COLLABORATIVE INCLUSIVITY NON-INCLUSIVE GROWTH AND THE CASE FOR INCLUSIVE BUSINESS MODELS

Inclusive business models provide access to economic opportunities for low-income communities and will also help businesses become more viable and sustainable.

In an earlier piece, I discussed the concept of a “cluster strategy” by which firms that operate in close physical proximity to one another (such as locators in Special Economic Zones) form a collaborative network among themselves for the purpose of virtually achieving economies of scale, effectively enhancing the scope of their operations, and enjoying the strategic benefits arising from networking. Such a strategy enables firms to remain small and agile while enjoying the advantages usually associated with size.

This piece focuses on a special application of clustering which I term “collaborative inclusivity” — the implementation of inclusive business models in partnership with other business establishments. The topic that dominated the Fortune/Time Global Forum held in Rome in December 2016 was the continued worsening in the distribution of wealth and increasing economic inequality both among and within the nations of the world. The two-day conference was devoted in its entirety on how to deal with this distressing trend and the consequent prevalence of poverty amidst plenty.

The forum participants were quick to concede that business has been complicit in the deteriorating world economic order and in the apparent failure of Western capitalism to spread the benefits of economic growth to all segments of society. There was consensus among the conferees that in order to thrive in an increasingly hostile global economic environment, business must find a new role for itself by making a “strategic shift,” one that would bring business and society together in what Lynn Forester de Rothschild, CEO of the Edmund de Rothschild Investment Partners, calls “Inclusive Capitalism.”

While aiming for such a major strategic shift makes good sound bite, it is problematic to pull off as it requires a 180-degree turn from the manner in which business firms pursue their traditional goal of profit maximization.

The crux of the matter is how profit-seeking firms can co-align the economic interests of their owners — or shareholders, in the case of public corporations — with those of the other groups which have a stake in the business, and who contribute to the process of value creation. Foremost among these stakeholders are the workers, the customers, and the communities of which business firms are an integral part.

We are particularly concerned here with how businesses can help solve social ills and alleviate poverty while pursuing their usual financial interests.

RETHINKING THE GOAL OF PROFIT MAXIMIZATION

We resolutely adhere to the goal of profit maximization as the primary motivation for value creation in a capitalistic society.

However, we believe that pursuing profits with single-minded determination and being driven by the overpowering urge to make big money often leads to short-sighted choices that may yield desirable immediate financial results for the business, but are detrimental to its continued profitability and survival over the long haul.

For example, cutting cost corners by underpaying workers often leads to low employee motivation and poor quality of work, while scrimping on customer service or product quality leads