I’ve had the pleasure of facilitating a CEO roundtable each of the last four years at the CEO of the year gala sponsored by Chief Executive Group. The 2021 winner was Merck’s Ken Frazier. This year, the roundtable explored the growing shift towards purpose. Specifically, the roundtable Topic was: “Purpose-driven: Implications for Strategy and Cross-Industry Collaboration”.
There are several broad themes that will receive attention in 2022. They include sustainability, health and wellness, social justice, and mobility (including electric and autonomous vehicles). At the heart of each of these themes is sustainable development, with dialog emerging in three broad buckets:
When viewed through a business lens, each bucket drives focus on sustainable development. The big question for the year is: how do you measure it? It’s one thing to say that sustainability, social good, and inclusion are on equal footing with profitability and growth – it’s another to realize it. A recent book via Alec Ross provides some ideas regarding measurement. Measurement aside, there are plenty of signs that focus will be there. In a recent article on ESG, author Stephanie Mehta Fast Company Impact Council provides insight from members of the council.
The signals are coming from every direction. To understand the future, signals illuminate possible paths. As I have written multiple times, history provides a wealth of signals. Looking at similar historical periods provides insight that feeds foresight. A book I recently completed did an incredible job of using history as a source of signals. In The Changing World Order, Ray Dalio explores all the major historical empires, the world order they presided over, and their eventual collapse. In doing so, he points to several signals that are shining bright red. Decision-makers would be wise to understand these signals.
In a post from 2019, I described the building blocks that established our modern society. It was convergence across multiple domains that shaped our current world. From the post:
A century ago, a convergence across domains ushered in unprecedented advancements in human development. As Robert J. Gordon describes, the special century (1870 – 1970) that followed the Civil War was made possible by a unique clustering of what Mr. Gordon calls the great inventions. The great inventions of the second industrial revolution significantly improved our well-being. In his view, the economic revolution of 1870-1970 was unique in human history, unrepeatable because many of its achievements could only happen once. What makes this century so special, is that these inventions altered what until then, was a life lived in misery.
Frank Diana – Convergence
I captured many of those building blocks in a visual that I use to tell this story (click on the visual to open in a separate window).
Prior to the 1980s (Specifically the post world war two era), there was a belief that business had a higher purpose than generating profits. This somewhat cyclical debate about the role of business is back again. Business in the post-war era served a broad set of stakeholders, not just the shareholder. Early business corporations formed in the late eighteenth and early nineteenth centuries were created specifically to create roads, canals, railroads, and banks. There was a focus on service, not maximizing investment returns. In these periods, business focused on stakeholder capitalism. Investopedia defines it this way:
Fifty years ago, Milton Friedman announced that the social responsibility of a business was to increase profits. So was born the shareholder value era. Friedman was pushing back on dominant movements of the day: the new deal and European models of social democracy. Global inequality issues trace back to this rise of shareholder value. A recent Article explores the topic and the resulting power of the stock market. The authors suggest that while the market and the wealthy soared, consideration of the interests of workers, the environment, and consumers declined.
As we close out 2019, the world is getting ready to gather once again in Davos-Klosters, Switzerland for the World Economic Forum Annual Meeting. The 2020 event is held from January 21st through the 24th. Stakeholder Capitalism is a major theme for this years event. Klaus Schwab, Founder and Executive Chairman of the World Economic Forum describes the need for a better kind of capitalism. In this recent article describing why we need the Davos Manifesto, he describes the three models of capitalism. The current dominant model is shareholder capitalism – a model that enabled hundreds of millions of people around the world to prosper, as profit-seeking companies unlocked new markets and created new jobs. This model is embraced by most Western corporations and holds that a corporation’s primary goal should be to maximize its profits.