Sun, Mar 30, 2003 page12

• Capitalism needs soul to survive in difficult times

  A provocative new book says we have to remember that companies are made by human beings and can be just as individual

  • By Simon Caulkin / THE OBSERVER
  • • 
    • 
    • 

  As the world totters into war, companies too are entering uncharted waters. Never has the future looked less certain and the contours of business less clear.

  Capitalism is caught between Viagra and Prozac, in the words of Jonas Ridderstrale and Kjell Nord-strom, two colorful Swedish anti-gurus and academics who made their name with their provocative views on the new economy in a book called Funky Business.

  But the optimism of the dotcom era is now long gone, and as the tides of the 1990s recede, they leave companies and individuals facing difficult dilemmas.

  On the corporate side, companies may be looking at the biggest slump since 1929, say the funky ones. Big brands -- McDonald's, Coke, Disney, even Ford -- are in trouble. All products and services are in oversupply. Better informed customers call the tune. As Adam Smith predicted, profits are being competed away. Hence the recourse to Viagra.

  Meanwhile individuals find themselves in a welfare society that feels as if it were designed by IKEA -- a DIY flat-pack kit with "no assembly instructions." No longer bound to their companies by a strong psychological contract, some individuals work themselves into the ground to stay alive, while others also work 80 hours a week because they know their knowledge is perishable and won't last -- the knowledge-worker equivalent of David Beckham.

  "Either way it's increasingly difficult to strike that balance between making a living and having a life," says Ridderstrale. Hence the Prozac.

  New world order

  What's causing this turmoil?

  The consensus world -- roughly speaking, middle-class, stable and standardized -- is breaking down, the funksters told the London Business Forum last week. It is polarizing into a "binomial" world of two separate norms -- gated communities and ghettos, haves and have-nots in both wealth and skills.

  The most extreme case is the US, but it's also happening elsewhere -- even in the egalitarian Nordic countries, where pay differentials between top and bottom are widening, and deregulation and liberalization rule the day. Even "poor" countries now have their quota of the incredibly rich.

  This reflects the fact that just as English is becoming the world language, North American is becoming the dominant dialect of capitalism. It's an open world, says Nordstrom, and unless Europe can find a way of making its diversity count -- as in the manner of an Airbus or 2G mobile telephony -- then the US version may drown out the rest.

  But is this where we want to be? Is this management for mankind or the reverse? And if it's not what we want, what can we do about it?

  Market capitalism is not an ideology, insist Ridderstrale and Nordstrom. They liken it to mach-inery such as nuclear power, which has potential for both creation and destruction. Market capitalism is good at efficiency. But like any machinery, it doesn't have values or a soul.

  "It's our task, I think, to provide this mechanism with a soul," says Ridderstrale.

  And this is where companies come in. Of course, corporations are part of capitalism's discontents -- but by the same token they have to be part of the solution, too. As the legitimacy of entities such as the state, the church and the family (not to mention the UN) is being sapped -- "the social capital that it took 300 years to build is in the process of being erased in one generation" -- it leaves a space to be filled willy-nilly by the corporation as the dominant institution of the time.

  Partly because of the dynamics of the labor market, this is already happening. To attract and keep talent, companies will change from being a consumer of labour and competence to being a co-creator of competence and a provider of personality.

  Personality wanted

  "If you look at a number of successful companies such as WalMart, Southwest Airlines or Virgin, they tend to be providers of personality they have evolved into communities or tribes," says Ridderstrale.

  People are looking for meaning in their working lives so in years to come, posit the pair, they will want not just a career but a calling, and what historically has been the preserve of organizations such as Amnesty, the Red Cross or the Vatican will filter out into traditional business organizations.

  "It has to -- companies will have to create these emotional switching costs" to retain their best people, he says.

  This chimes with another requirement. To create momen-tum, corporations need mass and energy.

  "Velocity is a function of mass and energy, and I think we've been too obsessed during the last 20 years with processes focused on demassification, outsourcing, downsizing, getting lean," Ridderstrale says. "Most organizations are pretty efficient competitive weapons now, but we've neglected the other variable, energy."

  "And there you can talk about soul, and about adding know-why to know-how. Because it's not only about core competencies. Core competencies are to a company what petrol is to a car: you can fill it up, but without spark plugs the car won't move. And the spark plugs of the company happen to be passion, soul, affection, intuition, desire, all the soft things that some people would call touchy-feely fluffy stuff. But we should also remember that research in neuro-science is pretty clear in indicating that the emotions always overpower reason. Our brains are emotionally wired," he says.

  Obviously, there are dangers this way, too. Tribes and communities can easily become cults, cults turn arrogant and coercive (think of Enron). But this is a reminder that there is a choice.

  Capitalism with a cause or capitalism with a curse? It's companies, not blind economic forces, that will decide, and companies are made by human beings.
• Most Popular

  • 1

    Iran’s supreme leader Khamenei killed

  • 2

    Iran prepare for Women’s Asian Cup in Australia as bombs drop on homeland

  • 3

    Marco Bezzecchi wins MotoGP opener

  • 4

    For Bangladesh, just playing is a win

  • 5

    Liverpool rocked by last-gasp defeat at Wolves