16 May THE PURPOSE OF ENTERPRISE
By Daniele Di Fausto
Data is the raw material changing our time, though we still have no idea how many new things will be created, nor which new concepts and classes of thought will be introduced. Within to the scenario of profound, radical and uncertain change we will encounter, two topics catch my attention.
The first is connected with the word “learning“, in particular with human learning, brought by the novel fact that also machines begin to develop the first learning skills. Learning, knowledge, meaning, philosophy are facing completely new scenarios and increasingly have a central impact in the development of society. The second point is the impact that this new transformation is going to have in the economic world, in the corporate environment, or as I like to name it, the world of enterprises, to emphasize the present difficulties operating in extreme and changing uncertainty. The two words, learning and enterprise, are intimately connected in our global world that has profoundly changed the known production models. We have gone beyond the Fordist organizational work system, characterized by the internal distribution of functions and roles developed through a specific vertical hierarchy. We have now reached a horizontal production structure based on the so-called knowledge economy, that is, on cultural capitals. In the knowledge economy, the finite resource paradigm is no longer meaningful and is replaced by the economy of abundance. In this context, economies of scale, so necessary to reach competitive advantage, give way to what we can define as large scale learning economies. Businesses will increasingly need to incorporate a heroic vision and an energetic action of their vital impetus. The ultimate goal, the purpose of a company cannot be just a marketing slogan to hang on the walls of offices or to be written on website pages to attract new talents and customers. To this regard, the CEO of one of the largest investment funds in the world – “Blackrock” – has clearly expressed that his company will no longer invest in businesses that do not have a transformative and sustainable impact over time. The need for meaning, the need for philosophy becomes essential from the concept of the business itself. This does not mean that the company stops pursuing economic sustainability objectives, rather extends sustainability objectives to the causes, the main challenges that the world faces for its sustainability. The United Nations Organization has defined the 17 global objectives (SDGs) and is encouraging the adoption of good practices by the corporate world. Despite excellent intentions, we are observing how difficulty is for companies to tune in as an organization on the present.
There is a huge gap between the declaration of intent and the incorporation the Purpose into all corporate moments. In my opinion this gap specifically derives from two contradictions which have not yet fully resolved. The first contradiction refers to the need of private enterprise to have a public impact. All company valuation and performance metrics are geared towards annual profit. To mitigate this effect, impact reports are being established, that is, sustainability balance sheets incorporating the positive consequences of corporate action on civil society. Though definitely a first step, these reports still remain enhancements and not replacements of the existing traditional ones.There is work to be done on their integration. The second contradiction refers to the decreased tolerance for mistakes in the current phase of uncertainty and risk. Over the past ten years, the worldwide average life of a CEO within the same company has dropped from 7 to 5 years and now reached and average of 2.7 years. The medium/long-term investment is not compatible with the pressure to achieve very short-term results. It is difficult to find investments with such a short return. It seems like there is an implicit relationship: increasing complexity brings forth uncertainty growth, and uncertainty lowers confidence to find solutions to new problems. Precisely for this reason it is imperative that the company’s “Purpose” is not restricted to the C-level, but is widespread to the entire corporate population and incorporated into all company policies, procedures and rituals. Therefore, overcoming the previous contradictions can take place only if companies transform themselves from closed to open systems, whose purpose is not the balance between private and public good,but the realization of the common good. Furthermore, the concept of leadership itself will have to evolve from an “egoistic” leadership to an “us” leadership, a conscious and responsible leadership to create the system conditions for the individuals and systems to evolve and grow in a shared path. We are here to begin this journey. We do not propose to create an exclusive club for top managers or a private circle of intellectuals. Rather, we propose a journey open to all those who feel the urge to undertake an enterprise in the dark, deep and fascinating sea of our time.