During this recent global financial meltdown, the best companies — from Toyota, UTC, HP and Apple — have done what is necessary to shield their corporations from collapse. They have made these moves like surfers, riding a new wave, while simultaneously positioning their firms for new and strategic growth.
These companies, spanning the globe, are moving up what we call the S Frontier, settling into new areas of value and leadership unique to this carbon and capital constrained world. They make better cars, better computers, and better more efficient energy systems in a smaller world. Here is how I visualize the change seldom noted in books about competing on price and quality only:
The surprising solution to a number of social and corporate malfunctions is learning how best to ride on this S Frontier, in terms of your personal finances and the financing of your firm. The wet suit needed by these new corporate surfers keeps them from getting the cold of too much debt. It also allows them to repeal the many bad ideas floating in any corporation. They can capitalize on the swiftness of information and the severity of global competition much more effectively than their peers at GM, Dell, or others because they have the reputational buffer of being known as “inventive, informative, and responsive” to the new world of social response capitalism.
We see at least three fundamental shifts in this new World Inc kind of competition on social needs:
• The swiftness of new global market information is more rapid than ever before experienced. It is about ten times faster than government regulation, and exceeds that of some military computers as it is rapid in its firing.
• The severity of some of the leading social problems before us (such as climate change and the rising price of oil) exceeds the normal return on investment calculations holding up the slower and less capable.
• The need for social response capitalists to liberate and to profit from new products that enable a better world. Witness the new cars (Toyota), the new computers (HP and Apple) and the new homes and furnishings (Masco, GE, Shaw Industries, LP, Owens-Corning) and appliances.
We cannot sufficiently address this new carbon and capital constrained world without real progress in each of the bullets above. The relentlessness of the new “S Frontier” evident in the markets is structural, not episodic.
Whether you are on the up and up of the S or in the downward spiral really matters to your customers, your banks and your staff. The competing companies certainly cannot afford to be sucked down by the old ways of thinking about carbon and capital. This matters because we need to learn how best to realign going global and going green in a fashion first perceived by a special set of environmental leaders, from E.F. Schumacher and Amory Lovins to the new generation of social change capitalists.
This involves the delivery of some uncomfortable news, and the demise of a set of easy myths. The world is not flat. The mindless celebration of globalization gets it wrong. The world is an S, some up, most down. You can see this S Frontier in the new generation of cars and computers than work for a smaller world. We believe this avalanche of rapid change will ride thru all industry types in the next few years.
There are those striving on the upside of the S Frontier — and then there are those being smashed by its aftermath. This is really not the simple formulas found in MBA programs about winners and losers regarding profit margins. The companies being eliminated by the S are those that are inefficient or corrupt. We saw this with the fall of Rome centuries ago, and the much more recent fall of Enron and Tyco.
Swindlers give capitalism a bad name. Always have, and always will. Peter Drucker based a sixty year career on that perennial feature of capitalism, which sprouts new deceivers like seeds in the spring.
But in the last thirty years, it is environmental and energy conservation leaders, in general, who acknowledged the real need that we needed more advanced capitalists, not senile capitalists.
The only reliable way to get the world off the petrochemical treadmill that is going thread-bear is to organize a new generation of leaders focused on energy, environment and economics with these new S frontier fundamentals front and center. Otherwise, you will be sitting in the back of the new world stage.
Those companies that have strong morals expressed in the efficiencies of their products have used their market intelligence and knowledge to position themselves for growth, even amid the global financial meltdown. Yet many other corporations have either missed the market signals and will try in the short term to manipulate and impede the natural shift in societal values. They might reap short term benefit, but in time they will fail.
Our hedge on the future as capitalists is the fact that social entrepreneurs and business executives like the founder of Patagonia; Tom Chappell, Founder & President of Tom’s of Maine before his sale to P&G; Bob Stiller, Founder & President of Green Mountain Coffee Roasters, etc. Etc. They set a stage in the late 90s that the more global firms in this new century came to understand.
These forward thinking companies are acting upon their strong values that “less will prove to be more” to help reduce their customers’ footprint. The difficult tasks of purposeful growth, holding true to values and acting on individual responsibility are not just powerful themes spoken at Presidential inaugural addresses. Today’s DC lobbyist, environmental expert, and corporate change facilitator have a sense of this in their bones.
The surprising solution is that senile capitalism is being readjusted by the S-Frontier into a more elaborate form of social response capitalism. I see this not only in Europe but Asia (Korea and Japan) but also now in Brazil and now increasingly in the United States under President Obama’s lead.
We commend those leaders pushing up the S frontier, continuing to strive toward excellence based on efficiency and effectiveness not waste and greed–as they navigate an economy and government in transition.
Bruce Piasecki is the President and Founder of AHC Group, a general management consulting firm, and author of the forthcoming “The Surprising Solution: Creating Value in a Severe and Swift Century.” Mark Coleman is a Senior Associate of the AHC Group. Coleman helped develop and write “World Inc.“