New business models

This week's Economist has two articles in it that caught my eye. The first is about NGOs and their relationships with corporate for-profits. Called Reaching for a Longer Spoon it outlines the closer relationships that activist non-profit groups are developing with for profit companies. The Nature Conservancy, for example, has received large sums of money from BP, while Conservation International has been paid, again by BP for advising on its oil extraction method. Environmental Defense Fund another non-profit collaborates with "such frequent targets of activists' ire as Wal-Mart, a giant retailer with no time for unions, and Kohlberg Kravis Roberts (KKR), a private-equity firm often depicted as a financial predator."

The second article is a review of two books about business in China that discuss 'state capitalism' whichc is basically a business model that the reviewer says embraces capitalism in so far as it can be used as an instrument of state power. China is the classic example of state owned companies selling goods on the global market.

From Latin America to the Middle East authoritarian governments are imitating China's model of "state capitalism". They are not only using state companies to shore up their power at home, they are directing those companies to reap the fruits of global capitalism. State-controlled manufacturers sell goods on the global market and buy up natural resources. Sovereign-wealth funds invest the profits from all of this activity in global markets.

The rise of this new hybrid has led to a dramatic change in the balance of power between the state and the market. State oil companies control three-quarters of the world's crude oil reserves. Three of the four largest banks by market capitalisation are state-controlled. The biggest mobile- phone operator, China Mobile, is also a state company.

What's interesting about both these articles is that they point to business models and organization designs that should be inclusive of partners, stakeholders and others in their overall design – and this is not the way organization design is traditionally approach – based, as it is in the notion of a single organization operating as a unitary system. I wonder, for example, how flexible and adaptive Galbraith's Star model would be dealing with these, or whether the McKinsey's 7S model would stand up to notions of organizations being both more than and less than an entity in its own right.

The Economist points out, in relation that "Collaboration between business and NGOs, if well designed, can certainly yield significant mutual benefit, "but does not explore the intricacies of 'well designed'. It takes a less bullish view on state capitalism saying that "that there is a lot of evidence to suggest that state companies are less productive and innovative than their private-sector competitors. Much of the dynamism of the Chinese economy comes from private companies rather than bloated state firms." Nevertheless it may also be true that a well designed 'state capitalist' organization will be very successful. It could be that state run companies are ripe for organization design skills improvement and my recent trip to Shanghai certain demonstrated that there certainly is the interest in it.

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