Sustainable Business Transformation

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Posts Tagged ‘Convergence’

That Old Debate Again: Profit Vs. Purpose

Posted by Hemant Puthli on April 15, 2010

McKinsey & Co. launched a website called “What Matters” some time ago, where they aggregate “knowledge derived from convening some of the best thinkers from around the world” (in their words).

“The Debate Zone” under their “Social entrepreneurs” section recently featured the topic Should social entrepreneurs adopt the language and practices of business?with expert opinions presented on both sides, and inviting reader comments. Before reading the rest of this post, it may be useful to click on the link above and browse through the two main arguments presented by Matthew Bishop, responding in the affirmative, and by Bunker Roy, against the motion. My comment is reproduced below and addresses the arguments presented by both:

There should be little doubt in anyone’s mind that the methods, practices and disciplines of business management are universally applicable to all kinds of organizations/ initiatives/ projects, and are useful in improving the likelihood of success when applied to just about any human endeavor – be it in the private sector, public sector or social sector.

‘Best Practice’ business is not just about scalability, it is also about effectiveness and efficiency at any level of operation. About doing the right thing and doing it right. It is about a having a sound strategy and executing it well, regardless of whether you’re a small business or a mega-corporation, whether you’re fighting a war or fighting for peace, and whether you’re doing it for money or out of love.

Management sciences are not evil; profit is not a bad word. Inefficiency, corruption, exploitation and malpractice are. And they can be found in any organization. Social enterprises are not inoculated against such malaises.

Ethical rectitude is not the privilege of the social sector alone. A business can be run with as much integrity as an altruistic mission. Yes, with as much fire in the belly too! Passion is not a prerogative of the “purpose-oriented” (as opposed to the “profit-oriented”). There is as much fun (and romanticism) in starting a technological revolution from a modest suburban garage as there is in starting a socio-economic one from a rustic mud hut.

One tends to polarize such topics so that they result in good polemics, but quite frankly, both extremes are undesirable. Profiteering is as undesirable as sloppy philanthropy. Charity brings its own issues with it as elaborated in this post: http://bit.ly/HPA_Charity

It is not impossible to seek profit through purpose. It is not so difficult for an enterprise to be purpose-driven and yet be profit-oriented. As individuals, we learn to achieve through our contribution to others. Similarly, mature businesses will seek to be successful through the success of their customers, stakeholders and other participants in their ecosystem.

At the time of posting this blog-post, my comment was submitted for moderation and yet to be published at the McKinsey site.

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Posted in Governance, Organization, Strategy | Tagged: , , , | Leave a Comment »

Convergence: Evolution of Sustainable Business

Posted by Hemant Puthli on August 26, 2009

The diagram below represents the three generations of evolution of organizations and corporations, ending with convergence, in the 3rd generation.

HPA - Evolution of Sustainable Business

Historically, through the Industrial and post-Industrial era, we have seen the rise (and rise) of the traditional ‘profit-oriented’ corporations whose main objective was to create wealth for its stockholders and investors. Several such corporations also felt a moral obligation to give back to society, and accordingly funded charitable initiatives to help and support various elements of society, mainly the underprivileged communities. In more recent times (especially post WW II), we saw the emergence of the traditional ‘purpose-oriented’ organization whose main focus was on social development and/or environmental protection. In the organized sector, some of these were Government-funded donors of ‘aid’ while others were Non-Government Organizations (NGOs) funded privately. In the unorganized sector, individuals, associations, clubs etc. took up social and environmental activism towards the same or similar objectives albeit at a smaller scale and perhaps more locally focused.

The second generation (mostly in the present time) is manifesting two trends: (a) the move towards efficiency and competitiveness on the part of the purpose-oriented organizations, and (b) the move towards responsible citizenship on the part of profit-oriented corporations. Purpose-oriented organizations are focusing on cost management, productivity and other parameters of efficiency and effectiveness (‘cheaper / faster / better’) that have typically been characteristics of the traditional approach, culture and discipline of mainstream business. The emergence of the ‘social enterprise’ and ‘social entrepreneurship’ is a key milestone in this journey of evolution. Social enterprises are just like other enterprises, except that they focus on social causes and serve ‘customers’ of a different type. On the other hand, profit-oriented corporations are taking on more responsibility for their actions and for the impact of their operations on the environment as well as their host societies in locations where they operate. This is visible through their Corporate Social Responsibility (CSR) programs and ‘Green’ initiatives (in syncretic co-existence, but seldom integrated with the mainstream business), which  are signs of a growing awareness and the sense of urgency to respond to challenges in these key areas, on the part of the corporate sector.

In a not-too-distant future, we will see a confluence of these two streams of evolution, converging into a single type of organization / enterprise — the sustainable business. The sustainable business will seek to make a profit, but through a purpose. It will try to be socially relevant, environmentally responsive and economically viable all at once, in a cohesive fashion. It will develop its own way of integrating what were hitherto seen as diverse and contradictory objectives, into the holistic goal of sustainability.

Posted in Economics, Environment, Organization, Society, Strategy | Tagged: , , , , , , , , , , | Leave a Comment »