How to secure that innovations in business help transform society
When I went on record over a decade ago that the only way to transform business is to sack all the MBAs, it created a seldom seen flood of reactions. For the first time I even had to read a series of hate mails. While I know all too well that I did not come to this world to please everyone, it is seldom that my blunt statements hit such a raw nerve. I should have known better. After all the MBA diploma has become the passport to fast track careers in large corporations. It is one of the money making diplomas on offer around the world, both for the students who graduate and the school that offers the diploma for which aspiring career people pay thousands in cash to get all the promises related to this paper chase.
It is time to be honest and transparent: I also thought that an MBA was the best ticket towards a future in business and management. Little did I know in 1980 when I applied with INSEAD Fontainebleau for entry, and for the record, my application was first refused since I had a lousy GMAT (General Management Aptitude Test). It was already clear from day one that I did not fit the prevailing management culture where standardized multiple choice exams determine your qualifications. However, I had my way of persuading the admissions committee. Before I graduated - on the Deanʼs List - it was clear that I would consider this academic degree as one of the major obstacles to move business towards higher levels of competitiveness, to move society towards better health and happiness, and to put nature back on its evolutionary path. What went wrong? I never considered that the MBA contributed to my career path.
An MBA is nothing less than a certificate of brainwash. This is another bold statement, perhaps even more offending than the earlier one. But let us be honest, what do the MBAs learn? We learn to make abstraction of all reality in the world, pursue corporate strategies from technology, to organizational behavior, to product design and marketing in one common language all around the world: cash flow. And while many will argue that the teachings I received in the early eighties is quite different from the modern day MBA courses, reality before me demonstrates that the Master of Business Administration is solely focused on business. While there are some reflections on the fringes about corporate social responsibility and environmental management, finance remains at the core, and the driving force behind the logic of this academic training is the philosophy of the core business principles to pursue ever larger economies of scale in an endless chase to achieve ever lower marginal costs, leveraging assets through mergers and acquisitions in order to compete in a globalized business reality. After 50 years of graduating MBAs, there are armies of individuals executing the same logic. It will be hard to stop them - after all I consider them brainwashed.
The notion that we should compete globally with standardized products on volume and price has lead to the unacceptable effect that whatever is damaging to the environment and is of low quality, while depleting natural resources is cheap; and that whatever is good for you and the environment, while generating jobs is expensive. The good with quality is relegated to niche markets, while the cheap and branded is advancing in this global market. While the concept of core business made sense after the devastation of the second world war, in order to rebuild infrastructure and society around the world, we have to realize that this model is not well adapted to respond to the basic needs of 10 billion people on earth. It is not even capable of guaranteeing the minimum of quality of life for 8 billion. After the arrival of another 2 billion, this business model where cash flow is king will only stress out the system.
The globalized economy, driven by highly standardized products where there is a permanent quest to cut costs requires a great discipline in management philosophy, culture and approach. Hence the need to put the operations into a common and highly predictable mould, i.e. the MBA. Since the markets are by definition within this business philosophy global, the rules of the competitive game are global, then you need to solidify the whole framework by reliable global players. This is only possible when there is a blueprint of training. The fact that Europeans have high unemployment, suffers from dying communities and the whole industrialized world consumes too much of everything requires an overhaul. I have called for a conversion of the Master of Business Administration into the Master of Brilliant Adaptations. We have to shift from Administration to Adaptation since it has become increasingly clear to me that the tools that have been installed through the logic of the MBA prevents managers to adapt to the new realities. All the tools, including remuneration is geared towards maintaining a strict financial bottom line. In brief: the MBA is resistant to any redefinition of the business model and the rules of their game.
Business environments have embraced the culture of certification, independent market studies, rating agencies, audits and consultants approval. There are hundreds of certifications that litter the minds of corporate executives, confirming that they conform. While the business of certification is itself run by MBAs, it has become one of the blocking agents in change. After all, once you have your ISO 14,000, it is confirmed that your business operates within the pre-established minima of environmental management. The fact that you know the waste you produce, as the certificate proclaims, hardly makes the industry sustainable. At best it gives the key players in the supply chain management the comfort that a common minimum has been achieved. Any deviation is discouraged, since these certifications block any dramatic innovation, and certainly render a change in business model impossible. While the world of voluntary certifications certainly has turned quality and environmental management a little bit more transparent, it has not made brilliant adaptations likely.
Today just about any shift, change or innovation will be subjected to an audit, worse a committee decision that will make certain it never really happens. An innovation will be subject to a rigid review internally, and if it were to have a pervasive impact into the business operations, then a third party review will impose itself. Technology audits have become the rule of the game, with a third party who confirms the expectations by establishing clear deliverables, so that these can be trustworthy enough to change the business plans (including the discounted cash flow analysis). It is hardly expected that a bold adaptation will receive a smooth approval. The risks involved with change, especially the unsettling of the tightly organized supply chain management will hardly get a chance. There is a remarkable preference for trimming and nibbling around the fringes, and a stubborn resistance to bold shifts.
The armies of consultants that accompany corporations have not by surprise emerged from the audit function that has become another feature of the globalized economy. Everything gets audited, and even the law or the by-laws of stock exchanges require broad audits of everything imaginable. When a factory is considered for closure, then the auditors will establish the closure costs, a great unknown. It is no surprise that companies prefer not to mothball an uncompetitive plant, and fast track embrace a breakthrough innovation, since the provisions that will have to be decided by the board are imposed by the auditors. And that were not enough, the insurance companies will also have their way of questioning any changes since they only work with standard agreements from where no deviations can be permitted. Once a process has been set in motion, certified and operating it turns into autopilot. Any attempt to implement a brilliant adaptation will find that the logic of innovation is all too often equated with the logic of the status quo.
Of course, if some breakthrough were imminent, then there are still the lawyers who will have to check, and double-check if the proposed changes are not causing additional risks. In a business environment where the MBAs are all applying the same straight jacket of analysis, and where the multiple whammies of certification, audits, insurance rules and legal reviews make society not just risk averse, any change from the median will be considered too dangerous for management. In order to overcome the impressively shy attitude of management, the human resource director will suggest to take the team to an experience in the forest, to increase their capacity to take risks and improve the willingness to navigate into the unknown. While these experiences in the wild are unique opportunities for development, business will have to increasingly adopt the philosophy “rather ask for forgiveness than permission” instead of sticking to the prevailing logic “better be safe than sorry.”
This does require that management eliminates the shackles from all staff. However, while people on the shop floor and those interfacing with clients have an innate desire to adapt through dialogue with colleagues and customers, the traditionally moulded MBA will require everyone to stay in step, since the overall whip, sweetened by bonus based on performance of the quarterly data will continue to search for ways to further improve profit margins by cutting costs, and engage in financial operations to improve cash flow in order to justify further mergers and acquisitions which are solely valued on the expected savings in money and people, and the capacity to pay back the loans taken to finance the next leap in the globalized economy. Of course, all certified with every point ticket off by the legal advisory team.
It is against this background that the design of new business models must evolve rapidly from the core business philosophy, to one that generates multiple benefits, measured both in financial terms (as the MBA can do well), but most importantly also in terms of the strengthening of the commons and the building up of social capital. How could a business ever obtain a license to operate if it were not strengthening the commons like the provision of free drinking water, the building of top soil, the purification of the air, the resilience of biodiversity. This is not about protecting the environment, and reducing water consumption, this is about revolutionizing business by ensuring that the capital and operational expenses decrease, while the value increases, and the externalities benefit society, instead of the dumping of the negative on society.This is not about paying fair wages to the workers, and providing cheap products at low cost. This is about building social capital that can be measured in improved purchasing power, thanks to making the most healthy, durable and desirable products that the market has ever known, thus revolutionizing the production and consumption model where clients do not simply consume.
The Blue Economy permits us to design these innovative business models. The reason why this represents such a shift is not because the pervasive innovations in technology, rather because of the logic that emanates from the philosophy that underpins the way strategies emerge and corporations shape their relationships through the capacity to respond to the basic needs of all with what is locally available.
The aim of this blog is to present a fresh look at realities around us. Whereas I do not pretend to present the truth nor a definite position, I do wish to push the reader to think beyond the obvious. After all, time has come to dramatically improve the plight of millions, and that requires more than the predictable. Sometimes it forces us into spheres of discomfort.