Strategy in
a business or organizational sense is highly material. It is all about
generating and utilizing resources, and equally about creating and deploying
wealth. All factor resources, natural or synthetic, are utilized to advance
businesses in pursuit of growth. Over time, a highly capitalistic approach was
proven to be a more efficient creator of wealth but a less effective enabler of
social activity. While alternate forms of public ownership (Russia), mixed
socialist economy (India) and totalitarian (China) have differentially
influenced resource and wealth generation paradigms, strategy has evolved as an
instrument that transcends ownership and influences resource and wealth in
societies and economies. Many times, these economic systems exist and evolve in
combination with political systems such as controlled elections, total
democracy and command & control administration to deliver relevant results.
Societies and
governments have recognized that societies must get back certain portion of
wealth generated through successful strategies; so have highly successful
entrepreneurs and businessmen. Bill Gates and Warren Buffet have been the
leading business lights in US who channeled a large proportion of their wealth
into charitable and philanthropic activities. In India, founders of a few major
groups such as Wipro, HCL, GMR and more recently Vedanta have pledged 12 to 75
percent of their wealth philanthropic and charitable activities. While such
acts are dependent on voluntary commitments by such successful leaders, the
legal framework of Corporate Social Responsibility (CSR) developed in India
under the new Companies Act 2013 signifies the desire of regulators to somewhat
compulsorily channel business profits (based on certain criteria) into acts of development for the
underprivileged sections of the society.
Many approaches,
one source
There are,
as summarized above, many approaches, ranging from voluntary to compulsory,
that may channel pre-existing and created wealth to causes of social equity. The
source for all the approaches, however, is profitability. That said, higher profitability
does not necessarily mean higher social contribution. Profitability that arises
from usurious squeezing of factor resources or excessive skimming of consumer
surplus may be seen to be socially exploitative. Any social investments that
are made from such unnatural profitability may be seen to be a distorted form
of social contribution. The policy of contribution after substantial generation
places the choice and discretion in the hands of businesses in that profits are
earned first and deployment is considered next (if at all). The much repeated
saying of businesses that they must give back to society what they take from
society arises from the first principle of earning allocable profits first,
before any deployment can be made.
More fundamental
than profitability is strategy that generates profitability. A smart strategy identifies
and fulfills latent and established (and even hitherto unknown) consumer needs
through efficient design, manufacture and delivery of products or services and
in the process optimizes investment-expenditure-cost-profit relationship. There
is a view that there can be no right or wrong strategy but only right or wrong
execution. This is an oversimplification of the strategic process. For example,
it is not appropriate to hypothesize that being the 100th firm in a
million unit market is a right strategy and execution will take good care of
such a pedestrian strategy of market and resource fragmentation. Right
strategic process involves an inventive mind, prudent resource management and
revenue generation without compromise to profitability. For businesses and
organizations to be socially responsible they must first be economically
responsible.
Economic responsibility
Economic responsibility
is a less understood concept. While the old adage says that time and money once
spent cannot be got back, there is a reluctance to accept money as a factor that
is as valuable as time is. Such reluctance is due to the popular perception
that money always buys something in exchange, and often generates more money. That
said, few realize that money, though a manmade currency, is a finite amount
that has a relationship with the overall efficiency of a national economy. Living
beyond means or means that trail the living aspirations lead to a negative
spiral of deficit financing and inflation. Like nations, businesses and
organizations must live within means or expand the means at unit level. Concepts
of globalization and cross-border pooling of costs and profits have impacted
the ability to incisively track economic responsibility at unit levels.
Growth in
population and aspirations requires more products and services, the inputs for
all which come from nature. In such a context, economic responsibility can be
best expressed in terms of three basic concepts. The first is doing more with
less, both in terms of natural and synthetic resources. The second is to conserve
natural resources by prudent utilization and efficient exploitation. The third
is to renew the natural resources by recycling. An economically optimized society
would follow a normal distribution where poverty and luxury, by value, are both
minimized and the core of the society has the maximal coverage of value. In
normal distribution mean, median and mode (of incomes) converge. A true
egalitarian society is one in which the standard deviation of the incomes is
such that 68.2 percent is within one standard deviation of the set, 95.4
percent is within two standard deviations of the mean and 99.7 percent is
within three standard deviations. Egalitarianism is hard to get in human societies
which require materialism and capitalism to crate productive economic activity
in increasing measure.
De-concentration
Concentration
of wealth is a concomitant of capitalist and free market economies. Even controlled
economies that have injected a measure of capitalism have experienced
concentration of wealth. While creation of jobs and improvement of economic
conditions is one way of economic development, voluntary de-concentration of
wealth provides periodic trigger and sustainable stimulus for efforts aimed at
economic egalitarianism. Azim Premzi of Wipro has pledged 25 percent of his
wealth of USD 16 billion. Shiv Nadar of HCL has pledged 10 percent of his USD
11 billion wealth while GM Rao of GMR has pledged 12.5% of its wealth of USD
2.6 billion. Today, Vedanta group chairman, Anil Agarwal is reported to have stated that he
would give away 75 percent of his wealth of USD 3.5 billion to charity. Globally,
Bill Gates and Warren Buffet together donated USD 69 billion to Bill and Melinda Gates
Foundation. Such initiatives help in de-concentration and diffusion of wealth
for social good.
De-concentration
helps kick-start major philanthropic and charitable initiatives. WHO in the
past and the Gates Foundation in recent times have contributed to eradication
of multiple diseases, including polio. There is no doubt that periodic
availability of billions of dollars helps the governments, private
organizations and public-private partnerships take up transformative measures
in the social arena. Eradication of poverty, disease and squalor, including national
transformative programmes like Swach Bharat, require massive allocation of
funds. Voluntary measures of de-concentration and diffusion of wealth, without
doubt, are vital elements of social equity. Given that strategy is the key
driver of wealth generation (or wealth erosion), strategy needs to be viewed an
important component of de-concentration.
Micro-strategy
Given that ‘earn
and distribute’ of the above type takes years, and even decades, of
industrialization and business growth to happen, development of nano, micro,
small and medium industries (together micro industries) in an aggressive manner
is a strategy to distribute wealth ab initio. Such enterprises create greater
employment opportunities and thus contribute to income redistribution. In a
similar manner, proliferation of service activities helps self-employment of a
large proportion of population. Infrastructure and transportation provide major
avenues for employment. Here again, diversification of infrastructure across
the nation (for example, developing 12 ports along a State coastal line rather
than I mega port) helps in enhanced and diversified economic activity and
consequent employment generation. Transportation services are also some of the
biggest generators of employment.
Micro-businesses
require micro-technologies, standardization and ancillary networks to succeed. An
automobile typically comprises thousands of components. Of these, at least a
few hundred components lend themselves to micro-enterprises. For example, nuts, bolts, washers can be
standardized in design to be of universal design. Micro-technologies can focus
on standardized designs and support manufacture with compact and high
technology machine tools. Well developed ancillary networks can help micro
enterprises cater to mega automobile makers. Electronics, electrical and
telecommunication industries constitute another example of the pyramid of
manufacture with micro enterprises supporting mega electronic products. This kind
of industrial and economic development may be characterized as development with
soul. Soulful development, which is development that reflects the inner good
qualities of human life, requires a spirit of strategy that is unique and
different from the one that is deployed solely for commercial purposes.
Strategic spirituality
Spirituality
has many definitions and interpretations. For the purpose of this blog post,
spirituality is the quality of being connected with humanism and human spirit. Humanism
is a system of thought that seeks to solve human problems with the help of
reason. Spirit is a state of mind that reflects courage, determination to
progress. Strategic spirituality integrates the human dimension in every aspect
of the corporate, business and functional strategies. From defining the
industrial structure of development and manufacture of a product (huge
integrated monolithic structure versus diffused multi-tier diversified
structure) to calibrating functional strategies in line with socio-commercial
considerations (products as revenue generators versus products as social
instruments), strategic spirituality adds a distinctive humanistic face to
commercial strategies.
A leading
manufacturer of personal hygiene products has interest in promoting product
sales. By undertaking a massive programme for girl child education (which will
improve perceptions on personal hygiene), the company can combine social and
commercial purposes. Leading manufacturers of sanitary hardware (companies such
as Cera) which have seen multi-fold increases in their market capitalization in
anticipation of Swach Bharat mission would do well to develop a range of
customized products to provide affordable solutions to the national mission. Leading
manufacturers and marketers of food products can leverage diversified culinary
skills of housewives to develop portfolios of low volume-unique taste products.
Possibilities are endless; chief executives and strategists must embrace
strategic spirituality as a larger professional purpose in life. Strategic
spirituality leads to soulful development; development that blends economic
growth with social equity.
Posted by Dr
CB Rao on September 27, 2014
1 comment:
This is really important and essential topic for us.
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