Creative capitalism business models

In the call for 'beyond capitalism' businesses Bill Gates in a January 2008 speech at the World Economic Forum called for creative capitalism

"an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities."

Going down this route has significant implications the businesses and for the organization designers supporting this level of change to the business model.

It means shifting from an over-arching purpose of 'making the numbers' to a an organizational purpose around social, moral, and environmental principles (many of them outlined in Adam Werbach's book Strategy for Sustainability).

The question is: "Is it feasible, or possible for existing businesses to make such a fundamental shift?" To answer: It's very unlikely as all aspects of an existing for profit, publicly owned companies are set up to maximize shareholder valuing and this is enforced through a variety of mechanisms – legal, regulatory, and so on.

However, a way to do this is for businesses either to establish parallel businesses set up on a new model – Grameen Danone is a much quoted example designed to support a dual model of for-profit and social/environmental purpose.

There are good examples of organizations that were established with the dual purpose framing the business model. Many are co-operatives for example, Amul an Indian milk farming co-operative and Organic Valley (a US farmer owned co-operative), other models are those of Triodos Bank or the John Lewis Partnership.

Trying to graft a new business model onto an existing one, or change an existing one to a different one is not a task for the faint hearted.

Future gazing

PWC's report, published in 2008, Managing Tomorrow's People: the future of work to 2020 outlines three plausible future worlds of work – derived from two surveys a) of 6000 graduates b) of CEOs.

They describe these scenarios as:

• The blue world: where the big capitalist company rules – controlling people and trumping states

• The green world: where sustainability, concern for others and environmental issues drive the business agendas

• The orange world: where collaborative, specialized organizational networks dominate the economy.

The report points out that none of these are givens but what the authors do suggest are givens are that the world will be more complicated, technology will advance faster, global expansion will continue, and people will become more demanding of employers as talent gets scarcer.

Any one of these three scenarios – or more likely to occur – a combination of the will force a change in business models. This is probably the most useful observation of the report as organizations as less likely to seek to change their business models than they are to try to re-organize or state a desire to 'change the culture'. Organization designers would do well to start prompting clients to consider the precepts of their business model as part of any design exercise.

Evaluating organization design

The Roffey Park Institute has just published a report 'Best Practices in OD Evaluation'. In this case the OD stands for 'organization development', but the discussion and recommendations hold just as much water for organization design.

In organization design work there is often little appetite to evaluate the success of the redesign. Companies who employ an outside consultant to assist with getting to the new design and then implementing it are reluctant to invite the consultant back 6 months or a year later to see whether it is achieving the intended outcomes.

Nevertheless getting an evaluation would be a sensible thing to do and the report outlines several reasons why:

• It focuses the project scope and the design work in the context of the business strategy, because it forces answering questions like 'why are we doing this?' 'how will we achieve the return on investment in doing it?' and so on.

• It defines success in both qualitative and quantitative terms, and ties it closely to achieving business objectives in best cases using measures that feed into the overall organization performance measures

• It puts the design work in a timeframe and helps the client see what results might be quick wins and what results will take longer to achieve and measure

• It places accountability for success in the hands of the client/sponsor – which usually means a close eye is paid to progress and quick decisions are made if called for.

• It fosters sharing of learning on successes and failures in organization design work – a neglected activity where evaluation is lacking.

• It enables issues to be identified and action taken as needed.

The report rightly points out that sound evaluation is not necessarily easy, but gives some useful ideas on how to approach it.

Collaboratories

A recent Business Week article discusses IBM's new venture into "collaboratories" reported that the company:

Hammered out six deals for collaboratories in short order-in Saudi Arabia, Switzerland, China, Ireland, Taiwan, and India. Four more are in the works. John E. Kelly III, director of IBM Research, says there's enough demand for 100 more tieups. "The world is our lab now," says Kelly. "I figure I can have a much larger impact on the company and our research if I operate this way."

By collaboratories IBM means forming research partnerships with outside agencies rather than doing their research and development work alone and in secret. This whole approach, a different take on open source, is an interesting one to watch as generates a range of questions, including:

• How will intellectual property rights be determined?
• How will IBM cope with scientific challenges and different ideas?
• How will joint research ventures be funded and staffed?
• How will partners be idenfied and selected?
• How do partners learn to trust each other and work collaboratively?
• How will individuals and teams be rewarded?

Answers to these questions are likely to result in a very different form of organization design that will start around the collaboratories but will inevitably impact the parent organizations.

New designs for education

A couple of articles have recently talked about new designs in education. Fast Company notes that:

The edupunks are on the march. From VC-funded startups to the ivied walls of Harvard, new experiments and business models are springing up from entrepreneurs, professors, and students alike. Want a class that's structured like a role-playing game? An accredited bachelor's degree for a few thousand dollars? A free, peer-to-peer Wiki university? These all exist today, the overture to a complete educational remix.

The architects of education 2.0 predict that traditional universities that cling to the string-quartet model will find themselves on the wrong side of history, alongside newspaper chains and record stores. "If universities can't find the will to innovate and adapt to changes in the world around them," professor David Wiley of Brigham Young University has written, "universities will be irrelevant by 2020."

Home schooling in the US has doubled in the last decade according to a report in the Economist, estimating that 3% of school age children are now educated at home – in part due to easy availability of information both to teach with and to swap information with other homeschoolers.

And in another Economist article there is a report on Quest to Learn "a new, taxpayer-funded school in that city (NYC) which is about to open its doors to pupils who will never suffer the indignity of snoring through double French but will, rather, spend their entire days playing games"

The article notes that much of the teaching will be transferred from teaches to the video games that students will learn through studying, in 90 minute blocks, various game based 'domains'

A recent 93-page report on online education, conducted by SRI International for the Department of Education, has a starchy academic title, but a most intriguing conclusion: "On average, students in online learning conditions performed better than those receiving face-to-face instruction."

This change in the way education is provided (and/or the way people learn) appears set to shake up traditional educational institutions in new and unpredictable ways. Their designs require radical rethinks if they are to compete with newer ways of educating.

Short term or long term success

For commercial organisations in public ownership 'business success' is almost invariably taken to mean 'making the numbers' or giving a good financial return to investors. Analysts comment on business performance each quarter, and company executives are often under great pressure to meet market expectations.

Companies meeting financial expectations are hailed as 'successful' pretty much regardless of how they got the results. The consequences of complying with this short term thinking are "loss of sight of longer-term value creation for all stakeholders leading to the unintended consequences of destroying long-term value, decreasing market efficiency, reducing investment returns, and impeding efforts to strengthen corporate governance". (See Breaking the Short-Term Cycle)

Long term business success is not achieved by an unremitting focus on short term profitability. Organisations that work for success in several dimensions are more likely to achieve longer term profitability and be more adaptive and resilient to changes in their operating contexts.

Designing organisations to be 'successful' means knowing what success is for that particular organisation.

There are several methods of aiming for business success in several dimensions: the Balanced Scorecard, the Malcolm Baldrige National Quality Award, and the European Foundation for Quality Management Excellence Award – are three examples of business results models that do this. Adam Werbach in his new book Strategy for Sustainability offers another way of defining business success. Which offers all sorts of possibilities for new organization designs.

Do older workers mean newer organization designs?

A year ago the Bureau of Labor Statistics released information on the employment of US workers aged 65 and over.

• Between 1977 and 2007, employment of workers 65 and over increased 101 percent, compared to a much smaller increase of 59 percent for total employment (16 and over).

• The number of employed men 65 and over rose 75 percent

• Employment of women 65 and older increased by nearly twice as much, climbing 147 percent.

• The number of employed people age 75 and over is relatively small (0.8 percent of the employed in 2007), this group had the most dramatic gain, increasing 172 percent between 1977 and 2007.

• Full-timers now account for a majority among older workers: 56 percent in 2007, up from 44 percent in 1995.

BLS data show that the total labor force is projected to increase by 8.5 percent during the period 2006-2016, but when analyzed by age categories, very different trends emerge.

• The number of workers in the youngest group, age 16-24, is projected to decline during the period the number of workers age 25-54 will rise only slightly.

• In sharp contrast, workers age 55-64 are expected to climb by 36.5 percent.

• The most dramatic growth is projected for the two oldest groups. The number of workers between the ages of 65 and 74 and those aged 75 and up are predicted to soar by more than 80 percent.

• By 2016, workers age 65 and over are expected to account for 6.1 percent of the total labor force, up sharply from their 2006 share of 3.6 percent.

So it is time to start acting on what this might mean for employers: more flexible work hour, different approaches to pay and rewards, more imaginative career development and talent management pathways, a greater opportunity for experience exchanges, younger leaders with older followers, changed employee/employer 'psychological contracts', changing of attitudes and stereotypes, and so on

inversions of leader age – younger leaders with older followers, changed employee/employer 'psychological contracts', changing of attitudes and stereotypes, and so on.