In shaping a new business model, I came smack up against some very ingrained beliefs about the underlying economics of the business firm. Ones that, upon closer scrutiny, just didn’t ring true, and certainly didn’t seem to help executives manage the firm effectively.
The basic underlying economic assumptions about business have placed the material dimension at the center of the business. Financial, physical and technological assets get center stage, whereas people assets are “second class” citizens. Just ask yourself what gets cut in a downturn. Or what gets a place on the balance sheet – and what is merely an expense.
As I explored this dimension of business – its economics, I began to see two mindsets – an older, yet firmly entrenched Material Economics one and an emerging Human Economics one. I wasn’t espousing any need to “overthrow” the material one, but rather to augment it more powerfully with a human one.
(For some reflections on Human Economics, you may want to visit a site we established earlier this decade – www.HumanEconomics.org. Many others from around the world have already visited it.)
Carrying this strain of thought further, I began to explore the question: Where in the business model is there room for humanity, for decency, even of nobility – not just to allow it to exist (even if begrudgingly), but to build it hardwired into our business model?
I was intrigued with the notion that business ethics might actually make good business.
The socially responsible investing industry has since disproved the early skepticism that if “you limit your business options to only those that are ethical, by definition, you limit the potential return on investment.” Amy Domini and her Domini Social Investment fund – and others have blown that one away.
I kept seeing examples where people, doing the “right thing,” actually succeeded far beyond those counterparts who acted less honorably.
My mental model of the corporation shifted from the established one of material resources and their flow to one of human energy – and the human relationships through which that energy flows.
When that’s healthy, then the company generates lots of great financial transactions and increases the income shown at the bottom of the P&L and the assets on the Balances Sheet. (It’s akin to thinking of the Golden Goose only in terms of the eggs it produces and not in terms of its health.) Conversely, when that energy is weak and sick, it’s a very good leading indicator of future financial sickness.
As this model began to take shape, I called it the Noble Enterprise, because of both its noble purpose and its noble actions. I viewed this model not so much as what business should be but rather as what business would naturally become in order to effectively attract great performers, turn them on, serve customers – and achieve great financial performance.