To achieve this Copernican-like revolution, giving rise to more complete and higher levels of performance, a number of practical steps must be fulfilled that were explored in depth by the speakers and delegates:
Specifically, the firm must map the ecosystem in which it operates, identify the most critical and relevant external pain-points it should internalise (a strategic decision), and acknowledge that the firm is not at the center of the ecosystem, but rather is a stakeholder among other stakeholders in service of a greater purpose. This methodology in the Economics of Mutuality is called Ecosystem Mapping & Shaping.
The firm must also shift from conventional notions of profit and management accounting practices to the notion of mutual profit that includes non-financial as well as financial value. This approach is based on the understanding that the firm not only creates and / or depletes financial capital, but is also involved in creating and / or depleting human capital, natural capital, and social capital, all of which have value and contribute to the overall value creation of the firm. The value of these non-financial forms of capital is essentially squandered by the firm today because it is not measured, meaning it is not managed intentionally.
This new mutual profit approach is made possible by two breakthrough insights that the Economics of Mutuality initiative has uncovered. The first is that a small number of simple, stable and actionable non-monetised metrics can account for different types of capital – based on the principle of respecting the nature of each capital, rather than attempting to convert them all (inaccurately) to a simple dollar equivalent, which would overvalue one form of capital (financial) artificially vis-à-vis the others. The second is that non-financial capitals are positively correlated with financial capital, meaning that when a firm intentionally invests in the social, human and natural capital of the ecosystem in which it operates, its financial performance (in terms of growth and profits) is higher than if it just focuses on financial profit maximisation in the short term. These findings are supported by the outcome of a number of Economics of Mutuality business pilots noted at the forum.
Finally, the impact of new performance metrics, more mutual management practices, and the change of focus from profit to purpose was discussed in terms of implications for corporate governance and ownership. For the Economics of Mutuality to deliver its full potential in business, continuous reinvestment by the firm in the social, human and natural capital of its ecosystem is needed, as well as greater attention to value-creation for stakeholders rather than just for shareholders. These factors all need to be prioritised differently to reflect the value each contributes to attaining the purpose of the firm.
Main Session Recordings
Friday 18th May
Saturday 19th May
This transformation at the core of business will require reforming the underlying frameworks and assumptions that influence and structure how we do business today. Although there are today some notable purpose-driven leaders in high-profile companies, and some truly aspirational corporate social responsibility initiatives, there is a need to ensure that mutuality and responsibility in business are embedded at all levels within the firm (and not only at the top or at the periphery) – through the alignment between the firm’s purpose and the higher purpose of the ecosystem in which the firm operates, the enactment of new performance metrics accounting for the value creation and depletion that the firm is responsible for and, ultimately, the alignment between the firm’s purpose and its management accounts.
This transformation will be achieved through different means starting with business and management education, and influencing the behavior of next generation MBA students as they move into the workplace. MBA students participating in the Forum highlighted this need to adjust the curriculum of business schools. One MBA participant ended her inspiring talk with an impassioned plea for action that captured the imagination of many at the forum by asking, “If not now, when? If not us, who?”. This can be achieved in part in higher education through a greater focus on critical thinking and creativity -- challenging rather than just accepting the status quo that the current dominant model of financial capitalism the only way or the better way. Another option discussed at the Forum was how the trend in business education of establishing separate technological institutions could be reversed, with increased focus insead on interdisciplinary learning and thinking, in particular, by exploring humanities and the arts. As mutuality itself is built on the idea of reciprocal relationships that build trust, the way ahead may also be through increased engagement with and learning from others, at both an individual and organisational level.
This transformation will be fully materialised when businesses experience on a large scale the superiority of mutuality-based business models in delivering business performance (even in the short term) – thus demonstrating practically that the current financial capitalism approach, while valid for a period of time, has today become inefficient, depriving business of profitable growth opportunities and of the incentives to become more responsible actors in society.
This transformation will finally be fully embedded in society when policy makers evolve the law with regards to the status of the firm in order to reflect the new responsibility that business size and global influence confer on corporations in today’s world.
This transformation cannot be something done by business to the world, but with business in the world. It is both a duty and an opportunity for business leaders, education and policy makers.