Q&A: What is the future of the company?
To coincide with the launch of the new four-part FT series on The Future of the Company
, Kai Peters, chief executive of Ashridge, the leading UK business school, and Mark Goyder, founder director of Tomorrow’s Company, answered readers’ questions. The best were selected and answered, below. There is also an online video of Mark in discussion on this topic
with Stefan Stern, director of strategy at Edelman, Michael Skapinker, assistant editor of the Financial Times and Daniel Garrahan, also of the FT.
How much do you think the future of the company rests in India and China?
Simon Boxall, Portsmouth
Mark Goyder One might also ask, is it more India or more China? And, also, does the future lie with the listed company? Arguably, the company of the future will be a family or private business, as it is predominantly today. Obviously, demographics and finance are hugely on the side of Asian companies. You just have to look at the numbers of companies from emerging companies in the FT Global 500.
But… the company of the future will be a global construct. The company of the future may originate in one country, but in time it will cease to be identified as such. In fact the global listed companies now emerging from China and India will shape our world. However, they will also be competing in a global marketplace. Some recent work we did brought home to me a simple truth: a global company is not only competing in a global market for customers and capital. It is also, ultimately, about competing in a global marketplace for admiration.
It is one thing to build powerful manufacturing and service companies in the B2B world. Before you can do the same in the consumer world, however, you have to build enduring brands. Brands are built on trust, and trust is built on meeting wide stakeholder expectations. Chinese and Indian companies that prosper are the ones that understand this. But how many global consumer brands have they built?
Kai Peters As an academic, or perhaps as someone who has too much time on his hands, I often ask myself what the role of a company is. The best I can come up with is that having many people under one roof allows for the joint creation of scale. The academic view is around transaction costs: is it more trouble to outsource than to do things under one roof? So — who is really big? In the west, it would be Walmart and the NHS. In the east, one looks to the Indian railroads and to many of the Chinese state-owned enterprises.
Antonio Borges, who used to be at Insead, has pointed out that in the east, they can still look west to see what to do: there is still imitation or at least organisational guidance on how to organise. In the west, we are exploring much more. This is harder, as there is not really a guide to what we should be doing. That said, what we seem to be doing is decreasing scale: much more outsourcing, independent research labs, etc, etc. It seems ultimately to be more efficient. So, companies will be everywhere in the future, but the larger ones will be in China and India and those in the west will be, in my opinion, numerous but generally smaller.
Given how much email has changed the way companies work in the past 15 years, what do you think will be the next big development in company communications?
Martin Watson, Tunbridge Wells
Mark Goyder The paradox of email is that, while it has made conversations like this one possible, it has also been used as a wall behind which many of us hide when we avoid talking to one another. Business is about meeting human needs. All businesses ultimately meet human needs through having relationships. Frederick Reichheld and other researchers have shown the very strong correlation between healthy employee relationships and healthy customer relationships. The Sears research published a few years back showed how this flows through into profitability.
The technology that has come after email has been far more “convivial” to use the term invented by the great Ivan Illich. Technologically, the next big development will be to use social networking in ways that enable individuals and groups to better come together and solve problems — often without travelling.
But ultimately, the development I long for is to recognise that the best communication technology of all is face to face. When I was a personnel manager in a paper manufacturing site of 1,000 people I spent the first hour of every day walking around and talking to people, so that I knew what was going on. Naively, I would like a return of that style of communications.
Kai Peters Surely we will reach the point of ubiquitous communications access within the foreseeable future. At present, frustrating 3G coverage, grinding Wi-Fi or paid-only access remain a big challenge. I expect that these issues will disappear and that we will have permanent access to our network needs using the same technologies that we are accustomed to: phones, emails and web access.
Speculating about the subsequent wave is much more fun. A recent headline noted that a woman thought that Amazon recommendations were better at suggesting what she wants for her birthday than her husband was – evidently he missed the boat completely. Therefore there is something in artificial intelligence that is appealing for organisations. No doubt video calling will also become useful – although some of the work we have been doing indicates that a proper phone call where the participants are concentrating is much more effective than video conferencing because visuals can easily distract.
My own private area of speculation involves human computer interfaces. Kevin Warwick at the University of Reading is already implanting chips into himself. I suggest that in our lifetimes we will be able to add technology to ourselves as additional memory, as thought-activated phone calls, for example. While one may consider these ideas a bit off the wall, early examples already exist if one looks around.
To what extent will employees working longer and retiring later help or hinder companies in the years to come?
Mark Goyder It will be more help than hindrance. It will force employers to have a continuing conversation about performance. It will introduce the potential for more flexible arrangements, because I anticipate many people over statutory retirement age will want to work part time. It will capture more experience inside companies. It could even drive more younger people into starting their own businesses because the path to promotion in the classic big company is less to be relied on. Ideally, it should challenge employers to think more laterally. More annual hours contracts, perhaps? More scope to negotiate a retraining that helps the mature employee to contribute more without having to leave the organisation. All assuming the employer knows how to create a culture in which the question is “What can I contribute?” not “What are my rights”…but that leads us on to another story!
Kai Peters First of all, it will surely help companies, especially if they have final salary pension schemes. Paying out from 60 or 65 with a life expectancy of 90-plus is very expensive. Given that there are presently predictions that 50 per cent of the children born this year will live to be over 100, we need to be realistic about how to be financially secure for our lifetimes. From the company perspective, we will surely face the trade-off between youthful exuberance and energy, and wisdom from experience. If we get it right, we are in good shape; if we do not we will have youthful frustration combined with older workers blocking mobility and potentially innovation. Overall, I am positive. Certainly in the business school in which I work, experienced colleagues make tremendous contributions.
What is the place of corporate governance in the 21st-century?
David Clark, Leeds
Mark Goyder There are two kinds of corporate governance. There is the box-ticking, compliance stuff. And there is the living breathing accountability stuff. The first is a huge and growing overhead, albeit one that companies have brought on themselves by their failure to do the second. The second is about keeping the company honest.
The company is a living system. Employees are its lifeblood. Strategy is the brain and measurement and communication the central nervous system. Culture is the DNA. Leadership and continued entrepreneurial energy are its soul and spirit. Governance and accountability are its rhythms and disciplines, like exercise, a means of keeping this living organism fit and lean.
Leadership gives a company energy. Governance assures its honesty.
Kai Peters There are, it seems to me, two points to raise here – the first is about “official” corporate governance, and the second is about “practical checks and balances”. From the official side, I firmly believe that organisations need people on the board who are respected and who know about the industry. While it is theoretically a nice idea to be fashionable and have outsiders/customers or a “man/woman off the street” to provide an additional perspective, the reality is that organisations are complicated, and making sense of what they do without depth of knowledge does not work.
On the second point, one comes to something that I’ve written about that can perhaps best be termed “the world is watching”. The immediacy and depth of technology means that external supervision of organisations is greater than ever. Whether it is Wikileaks or Twitter, the public has inordinate power to keep an eye on what organisations are doing. Certainly, this external scrutiny delivers better results than the ever increasing levels of reporting through Sarbanes-Oxley or equivalent.
My son is just about to graduate from university in the UK and keeps talking about becoming an entrepreneur. What advice would you give him in this current economic climate?
Mark Goyder I recently heard a professional piano teacher say that by the age of five it is too late to become a professional pianist. Fortunately, the opposite is true of entrepreneurs.
I would advise him to achieve his goal indirectly – gather experience, volunteer, if necessary, in the organisation he most wants to learn from, and pay off debt/build up financial reserves, if possible. Identify what he really cares about and what he is really good at. I doubt, unless he is a Richard Branson, that he knows that yet – and if he does he is probably already practising as an entrepreneur.
Most entrepreneurs would also testify to the loneliness of it all. If, in the course of gathering that experience, he meets someone else he thinks he could work with to build a business, I would give him five times more chance of success. I started Tomorrow’s Company in my 40s. Only afterwards did I see that the ideas had been slowly building in my head since I was 17.
Oh, and try writing your own obituary – as recommended by Stephen Covey. It really is a powerful exercise!
Kai Peters While it is altogether feasible to think up a super idea from scratch, most successful entrepreneurs exploit market imperfections in markets they know something about. The question thus arises, whether there is an area he feels comfortable enough in to have something to offer the market. Young people have oodles of energy and are well aware of new trends and needs. Their challenge is to get the business part right. Those with more experience will see that there is an opportunity to cherry-pick niches in established business areas, especially where incumbents are large, slow, and – sorry to say – often previously state-owned. Low-cost airlines, courier services and gaps in education have all been very lucrative.
In my experience, I have found executive MBA students to be more entrepreneurial than full-time MBA students for that reason.
For your son? If he has an idea, and you are willing to welcome him back home to keep his fixed-costs down, he should go for it. In my opinion, there is no such thing as failure. He will learn a lot and hopefully do well. If the idea does not work, he will have learned a lot, kept himself going for a while, and will simply move on to the next bright idea. Best of luck to him.
I find it incredibly annoying when colleagues claim to be “working from home” when, in fact, they are doing no such thing. Is this arrangement going to become the norm? Because I sincerely hope not.
Mark Goyder One of the best definitions I heard of a company’s culture is that it is what people are doing when the boss is not around. You obviously work in a low trust environment. I suggest you seek out a place where people feel committed to the purpose and don’t look over each other’s shoulders. It has a better future. And you will have better blood pressure!
Look at a company like John Lewis. When the company asked the partners in one of their stores a few years ago what they would change, they replied “abolish the lunch hour”. The partners thought it was ridiculous that when most customers are in the store, most employees are off duty. So they changed to having a morning and afternoon breaks.
Kai Peters Guilty as charged – I am working from home right now. Had two meetings this morning in London, am home in the afternoon and am heading out again for a fancy dinner.
The challenge you are pointing to is actually quite profound. In the past, we, as employees, did work where the inputs related to the outputs – manufacturing, service industries where you had to be there. Now, with many of us in knowledge industries, inputs are not a good guide – but we do not really know how to measure outputs.
The second angle is also a challenge. I would suggest that many of us are always sort of working – technology means we answer emails at ridiculous times during the week. We also ponder work questions in unlikely places. It has been suggested that much innovation happens in the “B’s”: in the bed, bath and bus – when we actually have thought time.
All that said, I am afraid that I also have some trouble with the concept – even if saying that seems to contravene dozens of UK and EU laws!