Why does your firm exist?

To maximize shareholder value? No – that’s the dumbest idea in the world.

To reduce transaction costs? No – that’s another economic model that doesn’t have much grounding in reality.

In fact, if you ask this of most firms, they don’t have a very good answer. There have been a few compelling contributions to this discussion recently. In the post linked to above, Steven Denning suggests that delighting customers is a much better goal than maximizing shareholder value.

And in his new book Betterness: Economics for Humans,Umair Haque says that firms should exist to make us and the world a better place. That might sound a bit utopian, but think about the opposite of that idea – do you really want to spend your life working for an organisation that makes the world worse?

Betterness

Here is the problem that Haque is trying to address:

Big Question: what does it mean to live meaningfully well? If you accept the less-than-heretical proposition that our way of life, work, and play, while materially rich, might be leaving us emotionally, relationally, socially, physically, and spiritually if not empty, than perhaps just a little bit unhealthy; that it might be optimized for more, bigger, faster, cheaper, nastier over wiser, fitter, smarter, closer, tougher — how would we redesign economies, markets, and organizations to help us live better?

He suggests that we start by redefining what we are trying to achieve with our organisations.

To do this, Haque says that “Going from business to betterness means going from vision, mission, strategy, and objectives to ambition, intention, constraints, and imperatives. To give you an idea of what this means, I’ve been using the book to think about what I’m trying to accomplish in my work. So I’ll walk you through what I’ve been thinking, which I hope will give you some ideas about how you and your organisation might change as well.

Ambition

Ambition replaces vision – and it answers the question “why are we here?” More specifically, ambition is meant to outline the kinds of returns you will provide, and to whom you will provide them. It’s based on delivering genuine value to people.

My Ambition: I will help make work better through encouraging innovation that matters – innovation that makes customers’ lives better, and which encourages strong, sustainable and interesting organisations.

Intention

Intention looks at how you will make the people you interact with better. How will you achieve your ambition? Which day-to-day activities will drive this forward?

My Intention: My work will help build innovation skills and strong networks to make firms more fun, resilient, adaptable, and sustainable. I’ll do by doing research that contributes to developing a genuine understanding of how organisations create value; and by communicating the results of this work in a way that will have an actual impact on the way people work – through teaching, through books and articles, through this blog, through speaking and through working directly with organisations.

Constraints

This is the trickiest one to get my head around. Constraints are the things that must not be done. Instead of trying to carve out a competitive advantage through executing a strategy, the betterness approach looks to build value by enabling customers. Constraints are about avoiding things that do damage.

My constraints: I will not: encourage innovation just for the sake of novelty; try to elevate my ideas by taking shots at others; get caught up in publishing for the sake of publishing instead of communicating to effect change.

Imperatives

Imperatives are simply the things that must be done daily.

My imperatives: I will: make evidence-based recommendations; share knowledge daily; have a positive impact on the people with whom I work.

Innovation Betterness

If you take these ideas seriously, you end up with what Haque calls behavioural innovation. In summarizing the research behind the book, he describes the organizations that were more successful:

Those who were able to create wealth were a new kind of innovator: behavioral innovators. Innovation is often conceptualized at the level of products and services, business models, or competencies. Behavioral innovators pushed the boundaries at a higher level. They made novel, different, innovative sets of decisions compared to current rivals and historical peers. These decisions weren’t one-offs, but consistent, repeated, and predictable: novel habits about products and services offered, investments seeded, people employed and goals sought, more sharply focused on elevating human potential.

This gets at another question that Steve Denning asked recently: Why Are There No Successful Innovation Initiatives?

In part, it’s because change is hard. As Gregg Fraley says in a comment on yesterday’s post – if innovation were easy, everyone would be doing it.

But it goes deeper than that: to have a successful innovation initiative, it’s not enough to just talk about the importance of innovating. It’s not enough to get some tools. To innovate successfully, you actually have to change how you do business.

This is one of the key points that Jeffrey Phillips makes in Relentless Innovation. He says that to embed innovation, you have to make it part of Business As Usual. That’s why we keep talking about the importance of linking innovation to strategy.

But if you do that, you are changing your whole business model. If you are genuinely committed to making a change, you end up changing your value proposition. Once you do that, everything else has to change as well.

I think that Haque’s Betterness principles can help with this. If you are going to become genuinely committed to innovation, you might as well start with your value proposition. If you work through defining clearly your ambition, intention, constraints and imperatives, you will have to embed innovation into your new Business As Usual scheme.

It took me longer than usual to write this post. I’m a bit nervous about stating my intentions as clearly as I have, and this is still a work in progress. But I hope that you will tell me if my ambitions are failing you, since the people here are a big part of who I am trying to have an impact on. If you have any feedback on how I’m doing, or suggestions on how to do it better, please let me know.

Here’s one last thought from Umair:

A life well lived is a consequence of human choice: the decision to pursue the significant over the trivial, the enduring over the evanescent, and the meaningful over the useless. So here’s my challenge – live one.