DUAL MISSION ENTERPRISES AND DEEP IMPACT INNOVATION - FUTURE OF BUSINESS

This article is a long read. So posted on a Saturday evening. This article foretells the future of business – the opinions are based on sound academic theories and 3.5 years of research. Comments for or against are most welcome. The author doesn't make a definitive claim that this is how the world of business may look like 3/4 years down. It may/It may not!

?The inability to innovate – failure to anticipate conflicts

“The reason why firms succeed or fail is perhaps the central question of strategy” (“Towards a Dynamic Theory of Strategy”, Michael Porter, 1991, Strategic Management Journal, Vol.12, 95-117): - 32 years down, Professor Porter’s prescient remark rings harder in this age of ChatGpt. Today companies face three main kinds of challenges: - 1) it has become a lot more tough to convince the customer about a product/service than it was in 1991 2) it is increasingly difficult to complete a R&D project with lesser resources and deliver a successful product – the probability of new launch failures has increased manifold 3) AI based technology development has accelerated since the pandemic, leaving legacy 20th century manufacturing/FMCG and banking giants to play a catch-up game with geeks in fintech, e-commerce and other fronts like unbranded E-vehicles. To add to this list comes a complex problem on the international business front – winning in African/Latin American markets – the last unexplored frontiers of international business, the rest of the markets including India and China are rapidly reaching saturation levels or has reached already like Europe – where today war clouds threaten the continent’s stability once more after 1939.

The key lies in CONFLICT ANTICIPATION rather than conflict management. Conflict management is passé and reactive. Conflict anticipation is the new name of the game, aided by AI. Anticipation of conflicts is an art – to be mastered over a period of time. The better the anticipation, the more successful the company will be in negotiating an increasingly complex environment and thrive – thus addressing the central question of strategy.

An increasingly complex environment

Business today not only has to address market share/profitability issues, it also is answerable on ESG issues, UN SDG compliances, circular economy practices. This poses a dual challenge of pursuing economic and social goals simultaneously. Add to this the increasing pressure of adapting to rapid advances in AI – the thorny question of retaining or retraining manpower comes up, add to this the worries of a looming global economic recession and energy transition issues, merging industry boundary issues in many industries – no wonder the proportion of sleepless nights in homes of managers is increasing.

The need to not to fuse but have a dual mission

Over the years CSR activities assumed a strategic dimension and many businesses latched on to the SHARED VALUE concept as enumerated by Michael Porter and Mark Kramer in their 2011 HBR article. HUL’s project SHAKTI, NOVARTIS’s AROGYA scheme and SBI’s JAN-DHAN YOJNA of financial inclusion are some of the best recent examples of Shared Value. However given the complexity and interconnectivity of ESG compliances, circular economy practices and UN SDG compliances, a fused strategy may not be successful in future. On the other hand the fused strategy approach which worked so well in the pre-pandemic era may cause more complications.

Here companies need to revisit their MISSION STATEMENT and this requires a paradigm shift – TO NOT TO HAVE A SINGLE MISSION BUT A DUAL MISSION. As the third generation AI and robotics free more and more human labor and frees managers from the Microsoft excel and MS-WORD, pursuing a dual mission strategy becomes more feasible. Dual mission enterprises have been emerging for quite some time now – these are known as hybrid social enterprises – who pursue social and profitability goals together. However the definition of a dual mission enterprise as enumerated by this article is different – it is entwining of profitability and social goals – interlinking them and have TWO CLEAR MISSION STATEMENTS IN STRATEGY – NOT ONE, which also implies that companies will have to pursue TWIN BALANCED SCORECARDS – NOT ONE – and link them. So the very definition of strategy undergoes a fundamental change – it is no more about gaining competitive advantage, but COLLABORATIVE ADVANTAGE OVER A PLATFORM + CREATING A DEEP AND WIDE REACHING SOCIAL IMPACT.

What this article just said may appear as academic fantasy to skeptics and closed minds. However if one closely watches the changing Government regulations worldwide, then one may observe that Governments all over the world are imposing increasingly stringent conditions for compliance of ESG/UN SDG/Circular Economy practices and more transparent disclosures. In India we may soon see SEBI and CLB tightening the screws on listed companies for increasing compliance and stringent disclosures, going FAR BEYOND 2% net profit rule of CSR activities.

Hence the idea of a dual mission enterprise with twin balanced scorecards may seem far -fetched right now, but then did anyone know about ChatGpt when the pandemic outbreak happened and a global lock down took place in 2020 March/April? Tomorrow arrives sooner than you think!

Deep Impact Innovation

An ever growling engine of innovation is the key to collaborative advantage in the digital era, problems start when the engine stops and the circus of blame games, employee turnovers begin and the company is on its way to winding up. A high rate of cash burn, poor project completion rates, failure of new product/service launches, declining markets, increasingly souring employee relations – all these are classic symptoms of the engine coming to a stop. A dual mission strategy may revive the engine of innovation – opening up new frontiers of thinking, imagination and application – where products with deep societal impact may be launched, or products that has an effect on climate change and promotes the circular economy (I don’t wish to elongate this article by giving examples but one suffices here – Mahindra Home Finance’s initiative to give housing loans in villages of India to build small houses, Sujay Jha whose company Hari Bhari Waste Valorization India Pvt Limited provides a respectable living to the trash collector and converts trash into fuel is another emerging example). If a company pursues a dual mission strategy over a digital platform – many products/services with deep societal/green/UN SDG impacts may come up. This does away with the headache of compliances of ESG/UN SDG/Circular economy activities that are not part of the main business!

The problem lies here!!! The mind-set prevailing today is – “our business is to make cars, compliance of social goals is a necessary headache to be dispensed with”! THIS MIND-SET IS GOING TO GET YOU NO WHERE. And if you don’t do it – others will, forcing you to shut shop one fine morning, because your cars don’t fit the customer’s notion of a DEEP IMPACT CAR. Please don’t forget that the 3rd gen AI is ten times more powerful than the second generation AI based social media companies. Ten years back Facebook/twitter/whatsapp/YouTube was not that popular. In next three years a new set of Apps may dominate a person’s smartphone – ChatGpt is JUST THE TIP OF THE ICEBERG we are seeing – the pocket monster or pockeymon rather! THE GORILLA is yet to arrive. By 2027 the customer will start demanding deep impact innovation from every company.

Hence if you build a DUAL MISSION ENTERPRISE and pursue the path of DEEP IMPACT INNOVATION – you are automatically complying with all government regulations as well as keeping your customers happy and customer acquisition may suddenly become an easy affair.

The question arises how does one build a Dual Mission Enterprise?

The Theory of Conflicts: -

?We three researchers (myself, PRABAL CHAKRABORTY , Dr. Dimpal Bharali ) – over a period of three and a half years (and after several submission failures) – have built a theoretical framework, which amalgamates dynamic capabilities theory (refer David Teece, Gary Pisano and Amy Shuen, Strategic Management Journal, 1997) and Paradox Theory (Refer Wendy K Smith and Marianne Lewis, Academy of Management Review, 2022) and network effect of digital platforms to build a theory around five key types of conflicts – that managers need to anticipate everyday 24X7X365. They are: -

1)???Conflict of trust – the company assumes one thing, the customer has a different mind-set, which is changing fast with newer versions of ChatGpt (here it will be wrong to assume that use of ChatGpt is restricted to Indian Metros, it may spread faster than you think in villages in vernacular languages in next three years). Conflict of trust is becoming more complex to understand as time passes by. The customer in 1991 was a much simpler person with limited exposure and limited choices.

2)???Conflict of strategy – as of today a single mission strategy creates more complications than one can imagine with persistent and multiple pulls in different directions. A dual mission strategy may sound very tough on paper and initially very tough to execute – but once every manager is used to be a part of a twin balanced scorecard system – the conflicts and pulls and diversification challenges may merge as?ONE SINGLE BIG CHALLENGE – making it easier to manage – AS EVERY PARADOXICAL PULL HAS INHERENT SYNERGIES HIDDEN IN IT – A Dual mission strategy will bring out the synergies hidden in the conflicts – a single mission strategy will not be able to highlight the synergies

3)???Conflict of Everyday work – there are certain conflicts which persist all the time, such as cost-quality, global-local, customer demand-internal capability that are never resolved and they spring up every time they are solved!

4)???Conflict of “Either-Or” challenges – The previous three conflicts – if viewed together will appear as a very large “Either-Or” challenge to be converted into an “Either-And” solution. “Either-Or” challenges are never a one single challenge – but a combination of complex, inter-twined and multiple challenges that appear as a wicked hydra headed monster to the top/middle management. The first symptom that a company is unable to handle this challenge is employee turnover! Followed by a rapid drop in market share, losses and unrest within the firm.

5)???Conflict in building a digital platform – the digital aspect comes into play here, when a company undertakes its digital transformation exercise, which in a large firm may go on for years. Two most common conflicts are – conflict of value sharing with complementors – who are contributing to the knowledge and technology build up and conflict of governance – of data sharing, data security and privacy.

?The philosophical foundations of a dual mission enterprise – Absurdist versus Bounded Rationality versus Rationality –

The rational school of thought of economic and strategic planning dominated managerial thinking and public policy for more than a century now, started by Alfred Marshall in 1890's, further, strengthened by economists like Paul Samuelson and his contemporaries in 1950's. Also known as the Ox-Bridge (Oxford-Cambridge) school of thought. This school of thought still dominates the MBA curriculum globally with a heavy quantitative bias, especially in first year courses. This school of thought emphasizes perfectly logical and rational thinking, like Captain Spock of STAR TREK serial, totally devoid of emotions.

This school of thought was severely challenged by the likes of Herbert Simon in early 1950's with his THEORY OF BOUNDED RATIONALITY – Simon was a sociologist and this school of thought came to be known as the Carnegie-Mellon school of behavioral thought. The main contention of this school of thought is that humans are BOUNDEDLY RATIONAL creatures, never devoid of emotions, biases. Simon’s thinking was further strengthened by scholars like James March, Tversky and Daniel Kahneman with their behavioral theories, especially Kahneman and Tversky with their theory of systems 1 – fast-emotional-intuitive and systems 2 – slow-logical-counter-intuitive thinking.

Absurd-ism never featured in business thinking! The noted philosopher of Absurd-ism – Friedrich Nietzsche once noted – “In heaven all interesting people are missing”. Can business decisions border on Absurd-ism? Well! This is an open question! Absurd-ism and Rationality are the two extremes and bounded rationality is the happy middle path pursued by businesses ever since Simon enumerated his theory and Simon’s theory dominated creative thinking – subjects like consumer behavior and organizational behavior. For nearly 75 years now, organizations have devised thousands of guidelines and policies to contain BOUNDEDLY RATIONAL behavior of managers – to make it more rational like Captain Spock. Yet boundedly rational behavior persists! In last fifty years many M&A decisions, overseas expansion decisions and millions of product launches have gone terribly wrong – leading to closure or takeover of many F-500 firms, not to speak of the resultant loss of jobs and distressed families.

On the other hand some seemingly Absurd decisions turned out to be brilliant later. Such as JCB’s entry in India in 1979 and Suzuki’s joint venture with Government of India in 1982 to start Maruti Udyog Limited (later #marutisuzuki -India Limited) – a company that revolutionized Indian automobile and auto-ancillary industry. Today India has a world class auto ancillary industry – the credit goes to MSIL’s first visionary chairman – R C Bhargava. Both the firms entered India at a time when every other competitor stayed away from the Indian market. Today both JCB & MSIL have a stranglehold on the Indian market that competitors find impossible to break.

So what is ABSURD IN THE FIRST PLACE? A controversial question!! Does now the idea of a dual mission enterprise promoting deep impact innovation appear Absurd?

The Future: - Circa 2027

Third generation AI on a quantum cloud and its cousin – Artificial Swarm Intelligence, which pools tacit (read absurd) creative thinking of 1000s of managers will change managerial thinking for ever! You didn’t have ChatGpt on your smart phone in 2020 pandemic lockdown, today you do! The same way an ASI app may help you all day long in 2027 in your smart phone or the quantum super-computing cloud powered laptop. Such a technology will give rise to two forms of thinking: -

a)????Fast-Logical-Intuitive – this mainly will be performed by machines. The generative AI on your smart phone and quantum cloud powered laptops. In fraction of a second the machines will throw up tons of data, graphs, pooled opinions and trends

b)???Slow-Absurd-Counter-intuitive – this will be performed by humans! The managers! Kahneman’s systems 1 and systems 2 thinking, will be split between human and machines. Humans will be mainly tasked to do systems 2 thinking, often bordering on Absurd-ism.

The final strategic decision will be taken by humans and machines together in a dual mission enterprise, focused on deep impact innovations. Deep impact innovations will only be possible when such a twin system of thinking co-exist. Again! Skeptics and closed minds may think that this is academic fantasy, but then so was Third Gen AI before pandemic. This puts Simonian thinking of managers to rest and Marshallian thinking is taken over by methodical brilliance of AI.

A NEW SYSTEM OF MANAGERIAL THINKING WILL EMERGE IN NEAR FUTURE POWERING DUAL MISSION ENTERPRISES AND DEEP IMPACT INNOVATION.