have enough money to retain their employees for a few months? How does one explain the rationale, if any, behind a 185-year old company asking a significant chunk of its employees to leave within a week of a national shut-down being announced?

Maximizing shareholder wealth has gone too far. It is time to say “enough.”

I am not for a moment against shareholders getting their due. My objection is to the obsession with short-term goals and shareholder value at the expense of other business goals.

The pandemic has already taken a heavy toll. Why can we not use the opportunity to re-think the traditional business models?

My suggestion for a sustainable business model that can withstand the shock of the next disaster (that may be just around the corner) is:

1.  Put People First: Organizations cannot exist without people. It is fashionable to think of AI, Machine Learning, and Robotics to take over routine tasks and jobs. As of now, people, and not technology, are at the heart of any business. Please show me one large organization that is vibrant and thriving but has no employees, and I will be happy to change my view. People represent a very special resource – one that walks in every day and walks out every day. Minus their people, most organizations would be worthless. Therefore, please place your people at the top of your business model. Have adequate retained earnings for the rainy day, week, month, or year. Use periods of disruption in activity to retain your people and enhance their skills.

2.  Put Customers Next: Engaged employees lead to satisfied customers. Make customer satisfaction and loyalty a priority. Loyal customers alone can sustain your business in the long term. The colliding forces of rapid change and ubiquitous information mean that customers are not interested in “the perfect solution.” They want their “jobs” to be completed with minimal effort.

3.  Put Society and the Planet Third: Do not indulge in any activity that harms the society that provides you the freedom to operate. In whatever you do, be aware of the short-term and long-term impact on the planet. Our ancestors handed over this planet to us in pristine shape. We have destroyed the planet in every possible way. Please, for the sake of the next generation and beyond, stop extracting more from our fragile planet than what you can place back.

4.  Put Shareholders Last: I do not mean any disrespect to shareholders. Without investors, organizations cannot grow. Placing people, customers, society, and the planet as priorities should serve shareholders very well in the long-term while discouraging fly-by-night operators who are in the stock market for quick returns.

It is a great time for organizations to reset their priorities and create the right environment for a bright future for everyone.

I am aware that some of you may think this is not very different from the Triple Bottom Line (Profit, People, Planet) concept. My simple question to you would be: Without using a search engine, please name five organizations that follow TBL in letter and spirit.

Are you willing to unlearn and relearn?

By: PROF. KRISHNA VENKATESH

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