In 2000 celebrated management thinker Gary Hamel published his book “Leading The Revolution”. In the preface Gary enthusiastically wrote “This is a book about innovation – not in the usual sense of new products and new technologies, but in the sense of radical new business models.”
In “Leading the Revolution” both Enron and WorldCom are cited as examples of exactly the type of interesting, forward-thinking innovative companies that we should be looking at and that leaders should be emulating. Within a year Enron had collapsed in a fiery ball, wiping out billions and decimating thousands of lives and jobs, pension plans and investment portfolios went up in the collateral damage that also included the demise of auditing firm Arthur Andersen.
By 2002, the US government had enacted Sarbanes-Oxley as a means to curtail the dubious accounting practices and layers of nefarious (and illegal) corporate executive behaviour that had lead to the Enron and WorldCom debacles.
My intent is not to deride Gary’s excellent work and his management thinking. Rather it is reflective of a scenario that I believe we’re facing yet again – with exactly the same type of horrendous consequences that necessitated the creation of SOX.
An idolatry of corporate behemoths – except now we use the more glamorous “Disruptor” phrase than the passé term “Innovator”
An ambivalence to the societal impact of these “Disruptors” or a nonchalant shrug and “you gotta break a few eggs to make an omelet” missive.
In the past six months we have seen the world’s most popular social media platform go from darling to derision because of their ad revenue business model. A business model that, not surprisingly, prompted Facebook to share customer data with numerous application developers who, subsequently, used that data for very questionable activities.
We have also seen the Alpha Male of Unicorns – UBER – go through an incredibly tough period too. Allegations of sexual harassment and a toxic work environment lead to the ousting of original CEO Travis Kalanick but, in recent months, we’ve seen UBER’s growth stagnate as more and more cities attempt to regulate the “ride-sharing program”. Why do we allow such vague descriptors when Uber is really nothing more a glorified taxi service with a better dispatch algorithm nestled inside a “cool” app? Is that language merely to avoid the cost and the need to comply with regulatory frameworks put in place to ensure passenger safety?
More troubling though is that UBER has been directly called out for creating a legion of drivers who must sleep in their cars in shopping malls because they can no longer make a living wage. In New York City, UBER and fellow ride-sharing service Lyft have even been singled out as contributing to at least four taxi driver suicides.
Taxi drivers hold a rally in New York City with 4 coffins to symbolize drivers who’ve committed suicide.
In Facebook’s case, their ad revenue and publishing model is at the core of their problems. Ironically, to this day Facebook still vehemently denies that they’re a publisher at all hiding behind the more innocuous descriptor “a platform”. Mark Zuckerberg’s recently sparred with Tim Cook of Apple claiming that some people can’t afford the internet which is why Facebook will always be free. Sadly, as the Cambridge Analytica story highlights, free comes at a significant cost.
The UBER model lowered the barriers to entry to the transportation sector, subsequently flooding the market to the point that supply far exceeds demand. As any 1st Year Economics student will tell you, that scenario typically leads to a downward pressure on price…which ends up in a downward pressure on cost-of-goods. No surprise that the drivers – the people actually providing the core part of UBER’s service – are the ones left to carry the can. And now, as UBER aggressively pilots autonomous driving options, the impact on those same drivers couldn’t be more stark. For all of us energetically using their service, we need to look beyond the convenience and take a long hard look at what they’re delivering – and where the real cost lies.
How are we still here?
How, less than 20 years after Enron and WorldCom, do we still have organizations celebrated for their disruptive business models but never evaluated on their societal impact?
Why are we so quick to put leaders like Zuckerberg, Sandberg and Kalanick on a pedestal yet so slow to scrutinize if their business models are actually advancing us in meaningful ways?
If there’s been something positive to come from the Cambridge Analytica scandal, it is that I am seeing some real signs of change.
And that gives me hope.
For the optimist in me, one such example of hope comes from Laurence D. Fink, CEO of investment firm Blackrock who, in early January, warned large corporations to show meaningful and measurable societal impact if they wanted any support from the firm. When your firm manages over 6 Trillion then you’ve got a very big stick to ensure your message is heard.
Fink is not the 1st to extol business leaders to follow the “Triple P Bottom Line” philosophy of measuring a business in terms of People, Planet and Profit but he’s certainly been the most active in terms of holding organizations accountable for their actions.
But there is more that needs to be done in my humble opinion.
Here in Canada we risk nurturing a generation of future business leaders who have more regard for winning a Hackathon than they do for the impact of their business model. This is a troubling trend.
On one hand we risk creating and building the types of businesses – or business thinking – that created the Facebook and UBER scandals we currently face.
On the other hand, we have a profound responsibility to these fledgling leaders to be ruthlessly tough on their ideas and build their acumen and their resilience too. Sadly, all I see today is a relentless charm offensive of government selfies and stirring speeches about the virtues of entrepreneurship at all costs. That kind of vapid feedback is why we’re in the place we are. In truth, not every idea is a good idea. Not every business deserves accolades and investment. The ultimate disservice we can pay our future leaders is to fill them with faint praise and platitudes.
We need to ensure that our business leaders can discern the difference between the light at the end of the tunnel and an oncoming train.
We should be demanding more world-class ideas of them.
And they should expect more scrutiny from us.
I profoundly believe that business can be a force for good in the world.
That profit isn’t a dirty word – but how that profit is earned is of supreme importance.
That businesses and governments should be working together – not working at cross purposes – to create positive societal impact.
Stephen Hawking, whose recent death saddened me immensely, once said “We are in danger of destroying ourselves by our greed and stupidity. We cannot remain looking inwards at ourselves on a small and increasingly polluted and overcrowded planet.”
I hope that we can prove him wrong.