Capitalism, After The Election - Forbes: " . . . Instead of blaming the ratios, we need to join theorists like Peter Drucker, Roger Martin and Ranjay Gulati as well as practitioners like Jack Welch who have recognized that the very goal underlying these ratios is wrong. Fixing the goal of the firm on making money for the company and its shareholders used to work but is now “the dumbest idea in the world”. The ratios are merely the means of implementing an obsolete idea. We need to root out this obsolete idea and recognize that the goal of making money for the firm and its shareholders leads systematically at the microeconomic level to the destruction of the firm and at the macroeconomic level the destruction of the economy.
Maximizing shareholder value: the dumbest idea in the world . . . By 2010, when all those elements were in place, the world was ready for customer capitalism. Roger Martin writes:
“We must shift the focus of companies back to the customer and away from shareholder value,” says Martin. “The shift necessitates a fundamental change in our prevailing theory of the firm… The current theory holds that the singular goal of the corporation should be shareholder value maximization. Instead, companies should place customers at the center of the firm and focus on delighting them, while earning an acceptable return for shareholders.”
If you take care of customers, writes Martin, shareholders will be drawn along for a very nice ride. The opposite is simply not true: if you try to take care of shareholders, customers don’t benefit and, ironically, shareholders don’t get very far either. In the real market, there is opportunity to build for the long run rather than to exploit short-term opportunities, so the real market has a chance to produce sustainability. The real market produces meaning and motivation for organizations. The organization can create bonds with customers, imagine great plans, and bring them to fruition.
Similarly in
Reorganize for Resilience, Ranjay Gulati writes:
Those companies built around an inside-out mind-set—those pushing out products and services to the marketplace based on a narrow viewpoint of their customers that looks at them only through the narrow lens of their products—are less resilient in turbulent times than those organized around an outside-in mind-set that starts with the marketplace, then looks to deliver creatively on market opportunities. Outside-in orientation maximizes customer value—and produces more supple organizations. Embracing an outside-in perspective—focusing on creatively delivering something of value to customers instead of obsessing over pushing your product portfolio—builds an inherent flexibility into organizations.
. . . Yet customer capitalism isn’t easy for traditional managers to implement because it requires a fundamentally different way of managing. It’s a new ecosystem, a new way of speaking, thinking and acting in the work place. It implies not just a new organizational goal, but also a number of other changes in managerial behavior:
a shift from controlling individuals to self-organizing teams;
a shift from coordinating work by hierarchical bureaucracy to dynamic linking;
a shift from a preoccupation with economic value to an embrace of values that will grow the firm; and
a shift from top-down communications to horizontal conversations."
Read also:
The dumbest idea in the world: maximizing shareholder value
The phase change to the Creative Economy
The identity crisis of American capitalism
Is delighting the customer profitable?
The best-kept management secret on the planet: Agile
The five big surprises of radical management
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