Business model positioning & employee capacitation as a prerequisite Date: November 21, 2011 Presenter: Daniel F J

1. Business model positioning & employee capacitation as a prerequisite • Date: November 21, 2011 • Presenter: Daniel F Jacobs

2. Introduction • Head: Centre for Business Dynamics • Founder & Executive Director: ILSC (Pty) Ltd • E-mail: jacobsdf@ufs.ac.za • jacobsdf@ilsc.co.za

3. “When the rate of change outside exceeds the rate of change inside, the end is in sight” • Jack Welch

4. Consensus …………….. business model positioning/change & capacitationof employees are all prerequisites for the future performance, competitiveness and sustainability of business • What is a business model?

6. Change in perspective … • Business model positioning / restructuring, innovation, maximising profits / shareholder returns / outsourcing / off shoring, etc. - needto change not only more often & faster BUT in more fundamental ways • Change has changed - “in many industries [change no longer move in a straight line], but is … discontinuous, abrupt, and distinctly non-linear …” and the starting point for change not with products and services, but in most cases the total business model • One of few competitive advantages – the ability to learn faster and change more effectively than competitors • Organisations must build capacity for change • Futuristic business thinking about present challenges and future opportunities - within the framework of a business model of “how [a] company now operates but [b] should operate in the future” • Boils down to alignment and ‘fit’ between the “organisationalenvironment, [the] business or competitive strategy, and organisationalcapability” • Common thread - the “[dissatisfaction with &] movement away from the status quo”/present state “to some desired state to increase effectiveness”

7. capitalistic jargon that we are familiar with …………….. and yes we are intrigued by the nice WOW stories ….. • What is the state of your core customers? / What is the state of your core differentiation? / What is the state of your industry’s profit pools? / What is the state of your core capabilities? / What is the state of your culture and organisation? What is the state of your staff? – gap between existing and required skills and competencies!!! What is the state of your business model in general? but ….

8. The problem is that despite the body of knowledge about business & change what we are busy with is not sustainable ….. • “a fundamental reorientation in the way you operate” - influence organisational members to behave differently • Purpose of business – purpose of academia? • Most Business Schools are failing us … evolving corporate universities?

9. Traditional capitalism is under attack - Why? You may ask • No, it is not only the 2008 World Recession and the factors that led to it …. • In 1965, CEOs earned on average 44 times more than factory workers. In 1998, CEOs earned on average 326 times more than factory workers and in 1999, they earned 419 times more than factory workers. The gap has remained more-or-less at 400 times • The income gap between the richest fifth of the world’s people and the poorest measured by average national income per head increased from 30 to one in 1960, to 94 to one in 2010 • A third of the world’s people live on less than $2 a day, with 1,2 billion people living on less than $1 a day • Carbon Bubble – iceberg melting in Antarctica • World Wildlife Fund’s Living Planet’s Report 2008 concluded that we are already operating 25% above the planet’s biological capacity to support life – and that before we add another billion people by the early 2020s

10. Overconsuming, overbuilding, overborrowed, and overlending – growth needs to be more balanced – economically and ecologically – the way we live under traditional capitalism is simply unsustainable – economically unsustainable and ecologically unsustainable • Business is viewed as a major cause of social, environmental, and economic problems - Companies are perceived to be prospering at the expense of the broader community • Overlooking the well-being of their customers, the depletion of natural resources, the viability of key suppliers or the economic distress of communities in which they produce and sell • A narrow conception of capitalism has prevented business to meet society’s broader challenges • Profits come at society’s expense – rising earnings have done little to offset high unemployment, local business distress, and severe pressures on community services • Outsourcing and off shoring weakened the connection between firms and their communities – many companies no longer recognise a home – see themselves as global companies • Broad breakdown in individual and institutional responsibility

11. Most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core • Corporate responsibility programmes – reaction to external pressure – have emerged largely to improve firms’ reputations and a treated as a necessary expense • The world was our oyster - and then we ate it

12. Economic slowdown in the developed world – seeking growth in the developing World • Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth - Marx • “Business managers can more effectively contribute to the solution of the many complex social problems of our time. There is no higher responsibility, there is no higher duty of professional management.” Frank Abrams, Harvard Business Review, 1951 • Society’s needs are large and growing - health, better housing, improved nutrition, help for the ageing, greater financial security, less environmental damage • Societal needs define markets • Companies must take the lead in bringing business and society back together versus being charitable donors – feeling good contributions

13. Solution lies in the principle of shared value – which involves creating economic value in a way that also creates value for society by addressing its needs and challenges – it is believed that this will be the next major transformation of business thinking and ULEASH the next wave of global growth and innovation • At the basic level, the competitiveness of a company and the health of the communities around it are closely intertwined - A business needs a successful community / society • A community needs successful businesses to provide jobs and wealth creation opportunities for its citizens • With the focus on this BALANCE – the one hand washes the other • Companies have overlooked opportunities to meet fundamental societal needs and misunderstood how societal harms and weaknesses affect value chains • Companies can create economic value by creating societal value – how: by reconceiving products and markets; redefining productivity in the value chain; and building supportive industry clusters at the company’s locations

14. Hybrid Enterprises – profit/non-profit boundary • WaterHealthInternational – for-profit uses innovative water purification techniques to distribute clean water at minimal cost to more than one million people in rural India, Ghana and the Philippines – investors socially focused Acumen Fund and the World Bank • Waste Concern – hybrid – started in Bangladesh 15 years ago – convert 700 tons of trash, collected daily from neighbourhood slums, into organic fertiliser, increasing crop yields and reducing CO2 emissions – improves health conditions while earning a substantial gross margin through fertiliser sales and carbon credits

15. Equal or even greater opportunities can arise from serving disadvantaged communities and developing countries – these customers have not been recognised as viable markets – billions of new customers at the bottom of the pyramid – articulated by Prahalad • The societal benefits of providing appropriate products to lower-income and disadvantaged consumers can be profound, while the profits for companies can be substantial

16. Low-priced cell phones provide mobile banking services to the poor and transforming the ablity of small farmers to produce and market their crops: • In Kenya, Vodafone’s M-PESA mobile banking service has signed up 10 million customers in three years; the funds it handles now represents 11% of the country’s GDP • In India, Thomson Reuters has developed a monthly service for farmers who earn on average $2000 per year. For a fee of $5 per quarter, it provides weather and crop pricing information and agricultural advice – it reaches an estimated 2 000 000 farmers and helped increase the income of more that 60% of them • As capitalism begins to work in poorer communities, new opportunities for economic development and social progress increase exponentially • Meeting the needs of underserved markets often requires redesigned products and different distribution methods

17. Procurement – some companies begin to understand that marginalised suppliers cannot remain productive or sustain, much less improve their quality • Nestlé • Most coffees are grown by small farmers in impoverished rural areas of Africa and Latin America who are trapped in a cycle of low productivity, poor quality and environmental degradation • Nestle redesigned procurement – work intensively with its growers, guaranteeing bank loans, and help secure inputs such as plant stock, pesticides and fertilizers • Greater yield per hectare and higher production quality increased growers’ incomes, and the environmental impact of farms shrank. Nestlé’s reliable supply of good coffee grew significantly

18. Distribution – Unilever is creating a new direct-to-home distribution system, run by underprivileged female entrepreneurs. Provides micro-credit and training and has 45 000 entrepreneurs covering some 100 000 villages across 15 Indian states • Location - the cheaper the location – rethinked partly by the rising costs of energy and carbon emissions • Olam International – shipped nuts from Africa to Asia – opened local processing plants and training workers in Tanzania, Mozambique, Nigeria, Ivory Cost – cut processing and shipping costs by 25%, greatly reduced carbon emissions – build preferred relations with local farmers – provided direct employment to 17 000 – 95% are women and indirect employment to an equal number of people • Local clusters – Yara - logistical infrastructure – agricultural growth corridors in Mozambique and Tanzania – Government – benefit 200 000 small farmers and creates 350 000 new jobs

19. Profits involving a social purpose represent a higher form of capitalism • To create economic value through creating societal value will be one of the most powerful forces driving growth in the global economy • Business has the capability to lead social progress in ways that even the best-intentioned governmental and social sector organisations can rarely match – CSI/R versus CSV – CSI not sustainable

20. The Way Forward for education & training institutions – corporate universities • Professional growth & Development – employee engagement

21. I THANK YOU