Defend Truth


Losing confidence and changing business models are two different things

Prior to being appointed as the Director of the UCT Graduate School of Business, Prof Baets was Professor of Complexity, Knowledge and Innovation, Associate Dean for Research and MBA Director at Euromed Marseille Ecole de Management. Previously at Euromed Marseille he was Director of Graduate Programmes. Before joining Euromed Marseille, he held the Philips Chair in Information and Communication Technology and he was director of NOTION (the Nyenrode Institute for Knowledge Management and Virtual Education) at Nyenrode Business University in the Netherlands. He has held academic positions in Belgium, France, the Netherlands and Spain.

The Reputation Institute 2012 survey shows South Africans are losing confidence in the leadership in the private sector. Great. Now we can start to have the kind of robust debate this country and the world so badly needs about the true purpose of business. And hopefully this will amount to something important and meaningful.

The findings in the Reputation Institute survey tell us two things. Companies can no longer pretend they don’t have and aren’t expected to have, a positive role to play in the general wellbeing of society. And people are beginning to notice that business has had a negative impact.  

It’s almost as if overnight people have started to see through the cloak of PR and are now demanding more from business. All of a sudden it’s clear where a large chunk of the blame lies for the situation in which we find ourselves.

The world is in trouble. The seas are being poisoned. Masses of people are being exploited for the profit of a few. Europe is collapsing. The worry is that we could go the way of Greece not Zimbabwe anymore. A sudden draining of blood and complete shutdown followed by a raging internal combustion leaving nothing but ashes.

People have lost their patience with business and its exclusive focus on shareholder value. And so the time has come for a serious discussion that, if handled correctly and if followed by action, could revolutionise business.

The problem with a survey like this is that often it leads to the same discussions about ethics. And my experience has been that fundamentally people are ethical at home or alone with themselves, but as soon as they enter the business environment they change. They become unethical because the environment demands it of them. The corruption is in the design, in the model.

It is, therefore, important that we change the model. While the Reputation Survey is based on perception, it is important that businesses do not respond simply by seeking to shift that. Perception is, after all, a malleable thing with the right marketing budget. If the discussion goes the usual way and the aim is to change nothing but perception, then corporate marketing teams will be going mad to green wash and social wash what they do. They’ll put forward very agreeable, convincing leaders to sing about how their respective companies positively influence the socio-economic standing of a country. But ultimately nothing will change. A few people will be dragged out in front of the crowd for unethical practice. There will seem to be a shift in business, but the shareholder will, by design, forever be put ahead of society when the time comes to enjoy the spoils.

And herein lies the interesting opportunity. If we steer clear of the easily-manipulated ethics/perception debate, we can start to talk honestly about business, to really look at it, dissect it, keep it naked in our critical scope and truly figure out what it is, how it works, what its purpose has been and what value it brings to the world. Then we can start to redefine it, change how it works, give it a new purpose and rethink what we consider to be “value”.    

For me, business today should not be about making money. It should be about creating value and not just for a favoured few shareholders, but for all stakeholders. That is a huge shift in thinking and could lead to an astonishing shift in the business model. The problem is none of us, including business schools, have any idea of what this alternative really looks like.

It has been called inclusive business, but how would it work? What needs to happen? Who needs to be involved? How will it be sustained?

The space is wide open for innovation in finding new inclusive business models that actually create value for society at large and even start to tackle some of the tremendous social and environmental problems that confront us. This is the challenge for us now – to define a new road, a new role for business.

If South Africans are losing confidence in business leaders, it’s because they assume that the right leader will make all the difference. That is true if that leader has come to dismantle a faulty yet extremely resilient business model and to explore more innovative business models that create more value for more people. But it is not true if that leader is merely there as a PR decoy to make subtle changes in people’s perceptions of business, while nothing fundamentally changes. DM

Walter Baets is the director of the UCT Graduate School of Business.


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