From the traditional goal and objective of business of maximizing profits, Managers are now talking about creating values. It can be safely said that the neo age managers look upon maximizing prosperity rather than maximizing profits. Prosperity is a greater challenge than profit as former is more wholesome than latter. The former is long term whist the latter is short lived. In today scenario, a responsible society will always attach higher value to long term well being of its population than to short term spurt in GDP. It may sound weird but perhaps this may the reason for slowed growth rate of Indian Economy over last few fiscal year. I may not gain many friends for commenting this.
2008 financial crises of US was an eye opener. If anything we learned from that period, It was that the boom of an unregulated economy might benefit consumers in the short run, it is a luxury often short lived. In the long run, profits that come from a unregulated market boom are ultimately condensed into pockets of few corporates but when those markets bust, common consumers are forced to pay the price.
Above was a clear cut indicative of keeping profits above prosperity. However if we have to create prosperity, many other issues needs to be tackled apart from profits. At times the other issues might have to be preferred over profits, but in the long run, there will be a definite payback.
Sustainability of business is the key. This sustainability comes from many factors. But for the sake of brevity, we will touch upon only a few in this write up. My favorites are a.) Processes, b.) Business Models and c.) Environment
a.) Processes: Time and again it has been proved beyond doubt that Incremental process and product innovations have brought us cleaner, more efficient, more socially conscious products and services. There are a huge number of ways that businesses can change, for example adopting cleaner production techniques, developing resource and energy efficient processes and examining the transportation of goods. As well as creating a lean operation and generating cost savings, these refined ways of working can enhance your reputation, building a positive image both with customers and staff alike.
People are critical to business success. Integrating good employment practices into business, such as family-friendly policies, flexible working and access to training, will help to create an environment where people feel valued and content. In today’s tight labour scenario, this could well prove crucial for ability to attract and retain the right people.
b.) Business Models: Having said what I have to say, it is also true that many novel or even radical new process or product innovations have fallen short of their potential because they were unable to compete within the constraints of an existing or traditional business model. This at times happen because more often than not vast majority of consumers and companies remain unwilling to pay a premium for such advances.
The biggest reason for companies to embrace business-model innovation is the threat that current models will ultimately slip or even fail. Examples of business models that have quickly transformed – or even become obsolete – abound across sectors: media (the decline of print), retail (the rise of online shopping and the sharing economy), education (the growth of online degree programs), music (the boom in digital music services), telecommunications (the proliferation of smart devices and associated services) and even finance (the creation of peer-to-peer lending). Many traditional business models that still remain viable today may rely on mispriced resources (from customer perspective) and other market distortions that make them more competitive than they would otherwise be.
To innovate within systems, companies need to be able to see and adapt to shifting market conditions and other changes by identifying trends and engaging stakeholders. Leaders must respond to, but also create, systemic change to build new markets while protecting themselves from any dramatic systems shifts that could present a risk. To do all this, companies must be willing to see beyond the obvious, short-term business case.
Rewards await those who can do it right. In health care, Narayan Hrudayala Hospitals, winner of a Financial Times’ Boldness in Business award in 2013, provides a good example. The hospital uses innovative process efficiency, revenue generation, cost structure and financing to make a profit while providing both rich and poor access to vital health care services. The company, along with others such as Arvind Eye Care, is changing the way medical providers in India think about the cost, quality and reach of their services. At Narayana Hrudayalaya, the average open-heart surgery costs less than $2,000, compared to well over $100,000 in the US.
c.) Environment: The greatest risk to the business sustainability is the struggle struggle and failure to articulate a vision of a future that is both prosperous while remaining within planetary boundaries. Until a business is able to showcase a paradigm shift, then no-one is going to feel safe letting go of the current system that is driving us towards the edge of an environmental and social disaster.
Given rising natural-resource scarcity and frail ecological balance, companies can no longer afford to ignore impact of their activities on environment. Forward-thinking business leaders already recognize that, in the twenty-first century, competitiveness will hinge largely on using natural resources more efficiently and cutting carbon emissions.
In addition to the obvious benefits, this approach will bring reputational advantages, as consumers – whether through education or first-hand experience – become increasingly aware of the environmental and social impact of the goods and services that they purchase. Companies that adhere to unsustainable, damaging practices and continue to pass on the associated costs to consumers may find that their customers start shopping elsewhere.
Many large companies have established sustainability goals and targets, and it is becoming increasingly common for these goals to address significant environmental challenges like climate change. More efficient use of natural resources, like energy, reduces operating costs and therefore makes business sense. In response to consumer preferences, some companies are also taking steps to reduce the environmental impact of their products and services as well as their supply chains.
Managers today are looking at long term sustainable values. It is a concept now deep rooted in the wellbeing of present and future generations. Businesses today are trying not to encroach upon the rights of future generations to meet the present needs.
People say about Bhutan’s focus on wellbeing as irrelevant as they’re just a little kingdom out there in the foothills of the Himalayas. There are questions as to whether the effort can be scaled up to deal with overdeveloped and highly industrialized nations? Of course, Bhutan’s endeavor is on a different scale but what it does is it simply opens up the imagination that this kind of thinking is possible and the tiny country is taking small steps in the right direction.