DAVOS DAYS: PART TWO
THE WORLD IN 2014: RETHINKING THE CORPORATION
In support of our theme of over commitment and doing things differently, we thought this session from the World Economic Forum's annual Davos meeting in January on what corporations can do differently would be of value.
The business enterprise has been a defining factor in the development of civilization for the past 500 years, said Lawrence H. Summers, President, Harvard University, USA. Yet the enterprise's relationship with capital -- physical, financial and human -- is in flux. How, Summers asked the panelists, will that relationship change over the next decade?
Michael E. Porter, Bishop William Lawrence Professor, Harvard Business School, USA, said there are three major trends that will catalyze the corporation’s evolution. First, he said, is the relentless internationalization of economic activity, with global demand shifting toward the developing world. Second is technological progress. And third is demographics, which will create labor shortages, especially among highly trained workers. These trends will likely force four major changes upon corporations, he said. First, companies will strive for distinction in innovation instead of size or diversification. Second, companies will spread their value chains, but will invest more deeply and meaningfully in fewer locations. Third, the scarcity of skilled workers will force companies to pay greater attention to retaining and motivating employees. Lastly, corporations will have to respond more effectively to the community.
Physical assets are already diminishing in importance relative to physical capital and intellectual property, said Carly Fiorina, Chairman and Chief Executive Officer, HP, USA. In the next decade, she said, maintaining competitiveness will require companies to seek out talented individuals worldwide. As technology renders more processes digital, mobile and virtual, corporations will restructure. Companies will shift from vertically oriented organizations with vertical chains of commands into horizontally oriented organizations based on partnerships. Companies will also be held to new standards of behavior. "The floor of what is acceptable character is rising every day," she said. Enlightened self-interest will compel companies to engage their communities more deeply, a move that will also help develop markets, employees and partners.
Peter Brabeck-Letmathe, Vice-Chairman and Chief Executive Officer, Nestlé, Switzerland, said demographics are the most important trend affecting the corporation. The human population is getting larger and older. The most important question for chief executive officers is not how to restructure or re-engineer, but what are their dreams? Companies have to have a strong set of values. And CEOs have to balance a variety of imperatives: growth vs. profitability, expanding a core business vs. diversification, and obtaining new information vs. focusing on the big picture.
Noting the tremendous change the Internet has wrought on the corporation when ten years ago it was largely unknown in the workplace, Nobuyuki Idei, Chairman and Group Chief Executive Officer, Sony Corporation, Japan; Member of the Foundation Board of the World Economic Forum expressed concern that new technologies are overwhelming the Internet. "Today's architecture won't survive the next decade," he said. "We need a quantum leap." With technology forcing many industries to converge, new competition will force companies to think harder about how to develop their brand.
Despite a desire by companies and governments to close the chapter on corporate scandals, Guy Ryder, General Secretary, International Confederation of Free Trade Unions (ICFTU), Brussels, predicted that there will be renewed interest in the question of corporate governance. Efforts by corporations to regulate themselves by adopting corporate social responsibility policies have failed, he said. Society cannot leave it up to companies to decide what values should drive business, he said. That is up to society. Nowadays, companies are shifting to locations where workers' rights are repressed or denied, he said. Regulations should be used to set a floor under corporate labor policies so that companies that do the right thing aren't driven out of business by companies that do not. Companies need to embrace such regulations appropriate to establishing fair competition. "Those that don't want that are only fuelling anti-globalization sentiment," Ryder said. "And they'll place in jeopardy the future of a sustained global economy."
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