We write to share with you the key findings of the major inquiry report "Tomorrow's Global Company: Challenges and Choices", which we will be launching in London next week on June 18th, and in India in the coming months. 

We want to stimulate a dialogue, which will ensure that the findings lead to practical action.  The launch of the report represents the first step: we do not claim to offer a detailed road-map, but we do believe that the report outlines the principles from which, through dialogue, such a road-map can emerge.  

The richness of this report is rooted in the powerful dualities that are harnessed:  'East meets West'; established and emerging global companies; and the creative tension between business and civil society.  After over a decade of working primarily within the UK, Tomorrow's Company has only in the last two years started to weave together these rich global threads, through a process of research, interview, consultation and inquiry which underpins the Inquiry team's conclusions. Our conviction is that lasting global solutions can only come by harnessing and transcending difference: the design of this inquiry therefore offers real hope.

Facing the global challenges, arising from the analysis, the Inquiry Team draw the conclusion that companies must expand the space in which they operate: the mindset of business leaders needs to shift and to be extended: 'global companies can be a force for good and are uniquely placed to deliver the practical solutions that are urgently required to address these issues', and to do this in practice requires a focus on three inter-locking and mutually reinforcing priorities:

• Redefining success - defining and measuring success in a way that aligns and integrates the social, environmental, human and financial aspects of companies' work;
• Embedding values - defining, living by, and being judged by values that are publicly espoused and applied rigorously in challenging situations; and
• Creating frameworks - supporting sound national regulatory frameworks and international agreements, working with governments, NGOs and others to create them.

Expanding the space in this way must become integral to the way in which we do business in the future.  "This is not about philanthropy or companies being seen to be 'doing good'. These are actions that serve the long-term interests of any company", the report argues.

The report celebrates the role of markets in providing 'the most powerful means of stimulating innovation and meeting immediate consumer needs for goods and services' but then goes on to argue that the "full creative potential of the market can only be realised if governments -- supported by companies and others -- put in place effective frameworks of regulation and incentives in the short-term. These are essential for companies to be able to compete on equal terms and to deliver new and innovative goods and services. It is therefore in the interest of global companies to be proactive and work in partnership with civil society, policy makers and others to help international organisations and governments create the frameworks necessary to strengthen and guide the market."

Countering climate chaos is of course a critical and topical example. Companies are developing a range of low-carbon energy technologies, from solar panels to biofuels - but for such solutions to be viable at scale, a new framework of regulation is required that rewards clean technologies and penalises the high-carbon ones.

Global businesses have huge resources, deep capabilities and extensive reach. They also have day-to-day frontline experience of key problems such as poverty, environmental issues and human rights dilemmas.  They can work in low-income markets - supported by Non-Governmental Organisations (NGOs) - to provide useful products at low prices - the so-called 'bottom of the pyramid' market. They can set standards in their operations that help to make decent working conditions the norm in developing countries. They cross boundaries and have greater scope than national governments. They also have greater power - though not necessarily greater influence or expertise - than NGOs.

Looking to the future, global businesses need to be confident in showing how large a part they can play in providing the solution.

Tomorrow's Company looks forward to working with tomorrow’s global companies, organizations of civil society, and government, so that, together, we can ‘expand the space’.

Mark Goyder and Tony Manwaring

What does this tell us?

Well, first of all, that we are all subject to temptation. These scandals are more likely to happen where we are not closely observed. There really is a value in the independent director.

Secondly, it should once and for all put to bed the argument about the ‘payback’ for good corporate governance. Corporate governance is not like your budget for advertising – increased in the fat years and suspended in the lean ones. It is more like insurance. Would you refuse to pay for house fire insurance because there had been no fires for the last five years?

Thirdly, there is a terrible lopsidedness to the way fund managers look after our money. Analysts will research many things such as the prospects for the market, the competitive landscape, and the implications of new technology. But still they do not have a method for working out whether a company has a robust and trustworthy culture.

It isn’t that difficult to tell. Just read the accounts of life in Barings or Enron [1]. People who worked close to the culprits had their suspicions. All these companies have statements of their values – the key to detecting rampant self-interest is to test if these individuals’ actual behaviours live up to the values of the organisation.

So why do those who look after our money choose to cut themselves off from these insights?

It’s because they have such a one dimensional view of business. They think of a business as if it were a machine running on money (financial incentives). To improve its performance, simply align the interests of the people at the top of the company with those of the shareholders.

But hold on a minute. What about loyalty, trust and discretionary effort? What about the people who stay longer in their jobs than the two and a half years that the average CEO works. What if the machine they have been invested in is being run into the ground by a CEO who is not worried what problems he bequeaths to his successor?

There is a new interest in Corporate Social Responsibility (CSR) in Saudi Arabia. I was to present a joint session with Asya al Alshaikh, the Founder and President of Tamkeen, the country’s first CSR consultancy. We went together to the conference hall to listen to the opening ceremony. We then had to go our separate ways.  She was required to sit, with other women behind one-way glass enabling women to observe the conference but not to be seen by its male participants.

In spite of this conservatism, a new era does seem to be beginning in Saudi Arabia. From the King downwards, there is an opening up and in particular there is a new recognition of the valid voice of women. My fellow speaker might not have been allowed to sit next to me to listen to the Prime Minister of Turkey or the Queen of Jordan, but she took the same stage from which they had spoken to challenge the men who run Saudi Arabia’s companies to recognise the strategic importance of CSR beyond charitable donation.  It was a historic moment.

And so to Manchester, to interview one guru (Charles Handy) and listen to another (Tom Peters).During Tom Peters session he declared the future is with women. In support of this point he told us that 70% of all new jobs created since 1970 have been filled by women; women take over 50% of purchasing decisions; more than 50% of the managers in the USA are now women; and in the UK girls are outpacing boys in educational attainment.

Never one for an understatement, Peters argues that “women do relationships; men do transactions”. This is an absurd generalisation - rather like saying that all accountants are introverts and all salesman like fast cars, but the implications remain interesting. The statistics make it inevitable that there will be more women leading our businesses –not only in Manchester but also eventually in the Middle East. In spite of the demands of the Blackberry, the skills associated with empathy and long-term relationships will be more and more in demand. What does that mean for your business?

C. K. Pralahad

Back in the late 1960s and early 1970s a number of original thinkers such as Peter Drucker, Daniel Bell and Alvin Toffler drew attention to certain emerging trends which were going to result in radical changes to the structure of Western industrial economy and society. Among these trends the most important were:

• The decline of 'smokestack' manufacturing industries and the growth of services, both in terms of employment and share of gross domestic product
• The rise in the proportion of women in the active workforce
• The increase in the proportion of the workforce who could be described as 'knowledge workers'
• The way in which information technology was ushering in a new industrial revolution
• The increasing globalisation of markets.

These thinkers were not using crystal balls and peering into the future. They were looking at trends that were already giving out early warning signals. Their ability to see how important these were and to draw out their implications was a function of the fact that they were, in C K Pralahad's words, able ‘to escape the gravitational pull of the past’. Regrettably, this is a mental capacity shared by only a relative few people in top management. Most cling to the conventional wisdom of the day in the same way that Linus clings to his security blanket.

Today one of the business techniques seen as 'the latest great idea' is 'knowledge management'. Its importance to industry is well summed up by the following statement by the chairman of one of Britain's major global companies

‘The competitive advantages on which our success depends all rest in the last resort on knowledge….knowledge has no marginal cost. It costs no more to use it in the 70 countries in which we operate than in one… Knowledge is not cheap…we spend many millions in acquiring it. But without this expenditure we could not survive.’

Quite so. But the point of including this quote is that the statement was made in 1972! Why did it take over 25 years for this essential truth to percolate through into mainstream management thinking? The answer is that most of us are mental prisoners of old mindsets. We were brought up to believe, (particularly those among us who trained in accountancy) that a company's assets lay in its tangible property such as its premises, plant and equipment and cash at the bank. We still tend to conduct business in that way, but things are gradually changing. The market valuation of companies is more and more based on the judgement of investors as to the likelihood of future earnings and this in turn is based on an assessment of the extent to which the company's knowledge base is being updated and renewed.

Nevertheless, the ability to exploit this understanding for competitive advantage would have been very much greater back in the 1970s, when the central role of knowledge management had not become an accepted part of management thinking. Those with imagination and who think creatively are seeking to be ahead of the game. They are searching for tomorrow's big idea. To be ahead of the game calls for the ability to think outside the box - indeed the ability to recognise that the box does not exist except in our minds. For managers to be able to think in this way their development needs to place much more emphasis on enhancing and bringing out their inherent ability to think creatively and less on ‘running the numbers’.