Archive for June, 2007
Is Small Business In A Position To Overtake Established Multinational Corporations? Will Whole Systems Thinking Result In Sustainable Business Models?
In “Capitalism At The Crossroads: The Unlimited Business Opportunities In Solving The World’s Most Difficult Problems“, author Stuart L. Hart (SC Johnson Chair of Sustainable Global Enterprise and Professor of Management at Cornell’s Johnson Graduate School of Management) briefly discusses the concept of whole systems thinking. This section of the book, pardon the pun, got me thinking.
In most university and college business programs, students tend to learn methods of business analysis dependent of marginal thinking. Basically the analysis of incremental changes in costs and benefits. At some point, any additional cost fails to result in any additional benefit and any business model must be structured so benefits outweigh costs. This is the law of diminishing returns. As a former track athlete, I was familiar with this concept, but obviously from a different paradigm. At some point, putting in any more training miles will result in no further physiological adaptations. Moving beyond this point is just contributing to overtraining and increased injury risk.
While using marginal analysis makes sense in a great number of business situations, when a company’s objective is disruptive change or innovation such as in the case of developing sustainable business models to solve pressing world issues (hence the book’s title), it becomes a roadblock to success. This is where the concept of whole systems thinking comes in.
Hart uses an example taken from Natural Capitalism to illustrate the usefulness of whole systems thinking within the framework of sustainability-that of the home construction industry.
While acknowledging that the stringent rules and regulations of the construction industry may prevent pure whole systems thinking from ever occuring in the construction of a home, it suits the purpose of illustrating the point well.
The authors of natural capitalism argue that using marginal analysis to design homes actually fails in producing an optimal home. Marginal analysis actually requires that a conventional home is built first before integrating any energy-saving measures. Then, such components will be added until the costs of attempting to save any more energy costs more than is returned.
Now, using the logic of whole systems thinking, we can build a house from scratch that is superefficient and costs less than the unimproved original house.
Basically, what Hart is trying to protray here is the idea that the logic of whole systems thinking is need for disruptive innovation and he argues that it may “hold the key to future growth for incumbents in industries currently mired in low-growth, commodity competition…and hold the key to moving us toward a more sustainable world”.
As I go through the process of researching and planning my startup, ideas like this make me wonder what the future holds for the established multinationals out there currently that are accountable to their various stakeholders. How can they really “wipe the slate clean”, so to speak, and embrace the whole systems thinking Hart believe will be required for sustainable business success in the future? Will these giant monoliths that drive the western economies and to a certain extent the eastern ones as well through outsourced manufacturing etc., be able to be disruptively innovative enough to move toward the sustainable model of business that may not only be required to create the shareholder value that are accountable for, but also the welfare of the earth and its citizens? Will they be able to make the transition from their current conventional modes of business without disrupting the returns to shareholders they are required by law to provide?
I feel that this is one of the advantages new businesses have at the present time. We have the clean slate and the awareness to build on it a business that will not only profit, but solve the world’s problems. We have the benefit of building the superefficient house at a cost that is less that the conventional house built by the previous generations of entrepreneurs.
In my last posting I alluded to my current employer and my dissatisfaction with the environment I currently must work in. This company is a perfect example of a publicly traded multinational, working in a commoditized industry at a point where the only further way to provide shareholder value is to cut costs. They have moved beyond the margin and now have to backtrack at the expense of their employees, customers, shareholders, and as some are currently arguing, the environment in order to move in a forward direction. There is no room for whole systems thinking, sustainable business models, or corporate citizenship. What is a company like this to do?
I know that their are always externalities involved when it comes to the trade of commodities; one prominent example being the current strength of our Canadian dollar resulting in a huge decrease in sales when most of our product is exported, but once again this still serves to illustrate the example. Big, inflexible company can’t adapt to the changes required to solve world problems while earning future profits.
What I really wonder is what the current need for disruptive innovation in business in order for our world to be saved and economies, developed and developing, to grow means for the large multinational we see traded on our main stock exchanges today? Will they be around in 25 years? Will they end up being the downfall of humanity? Will the startups of today be the for-benefit, for-profit, publicly traded multinationals of the next generation? It remains to be seen I guess.
While I’m going to school and working on developing my startup, I have to pay the bills. I was married to my lovely wife Kaitlin almost 1 year ago, so going without an income is really out of the question. To make ends meet at the present time I work as an industrial butcher at a major multinational food processing company. It would be an extreme understatement to say I do not enjoy my job. However, working with this particular employer has formed a part of my developing business philosophy by helping me see the type of business I would not develop. The company embodies nothing comparable to my values as a person or as a player in the business world.
Now I know that most of us at some point in our lives are faced with a job, boss, or employer that doesn’t particularly appeal to us. Drawing on my experience, I’ve come up with a short list of ways to deal with: THE DEAD END JOB!
1. Dedicate your job to someone- it seems to me that the act of dedication gives a greater meaning and purpose to earning a living no matter how little you actually enjoy the means of earning.
2. If dedication to a specific person doesn’t work for you, work at finding out what your purpose in life actually is and then frame your dead end job with the greater framework of your life’s purpose.
3. Plan a holiday-even if you have no holiday time.
4. Structure your recreational time outside of work to accomplish as many things that are meaningful to you as possible. This may help minimize the size of the looming job specter and help relieve the inevitable dwelling on your waking up tomorrow for work.
5. Plan your next big thing, whether it be a backyard project or a new business. It helps you feel as if you are moving in a forward direction.
6. Appreciate the small things. Pay attention to the beautiful sunrise or the sound of birds or just the early morning peace and quiet on your way to the workplace.
7. Pack a good lunch. By that I mean one which you actually really look forward to eating, not one you threw together five minutes before you left the house.
8. Exercise. The physical activity does wonders for relieving the mental tension of having to drag yourself to work each day.
9. Be thankful you don’t live in a developing country and have to know what the meaning of extreme poverty is.
10. Learn how to influence those above you. Leadership isn’t always top down in a traditional corporate hierarchy.
11. Joke around and laugh at work. The time passes much more quickly this way.
12. Give a portion of your income to a humanitarian or environmental cause. You may not realize this, but if you actually have a dead end job, it is your responsibility to assist those who don’t have that opportunity to meet their basic needs.
If anyone has any other tips or suggestions, please leave a comment or email me at firstname.lastname@example.org.
Most of those who follow business are aware of the the phenomenal growth of the Chinese economy for years now. A sizable amount of western corporation manufacturing processes are outsourced there as well. Numerical statistics help us in realizing how much is really outsourced to China, but they do not do justice at all compared to these pictures by Toronto photographer Ed Burtynsky. They evoke in my mind, the drawings of MC Escher.
MC Escher’s Relativity
Here’s an article reinforcing the ideas put forth in “The End Of Poverty: Economic Possibilites For Our Time”. Not surprisingly the article is by Jeffrey Sachs, who also happens to author the book just mentioned. Yet another reminder of why I feel so strongly, the need for good old-fashioned capitalism in solving the world’s problems. By that I mean financial contributions by private business.
You tend to hear most Web 2.0 news with an American flavor. That’s my experience anyways. Well, on Read/WriteWeb today is an article discussing the most popular Web applications in Canada. Check out the article here. Interestingly, one of the the most popular apps, GiveMeaning, “exists to reduce the barriers separating people’s generosity from the problems that need attention, close to home and far away” according to the website. It seems Canada is ready to tackle those Millenium Development Goals!
Here’s what I think to be a fantastic example of design thinking, rather sustainable design thinking. I came across this company via Treehugger. Similar to Nau, Ecosystems Brand incorporates sustainable design in to every facet of its product, from its design to the the method of shipping. As Treehugger states, the company strives to “provide eco-effective products that generate positive effects on the ecology, economy and social equity of the system they inhabit”. Here are the five steps illustrated on the Ecosystems Brand website describing their “cycle of responsibility”:
1. Responsibility development from start with acquisition and use of sustainable materials.
2. Automated manufacturing of product within region for large orders minimizing fuel waste.
3. Uses flat-pack shipping method to reduce packaging time and amount of material used.
4. Tool-free, snap-together assembly reduces time and monetary costs of assembly.
5. No wastage of product materials at end of first life as product materials are either recycled or reclaimed.
(Picture excerpted form Ecosystems Brand website)
I just finished a truly inspirational book by Jeffrey Sachs, macroeconomist and economic advisor, entitled “The End Of Poverty: Economic Possibilities For Our Time“. Sach’s gives a great conceptual overview of the world economy and how it connects and functions. He also lays out an ingenious plan to rid the world of extreme poverty by the year 2025 using the United Nations Millenium Development Goals (MDG’s) as a foundation.
Seeing a need for corporate involvement here, as world governments and relief organizations have consistently failed in properly aiding developing economies, I have requested web space from Barnraiser.net in order to incubate a business that actually has a purpose, besides making a profit, to contribute to the fulfillment of the original MDG’s that ultimately aim to halve extreme poverty in the world by 2015.
Greatly influenced and inspired by several conversations I had recently with a few incredible people, as well as some important works of literature, I have decided that there is no more time to waste in moving to develop this initiative. What exactly it will look like when fully developed, I’m not sure yet, but the time to start is now.
For any readers of this blog, I would deeply appreciate your support, thoughts, comments, ideas, and feedback.
Yes, I firmly believe that one person can change the world, and being fortunate enough to be born and raised in a democratic, developed, rich country such as Canada, I am responsible for using the gifts I’ve been given in ways that will 1) provide adequate financial support for my family, and 2) change this world for the better.
Stay tuned for updates.