Why modern companies think about doughnuts and lungs

The concept of cause and effect is one of the earliest concepts we learn: touch the kettle, suffer an owie. Bother Mom when she's on a video call, earn a hard stare. Annoy the god Vulcan, get buried for centuries under an angry pyroclastic flow.

But the world is so much more complex and interrelated. Even when we try to do the "right thing," results can veer disastrously away from what was intended.

For example, introducing maternity leave can seem like exactly the right thing a progressive business (in the U.S.) or government (rest of the world) should do. Yet, a 2018 study in the Journal of Applied Psychology found that a one year maternity leave actually harmed women's careers (spoiler alert: paternal leave is the solution)*.

The mad pace of technology - and frankly, some thoughtless self-importance - is particularly troublesome. As WSJ wrote a year ago about the congestion-increasing effects of ride hailing firms: "The reversal of ride-hailing from would-be traffic hero to congestion villain is the sort of unintended consequence that has become a recurring feature of Silicon Valley disruption."

We desperately need to move away from one-dimensional cause-effect thinking and approach business to a more systems-thinking approach.

This is what a modern company does.

From/To

When we think of how a company moves through time and space, we often think in terms of "people, process, technology," a term that Harold Leavitt, one of the early researchers on the discipline of management, coined in 1964**.

The idea was that you needed to address all three to achieve operational efficiency and manage change in an organisation.

At the time, technology was considered the set of tools people used: they were usually discrete tools fashioned for specific purposes. Processes describe how something gets done. They existed to reinforce uniformity and consistency. And of course, people were the ones using the tools, and going through the processes. They were the units of production.

Soon after, more really smart people formulated ways to approach business strategy, with constructs such as the GE/McKinsey Nine-Block and Porter's Five Forces Model.

These helped orient the three legs of the PPT stool to a particular set of goals, usually having to do with dominating a particular market.

So far, so familiar, right?

But this is classic cause-effect thinking confined to a narrow set of outcomes.

When you think of what companies must navigate these days, from the delicacy of managing social media influencers to the increased supply-chain scrutiny of how goods are made, it becomes clear a more holistic approach is needed. Specifically:

• Technology is no longer merely a discrete set of foundational tools, often maintained by a cadre of specialists, but present and pervasive throughout all facets of the organisation. This is acutely felt as many of us all wrestle daily with remote working tools.
• Processes can no longer mandate uniformity and consistency: their evolved role is to imbue an organisation with adaptability and flexibility, to make it resilient in the face of unexpected change.
• People are no longer units of production - most of that work has been automated - but catalysts of creativity, able to think of new and better ways of doing things. (Though it seems daringly revolutionary now, companies like John Lewis and Bob's Red Mill have long shared profits with all employees, not just senior executives. Jamie Mitchell argues persuasively for the concept of intentional contribution in his article on building progressive businesses.)
• Strategy must expand beyond the narrow view of the market into the broader ecosystem, both in the literal sense of ecological impact and in the conceptual sense of operating within a larger society whose members (Tik-tok influencers?) may form an opinion independently of a company's direct efforts. Strategy thus moves from long-term planning into a more iterative and opportunistic form that affords quick pivots. Kate Raworth's Doughnut Economics is an excellent economic framework for companies to expand strategy thinking beyond markets.

The idea is that because everything exists in an interdependent state, the aim of fulfilling wants is often at odd with the resources of the planet. As with attention, we exist in a finite, perpetually recycling state.

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On top of the operational and strategy work, a modern company deliberately and thoughtfully crafts a culture that it wants to have. Most large companies that came of age in the 1900s basically reflected the culture of their leader, whether that was Herb Kelleher at Southwest Airlines or Albert Dunlap, better known as Chainsaw Al.

But the modern company stops and thinks. It looks at history. It looks at psychology and sociology. Sometimes, this results in a deliberate Lord of the Flies approach, and you get Travis Kalanick's Uber. Done right, though, shaping a deliberate culture, one that is diverse and inclusive, yields abundant dividends, including the financial kinds.

If companies can think of themselves as part of a vast, beautiful, and complex organic structure, it then begs the question of, why are we here?

A modern company ponders its purpose. It's gone beyond signing Business Roundtable statements and is contemplating (or has attained) B-Corp status. It knows implicitly that employee experience is the top driver of customer experience. It seizes on the outsized impact that business has in a capitalist world, and acts as a force for good for society and the planet.

So, um, what's that about lungs?

As Brooke Jarvis wrote in the New Yorker article, "What happens when you breathe," our lungs are "open, like a wound, to the outside world." Our air is a communal space, one that is at once highly personal and global. Your exhalation is my inhalation.

Our breath is also intimately connected to the world, part of the water cycle: when you blow on a window pane, the water in that condensate may have dribbled, on its way from glacier to sea, past a snow leopard.

Businesses, one of the most powerful forces in the world today, are inextricably intertwined in this system. The problems of the world are the problems of a business. A modern company doesn't just understand that, it actively—joyfully, even—works to heal, renew, and secure our shared future.

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* When fathers took parental leave, outcomes improved for society overall, not just for women. Win-win.

** The paper, entitled "Applied Organization Change in Industry," originally posited four areas but has since been condensed into three.

(Thanks to Simon Erdmann and Jamie Mitchell for helping refine the thinking that went into this piece.)