Published: 5 July 2020
Words: Simon Middleton
Further reading: The Contributive Business
Just over a year ago, in February 2019, I wrote a series of articles on the theme of what I called The Contributive Business. I also published it in e-book form (more a short e-pamphlet than a book).
Given the extraordinary circumstances of the present time, and some of the responses to the Covid 19 crisis, and its dramatic effects on society and the economy, both now and in the future… the idea of The Contributive Business suddenly seems even more relevant than it did a year ago.
With that thought in mind I am publishing the whole of the pamphlet here as one piece.
Bear in mind, if you decide to read it, that I haven’t edited it at all from the original. There’s no mention in it of the virus. [editor here – thank God for that!]
Some of it will no doubt seem simplistic, naive or plain foolish… but I hope it will contribute to the growing debate about what business is for, how it should behave, and what role it can and should play in society.
Please feel free to comment and challenge. But please be kind.
It is taken as a given, when we talk about business, that all business is defined in part by its need to be competitive: that is to compete against other businesses offering similar or the same products or services to the same potential customers. We even talk of businesses having to compete for share of attention and for share of wallet with other businesses which are in completely different sectors.
We talk about the need to compete on price, and to compete on service, and we talk about standing out from the competition.
Because making a profit (that is earning more money in sales than it costs to run the business) is so core to our concept of what business itself means, we always go further, by making the assumption that there is at least one other business, and probably many more, that have amongst their objectives the desire and need to deprive us of our custom, and thus of our profit. Like us, those ‘other’ businesses are competing, and competing has the objective of taking something away from the competitor (the opponent).
The popular working hypothesis of business owner and managers is that we must always be competitive, for to be otherwise we believe will certainly result in failure, either imminently or some way down the road. Somewhere up ahead, we are certain, perhaps just out of sight, lies a competitor with the intent and the means (better product or service, lower price, dazzling innovation, or more effective marketing effort) to put us out of business. We might be in business now, but if we don’t compete effectively and always, we will ultimately be out of business.
However, perhaps the hypothesis that competition is an absolute given is incorrect. Perhaps there is more than one kind of business. Just as there are businesses for which competitiveness is a necessary focus, perhaps it is possible for a business to put its focus elsewhere. Perhaps it is possible for a business to focus not on competition but on something else.
I’m going to refer to this other kind of business as Contributive. So, for the sake of this discussion, we have two kinds or types of business.
The first is the Competitive business. The kind we are all familiar with, whether huge global corporations or tiny so-called micro-businesses. This is the dominant form of business and ever has been. The second is the Contributive business: a different approach to business, requiring a different attitude from the entrepreneur and the investor.
Competitive and Contributive businesses have much in common. Both types of business do something which is of value to a potential customer. They manufacture, or they process, they serve, they problem-solve, they invent, they labour: and then they market and sell. It might be something tangible or intangible: made of concrete and steel, or of circuitry or physical effort and skill, or of ideas.
What they make or do is not the thing which sets the two business types apart. The difference lies in why and how they do it.
Both types of business need to generate a surplus of funds: to make a profit. But the making of profit itself is not the point of difference between a Competitive business and a Contributive business: rather two aspects of profit. These are: the rules by which profit is created, and the use to which profit is put. The Competitive business has one attitude to the rules and use of profit: the Contributive business has a different one.
It is important, before going any further, to note that Contributive businesses might include non-profits and social enterprises. But it is possible for businesses to be Contributive without necessarily being non-profits or social enterprises. So Competitive businesses and Contributive businesses both have owners and both aim to make profits.
Since the industrial revolution and the rise of capital the focus of all business has been on competition, because it has been perceived that only by vigorously competing can any business survive and thrive. In fact competition as a business strategy goes back much further in history. People in trade/business have always competed with one another in a huge variety of ways: through price, through visibility, availability, quality, speed of delivery, continuity of supply, product innovation, tariff barriers, advertising, brand-building, bribery, and piracy. They have competed too through attempts at market domination, resulting in cartels (which then collaborate but ultimately compete with each other), and through creation of monopolies. They have competed through military action, via tribal wars, with corporate ‘private armies’, territorial acquisition, the building of empires, the defence of exclusive trade routes, and of course the enslaving of particular classes of people (captured in war, plundered from other countries and continents, raised through generations). Every conceivable strategy and tactic has been used by humankind to achieve greater competitiveness and thus greater profitability.
If it has always been thus, then many would say it will always, of necessity, be so. But does the longevity of the competitive approach to business and trade really mean that competition is inevitable? Is competitive-focus the only possible focus for business? Is it even the most effective focus? The past is not always the best guide to the future.
In his slim but dense book Finite and Infinite Games (Free Press, 1986) history professor James Carse describes two kinds of game, in these words:
There are at least two kinds of games. One could be called finite, the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.James Carse
Carse applies his analysis to society, to culture, to all of human behaviour. It is a useful lens through which to look at the two kinds of business that I’m describing.
Competitive businesses play a finite game: because they are focused on winning. The driving impetus of the Competitive business can be said to be the drive to win, not because of the need to achieve and maintain profitability (a need shared by Contributive businesses) but because of the focus on doing so through competing.
The need to compete in turn drives all sorts of particular behaviours, including the following. A focus on minimising costs (which of course means limiting wages as much as possible). A focus on minimising taxes to be paid. A focus on the maximum exploitation of the cheapest viable resources. A focus on increasing the dividends payable to shareholders and owners. A focus on the payment of disproportionately high salaries and bonuses to the most senior executives (as part of the ‘war for talent’).
Contributive businesses, by contrast, play an infinite game: because they are focused, not on winning, and therefore not on competing, but on continuing to play: continuing to contribute.
I have called conventional businesses (those focused on competition) Competitive businesses, and I have called the alternative type (those focused on something other than competition) Contributive businesses.
I have also emphasised that Contributive businesses can still be interested in making a profit (which is to say they are not necessarily non-profits or social enterprises). The distinctive nature of Contributive businesses lies in the rules they create for themselves to follow in the creation of profit, and what they choose to do with their profit.
In this article I will elaborate on the nature of the Contributive business, and compare its characteristics to the Competitive business. In the next article I will explain why the time is right for a Contributive approach to business, indeed why the circumstances of our world make it imperative that the Contributive model grows.
The defining characteristic of the conventional, Competitive business is the need to focus on competing in order to win the game of business: in order to make the maximum achievable profit.
Competition against other businesses is seen as vital because it is considered that there is a finite amount of ‘spend’ available from potential customers and a virtually infinite number of businesses ready and eager to fulfil those customers’ needs and wants.
Competitive businesses can therefore be considered a finite game (in the terms of James Carse, Finite and Infinite Games, Free Press, 1986) because it is about winning. Every sale must be won by a particular business, and thus lost by its competitors. I discuss finite and infinite games in the first chapter.
Competitive businesses that fail to win sufficient sales and to generate sufficient profit eventually lose the game of business and are forced to leave the field of play (they go into administration).
Some Competitive businesses approaching a position of failure are ‘rescued’ by other companies or individuals who, for a variety of reasons, see the acquisition of all or part of the failing business as an opportunity (if it’s a part then it’s always the profitable part). Perhaps the failing business can then come back into the game, and may even begin to win under new management strategies. But this does not mean that somehow the business has moved from finite play to infinite play. Rather it has started another finite game: because its destiny still rests on the need to keep competing against other businesses.
When such businesses are revived, it is not in order for them to play for the sake of play (to serve customers, to support their employees, to enhance the world – i.e. the infinite game). Instead they have been revived in an attempt to squeeze maximum profit out of the remaining potential in the (usually stripped down) business.
So Competitive businesses are focused primarily on competing. But the focus of Contributive businesses lies somewhere very different.
Contributive businesses are focused, above all other considerations, on making a positive contribution to the world in which they operate. To put it another way: they want to make the world a better place.
The contributions they want to make cover a range of aspects:
In all these areas it is the intent of the Contributive business to make a positive contribution, thus…
This might seem a simple list of ‘nice things for a business to do’: but it is actually much more than that. This approach changes virtually every decision a business makes: and every outcome. So for a Contributive business…
Why is the Contributive business concept such a vital one? Why would I argue that it describes the most important project of our time? Because business drives economy, economy drives politics, politics drives the world. And the world is at a fork in the road. A dangerous one.
There are several aspects.
Environment. The truth of the massive and existential threat of the global environmental crisis is now almost entirely accepted: disputed only by ill-informed ideologues. What little credible dispute remains is focused on the degree of threat, the pace of acceleration, and whether or not we can do anything to ameliorate the damage done and prevent us from all going to hell in a handcart.
Threats to food and water security, and its consequent threats of famine, war, mass migration.
Global unfettered capitalism, which which has made the world less fair, more volatile, more likely to tip into chaos.
The reaction against liberal democracy, and against aspects of its bureaucratic structures and its economic power: a reaction which manifests itself both in the threats of fundamentalism and the threats of populism and the new right.
The speed of change in technology, particularly the internet and in AI. The pace of change has virtually overwhelmed us culturally and economically. From the high school to the high street, and from city to remote hamlet, everything about the way we communicate, shop, relate, decide, vote, has changed. We like to think we are in control. But are we?
The uncomfortable jumble of three (or four) generations: the baby boomers; Generation X; the people coming of age in the 21st Century (so-called Millennials or Gen Y, the oldest of whom will be 40 next year); and those born in this century (Gen Z).
Despite all of this extraordinary change, business persists, for the main part, in operating pretty much as it has done for the last 100 years and more. Of course there are technological changes. But the fundamental outlook of business remains to be Competitive. Business, large or small, in whatever sector, strongly tends to believe that what it must do is to WIN against its competitors.
But that outlook is no longer fit for purpose. The Competitive focus is about the past, about the way the world used to be. Business, and that means individual entrepreneurs as much as it does corporations, must refocus on the present and more importantly, the future. Business has only one option if it is to survive, and that is to become Contributive. That is, to make a positive contribution to society, to community, to the environment, to the world.
To fail to make that switch in outlook won’t be a simple matter of attracting fewer customers (although it will manifest itself that way initially), or even of making dwindling sales and lower profit (although that will quickly follow): instead it will be something existential.
If business fails to make a change from its single-minded focus on competing over to the new outlook of contributing, then business itself will fail.
Business cannot function in a world without air to breathe and food to eat. Business cannot function in a world torn apart by war. Business cannot function in a state of massive political and economic and migratory upheaval.
The young environmental campaigner Greta Thunberg told an audience at DAVOS 2019:
Some people say that the climate crisis is something that we all have created, but that is not true, because if everyone is guilty then no one is to blame. And someone is to blame. Some people, some companies, some decision-makers in particular, have known exactly what priceless values they have been sacrificing to continue making unimaginable amounts of money. And I think many of you here today belong to that group of people.
Greta is not alone. Generation Z is moving fast, growing up, thinking, speaking, changing, demanding change.
Generation Z don’t want brands to be loyal to. They want a future.
History will judge those who stand in the way of a positive change very harshly. Entrepreneurs, business owners, executives, start-ups, legacy brands, corporations, everybody in business, now has to decide (and fast) which side of history they wish to be on.
In my last three parts I have covered:
In this last part, I will outline some of the threats and opportunities for business in the new era, suggest which types of business face the greatest threats and the biggest opportunities, and begin to outline a new thought-leadership role which all businesses will need going forward.
My belief is that we have reached a time when customers and potential customers, employees and potential employees, suppliers, partners, and all kinds of people and organisations will make judgements about any given business which go far beyond old measures of financial stability, quality of product and/or service, legality, reputation, marketing, and even brand.
I believe that, increasingly, and with the pace of change accelerating every day, businesses will be held to account on their authentic positive contribution to society (I use the word society to refer to everything from the individual employee and the individual customer, to the global climate).
Buying decisions. Investment decisions. Advocacy decisions. All decisions about any given company, whether a one-person provider or a global corporation, will be increasingly influenced by this new measure of contributiveness. It won’t all happen at once, equally, to every kind of business.
We will be more forgiving and tolerant of small enterprises, at least initially. By contrast, with much bigger, more complex, more opaque corporations, those with numerous brands and numerous touchpoints, we will be more inclined to judge harshly but less able to ‘vote with our feet’ (because it is hard to choose to not buy from an organisation that one doesn’t understand). Similarly with tech corporations, such as mobile phone companies: it will be hard for anybody to choose the most contributive company from amongst the makers of mobile phones, because we all know (although we may pretend we don’t) that there is no such thing – at least not yet – as an environmentally-friendly mobile phone).
So the first type of company to be judged and held accountable under the new focus on positive contributiveness will not be the very small or the very large: but those in between.
The small to medium sized enterprise that can be observed and understood.
These businesses have the most to lose in the early years of the new focus. They are the easiest to walk away from, the easiest to replace in our loyalty and consumption habits with alternative providers. But they are also the companies with the most to gain, with the greatest opportunity to make positive change, to become part of the new order rather than the old: the opportunity to become the first wave of contributive businesses. The vanguard of a new and better way to do business.
If they do that, then the much larger corporations will be forced to follow.
An even greater opportunity presents itself to start-ups and pre-start-ups: the opportunity to shape themselves from the very beginning of their business lives and stories as representing the new order of things rather than the old: to look forward by focusing on their contribution rather than looking over their shoulders at the competition.
The Contributive business will be judged by its performance across a number of areas. These will include its behaviours towards:
This is a long list of things for any business to think about and to take heed of when acting: but this is arguably as short a list as we can make. All of these things matter.
A business with an impeccable environmental approach but which avoids paying taxes can’t really be called Contributive.
A business which donates generously to global charities but which has poor policies around inclusion or around the care of its employees, will inevitably be seen as hypocritical.
These elements of contributiveness cannot be looked at in isolation from each other. They need to be envisioned, directed, managed, driven, executed, at the most senior level in any company.
Traditional companies have around their boardroom tables: a chief executive or managing director, a chief finance officer or finance director, a chief operating officer. Many will also have a marketing director, sometimes a brand or communications director, an HR director.
The new business model demands a new addition to the board: the Contributiveness Director. A person for whom all of the elements listed above constitute their sole focus. The Contributiveness Director cannot be a functionary within HR, or within marketing, or hidden away in some other department.
Companies which pay lip service to the concept will fool nobody but themselves. They will miss the opportunity to be in the vanguard of positive change.
Contributiveness Directors will be the new thought leaders in business, the people leading business forward through the most challenging period in the history of commerce.
Originally published at www.simonadvises.com
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