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Home» Notes on Noble Business » Business Economics » While Solving the Financial Mess, Let’s also Transform the “Business Model”

While Solving the Financial Mess, Let’s also Transform the “Business Model”

September 26, 2008 - Business Economics, Business Strategy, The Common Good
0

Can you imagine a worse scenario than business and government essentially colluding to achieve a societal goal (in this case “affordable housing”) but doing it in a way (providing high risk credit) that actually bankrupted major corporations in the process?

What’s the solution? Clearly government is realizing that they need to play an oversight and regulatory role, not merely an encouraging role to provide more credit to those who cannot afford it.

But what about business? What’s its role, and what should be its role? Sure, to get back to prudent lending practices, looking at the risk of each borrower. But let’s go further than that and adopt a new business model – a Noble Enterprise model that looks not just at profit maximization (by increasing the numbers of borrowers and rates) – but that looks at what the true benefit value that you are trying to bring to customers. Sure, the immediate value to customers is to provide them with credit, but what is the long term impact on the customer? That should be the concern of the lender as well as the borrower (and the regulator).

Such a Noble Enterprise does a couple of things that the traditional business model does not do.

  • For one, it looks at profit as just one objective and one measure of long term success. Other objectives of equal importance include serving other stakeholders – serving them all well and in concert;
  • It looks at dealings with customers not primarily as transactions, but rather as relationships. What is good for that relationship and that customer is the overriding concern – not merely how you can make another sales transaction and maximize the profit of that transaction.

When we have companies adopting this Noble Enterprise model – and some are already functioning this way in a range of industries – then we will be far less likely to have the kind of meltdown in the financial services industry, and will be on the road to serving all constituents well.

business model, financial bailout, role of business, role of government

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