June 5, 2019
There remains a strong widely-held belief among businessmen, entrepreneurs, and business students that the primary goal of a business is to maximise its profit.
Milton Friedman is often cited as the source of this view but they do a disservice to his 1970 paper “The Social Responsibility of Business is to Increase its Profits”.
First, the context. In the 1960s it had become popular for companies to support a range of charities – what was then termed Corporate Social Responsibility (CSR). Friedman argued that spending money on social causes unrelated to the core business was wrong and that instead the funds should be paid to shareholders as dividends who could then support charities of their choice, should they wish to. He was against such Corporate Philanthropy.
Perhaps CEOS thought they were following in the footsteps of great business philanthropists, such as Getty, Rockefeller, and Guinness. But mostly, these gentlemen gave away the money they had generated for themselves, their own money. Just as Bill Gates today gives away his own wealth and not Microsoft’s.
As Friedman says, in the article: “The situation of the individual proprietor is somewhat different. If he acts to reduce the returns of his enterprise in order to exercise his ‘social responsibility’, he is spending his own money, not someone else’s.”
Second, let’s look at the full quotation: “… there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
How many CEOs, who rely on this quote to justify their pursuit of profits, do so in “open and free competition without deception or fraud”? Certainly not the US and European financial institutions who led the world into the Global Financial Crisis nor the Australian ones whose behaviour was severely criticised by the Hayne Royal Commission.
As Andrew Cornell, writing in ANZ Blue Notes, states: “Critically, it is the ‘rules’ of the game which are complex and, long term, rely on a social licence as well as black-letter regulation. Understood more broadly, the ‘rules of the game’ are not just black letter law but those principles which govern behaviour – they are set by society, by providers of capital, by staff, by customers.”
Modern businesses are not engaging in CSR (first make a profit and then give some back to society) and are world’s apart from the corporate philanthropists of the 1960s. They start with a clear consumer (or societal) purpose.
- Danone – to bring health through food to as many people as possible
- GSK – to help people do more, feel better, live longer
- Philips – to make the world healthier and more sustainable through innovation
These and others are embedding environmentally-friendly and sustainable practices into their day-to-day operations as described in a recently-published book.
“All In: The future of Business Leadership” by D Grayson, C Coulter & M LeePublisher: Greenleaf 2018.
Should be required reading for all C-suite executives!
Tagged Business Case, Business Purpose, CSR, Friedman
March 12, 2018
Text of Rotterdam TEDx Talk
The theme of this year’s Rotterdam TEDx series is Great Heights. At first you may wonder what the connection is between food and education and great heights. I hope it will become clear.
Food courts
Food courts are very popular across Asia.
In the modern metropolis of Singapore – people still flock to food courts like Newton Circus.
Most shopping malls will have a floor or a large part of a floor devoted to food. So even in luxurious shopping malls featuring shops selling all the latest Parisian fashion – there will be plenty of food choices.
They are a more recent innovation in The Netherlands. At Erasmus University there is a modest food court for students. In Utrecht – they have Speys as part of the Jaarbeurs convention centre – and of course, here in Rotterdam – we have the new Markthal offering a wide variety of foods – although strictly speaking this is not a true food court – as it is not possible to find a table where you can sit down and have a family eating food from multiple food stores.
In a typical food court, you’ll find there is a wide range of food options each served at a specialty outlet.
Individuals can mix and match their selections and then come together in the centre and converse over their separate meals.
Families love this because in one spot you can satisfy mum, dad, grandma, grandpa, and all the kids – each eating their favourite food.
Perhaps one will see that something another person is eating looks tastier and decides next time to try that. On the next occasion each is free to try a different food.
A food court serves food at all hours: breakfast, lunch, dinner and snacks from morning until late at night.
A TED presentation of a few years ago started with this picture – Hogarth’s depiction of a coffee house, often the source of many new ideas that drove the enlightenment – let’s see how modern day food courts fi tin.
The 21st Century is truly VUCA
We are living in what has been popularly described as the VUCA World. As with much of the modern language of business, VUCA comes from the military, in this case the US armed forces describing conditions in Afghanistan.
V for Volatile – just try to follow President Trump from one day to the next!
U for Uncertain – just what will Brexit mean?
C for Complex?
The Rotterdam University Research Centre, Sustainable Port City, Duurzame Havenstad, known as RDM to most, has set out 21 trends that could have an effect on the way the Port functions all of which illustrate the potential VUCA.
These trends include the increase in the use of robots and drones, the impact of the circular economy with reverse logistics becoming as important as forward logistics, the rise in renewable energy, and self-propelled vehicles.
Simple arithmetic says that the interaction of these 21 trends adds up to a staggering number of potential combinations.
51,090,942,171,709,440,000!
A for Ambiguous?
Will robots yield fewer jobs? Fewer but higher-paying jobs? More jobs – but paying less?
Technology Change
We are currently in the 3rd, 4th, or 6th wave – depending on which academic you prefer to read.
The Australians developed the concept of the 6th wave of innovation.
The Germans described the 4th Industrial Revolution – adopted by the World Economic Forum.
And the American academic, Jeremy Rivkin – talks about the 3rd.
Whatever it is – the future is being driven by rapid advances in technology.
Just looking digital alone – here is one projection of the growth in connected devices. 50 billion by 2020.
Roadmap – Next Economy
In an attempt to make sense of the future – 23 municipalities have combined together to set out how the Rotterdam Delta should respond to the future
“In 2025, the metropolitan region of Rotterdam and The Hague will be the international market leader in the design, development, manufacture and marketing of solutions in the area of sustainable living in a heavily urbanised delta region. In the region, coherent solutions will be devised, tested and produced for global logistic, energy, food and safety issues.”
The Roadmap sets out five strategic areas of focus – or future economies – for the Delta:
1. The Renewable Energy economy
2. The Digital economy
3. The Circular economy
4. The Start-up economy
5. The Inclusive economy.
Arising out of this, in Rotterdam we have the Innovation Quarter seeking to redevelop older parts of the harbour known as the RDM and M4H districts. In fact, all this week we have had 90 students, from the Rotterdam Business School and the NEOMA Business School in France, tackling a problem specific to attracting new businesses to the planned circular economy area of M4H.
The question arises, are we preparing our students to be a part of this Road-mapped economy? I fear not. As in many countries, I see that education is stuck in a 19th Century paradigm.
The Problem
‘The Times’ recently published its 2018 world rankings of universities. I was pleased to see my alma mater, Oxford, remaining on top of the global list.
But more troublesome are reports that student satisfaction is low.
A third of students don’t believe their course is offering value for money
Over a quarter believe feedback from tutors is poor and too many students end up regretting their choice of course.
In the recently published book, ‘Overschooled and Under Educated’ the author John Abbott asserts that education is about preparing children to become good citizens and adults who will thrive at unstructured tasks – not just successful pupils.
In 2014, The London School of Economics found a mismatch between what universities were providing and what businesses need. Their research among CEOs identified three core capabilities sadly lacking in recent graduates:
Problem solving
The ability to connect different parts of the business in a holistic way
Collaboration and teamwork.
These capabilities are echoed in a Twente University paper entitled “21st Century Education”.
As the eminent international advisor on education and creativity, Sir Kenneth Robinson, has pointed out, our model of education was developed during the industrial revolution – fit for purpose in the 19th century. If you were to ponder who succeeds in the current system, he asserts – the answer is university professors.
But if we are to achieve the goals of the Road Map then what we don’t want are more university professors.
Greatness?
Now, you might be wondering. This is all very interesting, but what does this have to do with greatness? The theme of this conference?
Here’s my concern. Are we providing our students, our future leaders, the kind of university education that will allow them to be great? Inspiring them to pursue their own greatness? To find, what Sir Ken Robinson calls their Element. Where they can be great.
Over the past three years I have been inspired by my students. They come from everywhere. All parts of Asia. The Middle East. Africa. The Netherlands and other parts of Europe. Central and Latin America. Even Australia.
They come to study business but they are also imbued with a desire to create a better world. They are aware of the problems of the modern world – climate issues, poverty, and they want the businesses they work for or create to be good citizens.
So, are we providing them with the education that will prepare them for this future?
I know that we are not.
Too often this is the view of the classroom. And old textbooks are the focus of learning.
We need schools that start to encourage new capabilities. Pupils to learn basic facts and theories but also we need to encourage an entrepreneurial spirit, nurture and develop their imagination and creativity and not snuff out these innate capabilities.
I was quite intrigued by this Infographic – produced by Funders and Founders. Everyone will become an entrepreneur.
I have asked several cohorts of graduate students – has your university career prepared you to be more entrepreneurial? To be creative, innovative? The overwhelming response has been NO.
As Prof Ken Robinson has pointed out the current education system, in many countries, stamps out creativity and instils uniformity.
We need to encourage young people to develop a flair for learning to learn.
This latter capability is going to be fundamental in the 21st Century. With knowledge changing rapidly, we are going to have to be continually re-learning.
What do we need?
Of course we are going to need specialist skills, built on a foundation of facts and proven theories – so engineers of all types, scientists, and doctors. I am not arguing against the need for pure science and academic rigour in disciples – what I am arguing is that we need a different approach to conveying that knowledge from the academic world to the community at large.
We also need creativity, entrepreneurial spirits to foster new technological, business, and social solutions:
Basic skills and knowledge
Collaborative and team-building skills
Creative problem-solving.
We see so many advances being made by differing specialists collaborating, e,g.:
” New health solutions combining basic medical knowledge with nano-robotics, engineering, and IT
” Engineers studying nature – zoology and botany to create new materials or new ways to harness energy from the sun.
Back to the food court
The need for business education is clear
Encourage inter-disciplinary work – active interaction between researchers, lecturers, students, and business people
Develop stakeholder-engagement and cross-sectoral partnership building skills
Nurture creativity and entrepreneurship.
Or is it?
What to teach? The importance of topics seems to vary.
I was perusing Friedman’s book ‘Thank you for being late’ where he discusses Teller’s view of the rate of growth of new, technological knowledge and contrasts that with human adaptability.
One of my colleagues is studying 21st century skills and has found a large discrepancy between what educators think their students need and what students believe are their priorities.
Here is the list of essential topics.
Here are the student survey responses.
But why should we try to force students into a specific box right now? Maybe numeracy Is not important – now – but perhaps will be in the future. So why not allow students to return to add to their knowledge – when they need it?
My view of the future business university is a kind of educational food court.
The university of the future should allow students to mix and match topics of their choice. Not just choosing from a range of pre-structured, fixed degrees – but choosing from a wide range of subjects. Including the creative arts.
Why not a degree in which you study management, mathematics and music?
Just as a food court serves food at all hours so students will be encouraged to return to the university at all times in their lives – to learn new stuff. The current stuff.
I see the university of the future offering short, specialised courses. And as new technologies and new capability requirements emerge in the 21st century, universities will develop new very-focused courses perhaps only a week in length.
Instead of degrees – business schools will offer shorter courses in specific skills and capabilities and award certificates attesting to achieved competencies. In the same way that boy cubs, scouts and girl cubs and guides collect proficiency badges. Right now I’d like to sign up for a cryptocurrency proficiency course and badge.
Businesses will send their managers armed with live problems to these courses – aiming to achieve solutions to their current business issues – collaborating with lecturers and full-time students.
Perhaps studying for a degree might become obsolete for business. It may well be that certain disciplines (such as medicine and law) will still need focused basic degrees – although rapid changes in medical technology will force constant retraining.
But right now too many of our universities are too silo-ed.
As David Grayson of Cranfield University writing in the ‘Financial Times’ asserted: “Part of the problem is the emphasis for academic career progression on publication in three- and four-starred academic journals which can encourage incremental development of academic theory.”
The Roadmap may need such incremental development in basic sciences and technologies – but it also requires breakthrough, creative solutions.
Steps we are taking at RBS
In my experience, the current accreditation system in the Netherlands does not encourage rapid innovation. We need members of our education boards and administrators to return to school and study entrepreneurship and creativity – then return to their roles and transform the system.
At RBS – central to the structure of our one-year Master degrees is building in the capabilities of:
Creativity – divergent thinking, and not just thinking but how to apply and operationalise
Critical and analytical thinking – problem-solving skills, making judgements
Collaboration – emotional intelligence, interpersonal communication, and teamwork (not just between known allies – but also between competitors and unexpected allies). We create cross-disciplinary teams of students to work with businesses to tackle real-life business issues.
We have experimented with new forms of collaborative and distance learning – first with Brazil and more recently with Barcelona. But instead of encouraging development – supporting experimentation – instead of helping overcome potential issues – the overwhelming response I have observed is – why do you want to change. Why can’t you just leave things as they are.
The dead weight of inertia and fear of change.
The Barrier
In a recent blog on LinkedIn, Sahed Ladapo these graphs, showing technology, businesses and public policy.
If you then take one of the observations of Sir Ken Robinson, that our educational systems were designed in the 19th century, we can posit that they were fit for purpose in an era when the rate of change of knowledge was sedentary when compared to that of the 21st Century.
Now we can understand the frustration of forward-thinking educators – I’d like to include emyself int hat category – who recognize that their role is really to help students grapple with a fast-changing world and would thus like to focus on building fundamental capabilities, like learning how to learn – but have to operate in a rigid structure that discourages change.
Our educational systems need to become more fleet-footed.
Look at what is happening in China. Often we think of China as being a cheap manufacturer of western products – but their students of today are being prepared for a different world.
If we are going to inspire this new generation to become great leaders – whether in business, politics and society, the sciences, or the arts – we need to introduce some radical changes.
In conclusion, I challenge our educational bureaucrats – unleash the greatness in our current generation – start to become versatile, creative, and fleet of foot yourselves and if you can’t – get out of their way.
Tagged 21st Century Education
December 9, 2017
This is a blog I wrote specifically for the HR Business School (Rotterdam) but some might find the thoughts of interest.
In business and university circles we often hear the phrase “students must become more entrepreneurial.” We read articles arguing that everyone will have to become an entrepreneur in the new economy[1] and one of the key focus areas of the ‘Roadmap to the Next Economy’[2] is startup economies. The EU has a 2020 Entrepreneurship strategy[3] and, in 2014, the World Economic Forum sponsored a workshop entitled ‘Fostering Innovation- driven Entrepreneurship in Europe’, in which they put forward the structure of “stand up, startup, scale up” as a means to supporting the creation of new businesses.[4]
Asked for a definition of an entrepreneur, my graduate students will come up with familiar names; Gates, Jobs, Zuckerberg and Musk. They will describe a vision of a lone wolf working in a small workshop or garage, coming up with a brilliant idea that creates a billion-dollar business.
I recently interviewed 90 final year bachelor business students about becoming an entrepreneur and most replied “I don’t have what it takes”. Only five planned to start a new business after they graduated and a further 75 said – “Maybe in a few years’ time, but not just yet.”
No-one responded “Yes” to the question: “Has university prepared you to be able to start your own business?” Most only replied “Somewhat”.
This after three and half years of study at our business school!
Are we doing a good job at HR Business School helping our students become entrepreneurs? Perhaps we are discouraging ambition by projecting the wrong image of an entrepreneur?
That would not be surprising when there are so many ideas of what an entrepreneur is. For example, ‘Business News Daily’s’ Paula Fernandes interviewed 15 company founders and received different 15 versions of what makes an entrepreneur.[5]
In a recent ‘HBR’ article[6], John Hagel III reminds us that high growth new businesses (often referred to as ‘gazelles’ or ‘unicorns’) are few and far between and argues that we shouldn’t unduly focus on them. With new technologies making production and distribution processes more reachable to smaller businesses, perhaps we should focus our students, not so much on the building of multi-million dollar enterprises but, in Hagel’s words; “making a comfortable living for themselves and perhaps a small team of people” by “designing and commercializing products that are targeted to the specific needs of small groups of customers rather than the mass market.”
One can start to see this in the rise in new small businesses challenging global players – such as specialty gin companies, artesian bakeries, boutique breweries, and bean-to-bar chocolatiers.
Most of our graduates join small businesses rather than large ones and therefore don’t see the need to be entrepreneurial, but even existing small businesses need entrepreneurs to remain competitive.
The EC writes that “Europe’s economic growth and jobs depend on its ability to support the growth of enterprises. Entrepreneurship creates new companies, opens up new markets, and nurtures new skills. The most important sources of employment in the EU are Small and Medium-sized Enterprises (SMEs). The Commission’s objective is to encourage people to become entrepreneurs and also make it easier for them to set up and grow their businesses.” [7]
So, as the HR Business School, what should we be focusing on? I suggest three capabilities:
Creativity and Innovation:
How can we involve other parts of the university more with our business school? How do we encourage closer collaboration between our students and those of, say, the Willem de Koning Academy, CMIT and the RDM Campus?
Problem-solving, teamwork and collaboration:
The recent Rotterdam International Case Competition, in which teams of students tackled complex business cases under time pressure, is an example of what the few participants would say was a wonderful learning experience. But why just for a select few students in the occasional competition? Could we not use this methodology as a regular feature in more of our courses?
Calculated risk taking and learning from failure:
It is often thought that entrepreneurs are risk takers, but a recent study revealed that they take carefully-considered risks and, importantly, they learn from their mistakes.[8] Perhaps we can encourage our own FU nights[9] within the HR Business School – where we invite current students and recent graduates to share their experiences of mistakes made and lessons learned?
[1] “Why everyone will have to become an entrepreneur” Paul B Brown Forbes May 13, 2012
[2] https://mrdh.nl/RNE
[3] https://ec.europa.eu/growth/smes/promoting-entrepreneurship/action-plan_en
[4] http://www3.weforum.org/docs/AM14/WEF_AM14_FosteringInnovationDrivenEntrepreneurshipEurope_SessionSummary.pdf
[5] “Entrepreneurship Defined” Paula Fernandes Business News Daily, March 2, 2016
[6] “We need to expand our definition of entrepreneurship” John Hagel III, HBR, September 2016
[7] https://ec.europa.eu/growth/smes/promoting-entrepreneurship_en
[8] “Effectuation: Elements of Entrepreneurial Expertise” by Saras D. Sarasvathy Edward Elgar 2008
[9] https://fuckupnights.com
This blog is written by Ron Ainsbury, associate applied research professor Business Responsibility & Sustainability, Research Centre Business Innovation, Rotterdam University of Applied Sciences.
