Discomfort and The Emerging Future of Value
We are beginning to witness the future of business, which is best described as the ‘age of discomfort’. The boundaries of competition, differentiation, social responsibility, and value creation are rapidly dissolving. Emerging in their place is a blank canvas, devoid of rules of engagement, demarcation lines between consumer and producer, and clear signs of encouragement that we’re on the right path.
An inkling of how your company can succeed tomorrow comes from a sector that is viewed by industry watchers as antiquated: the U.S. public utility sector. For decades, utility companies had the comfort of certainty, knowing how much they could invest in the future via a simple forecasted calculation of regulated rates, a range of the likely regulated rate increases, and population changes in their coverage areas. This comfort is being shattered in a growing number of states that allow today’s individual consumers to be paid for energy that they produce and place back on the grid. Now utility consumers are evolving into suppliers and even micro-competitors for public utilities. Most companies are calling plays from the traditional rules of engagement: increase prices and cut investment. As prices increase, the costs of generating renewable energy creep toward parity with traditional power sources.
The boundaries of competition, differentiation, social responsibility, and value creation are rapidly dissolving.
A small number of public utilities are redesigning their business models, seeking to enable consumers to sell back energy by leasing tools and means to generate power. Essentially these companies are choosing to view consumers as co-creators, a vital part of a new and potentially vibrant business. If entrenched companies in a sector where innovation is capital intensive can evolve, then what’s to stop your company from doing the same?
This second post in my series of reports on The Future of Business focuses on the changing assumptions supporting how companies create value in the age of discomfort.
What are these assumptions? Employees are, well, employees; functions are clearly defined and delineated from one another; investors are the primary stakeholders that must be satisfied; and command and control processes are the most effective way to achieve corporate success. Each assumption is showing signs of being invalid as a result of the perfect storm of megatrends forever altering the business terrain.
If entrenched companies in a sector where innovation is capital intensive can evolve, then what’s to stop your company from doing the same?
Employees No More?
Over the past 15 years, the implicit employment contract (Work for us and we will take care of you) between companies and employees has been broken. Defined benefit, defined contribution, and healthcare participation plans have been either scaled back or completely eliminated. At the same time, U.S. workers are dedicating the equivalent of an extra day of work each week to their employers by checking their work email eight hours per week during nights and weekends. Our globalized workforce has become mobile, and physically disconnected, via advances in technology that can provide instant virtual connectivity. The next generation of workers has grown up in the ‘overnight billionaire era’; they prefer ‘InstaStar’ status to the proverbial golden watch of retirement. The likely outcome of this potluck is employee backlash; indeed hidden in U.S. unemployment data is the growing sense that more and more employees are opting out of the broken contract and seeking to work for themselves. As we approach the heretofore unexplored, consider this: In the extreme future scenario, what would your company be if the majority of your W-2 employees choose to become 1099 independent contractors?
The next generation of workers has grown up in the ‘overnight billionaire era’; they prefer ‘InstaStar’ status to the proverbial golden watch of retirement.
Functions Function Tomorrow Like Yesterday?
The last decade has witnessed the rise of the CxO who seeks to position their function as a profit center. So they are working to secure a seat at the enterprise strategy table. At the same time Boards, CEOs, investors, and activist stakeholders are seeking increased agility and accountability from and resiliency within their companies, increasing the pressure on functional leaders to plan and work closely together. Where siloes and “silo masters” once existed, super generalists – functional leaders equipped to contribute to the success of other functions at the same time as they lead their own – are now on the rise. Changes to executive compensation – balancing functional success with corporate success – has furthered the push to erode the hard lines that traditionally served as boundaries among functions. While it’s nearly impossible to envision a company without functions, it’s not a stretch to see that the benefit of functional hierarchical structures are under pressure to fluid access of a function’s attention, skills, and capacity. Is this the dawning of the modular function era?
Who Do Companies Serve?
The CEO mandate is to maximize shareholder value. The need to satisfy the insatiable hunger of industry analysts gives companies implicit permission to act myopically. Even in companies that are mission driven, a quarterly number miss leads to cuts in funding for social and environmental impact programs. But companies that rely on physical supplies to manufacture products face a dilemma: How do we prioritize shareholder value creation when local communities, whether through stewardship of finite resources or rejection of a local license to operate, hold the key to delivering larger and larger value to investors? Who does your company truly serve and how is it changed mindset and business activities to provide this value to the appropriate stakeholders?
Who does your company truly serve and how is it changed mindset and business activities to provide this value to the appropriate stakeholders?
Which Leadership Mindset Wins The Future?
The more stakeholders there are to satisfy and engage in order to complete business activities, the less control a company has over its corporate destiny. Yet rare is the company that has committed itself to shed the ‘Command-and-Control’ leadership mindset and embrace the ‘Influence-and-Persuade” mindset. Ask yourself this: Would you prefer to work with a company that values your views and recommendations or a company that espouses the ‘My way or the highway’ mentality? Wouldn’t your customers prefer this, too?
In the coming era of business discomfort, the company that operates without boundaries will win. No doubt there is great disruption and pain ahead. But we are entering a world where we are learning to live with collaboration, reliance upon strange bedfellows, and shifting roles and responsibilities. Are you ready?
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