Why We Need a New Way of Doing Business
To truly prosper in today’s complex world, businesses must embrace a model that prioritizes positive engagement with employees, suppliers, and customers. The traditional frameworks that have guided free-market capitalism are increasingly outdated and unable to address the challenges of the modern era.
As Mary Beth McEuen, Vice President of The Maritz Institute, states in her white paper for the Cornell University Center for Hospitality Research, "In the 'new normal' environment, businesses must do more than merely offer a good product or service to create value… customers, sales partners, or employees, all are looking for relationships with organizations they can trust… organizations that care… organizations that align with their values. Instead of viewing people as a means to profit, contemporary businesses must see their customers and clients as stakeholders in creating shared value."
This new paradigm challenges long-standing beliefs in business strategy. McEuen emphasizes that traditional management practices, rooted in industrial-era thinking, fail to address the demands of today’s social and economic landscapes. Historically, management sought to maximize shareholder returns by tightening control over stakeholders, safeguarding competitive advantages, and driving profit—strategies that often came at the expense of employees, customers, and the broader community. But in a world grappling with environmental, social, and economic inequalities, this approach no longer serves.
The Case for Shared Value
In my National Post article, I argued that businesses function as communities of people working together to create value for society. Leaders must move beyond narrow pursuits of corporate and individual self-interest, shifting instead to a “triple bottom line” approach—profitability, social responsibility, and sustainability. At the World Economic Forum, commentary highlighted the urgent need to curb self-interest in favor of collective good and greater social responsibility. These perspectives underscore a critical truth: unrestrained economic growth, particularly when it benefits only the wealthiest, does not necessarily equate to improved human welfare.
Instead, businesses must embrace a new model grounded in sustainable well-being for all. This involves recognizing that material consumption and GDP growth are means to an end, not ends in themselves. McEuen’s concept of "shared value" calls for expanding the total pool of economic and social value by addressing the needs and motivations of all stakeholders. This approach is rooted in three core principles:
Overcoming Flawed Assumptions
The old business norm is deeply flawed. It relies on assumptions about human behavior that have been debunked by decades of neuroscience and behavioral research. Classical economics, which underpins most traditional business practices, posits that individuals act rationally and out of self-interest. Similarly, management theories inspired by B.F. Skinner’s behaviorism focus solely on observable behavior, ignoring the internal mental processes that drive decision-making.
Modern brain science reveals that emotions and rational thought are intertwined, influencing decisions and behavior at both conscious and unconscious levels. McEuen highlights how this interplay affects organizational success: “Our emotional and rational systems are working in various ratios all the time… affecting whether people feel motivated to buy more, sell more, advocate for, work harder, innovate, create, or disengage.” Businesses that ignore these dynamics risk alienating employees and customers alike.
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Building a New Business Model
To foster meaningful engagement, businesses must shift away from the "one-size-fits-all" mentality. McEuen argues that understanding stakeholders’ values is critical for inspiring trust and motivation. This requires a fundamental redesign of business practices, placing equal emphasis on the needs of employees, customers, and other stakeholders. Too often, companies focus exclusively on maximizing profits without considering the human element—a short-sighted strategy that undermines long-term success.
Research shows humans are inherently social beings, hardwired for connection and interdependence. Studies reveal that emotions, attitudes, and motivations are contagious, spreading among individuals like a virus. Motivation is not purely individualistic; the social context and the actions of others shape it. Businesses that recognize this interconnectedness can create environments where stakeholders feel valued and engaged.
The Path Forward
The traditional business paradigm has produced significant environmental, social, and economic challenges. As cynicism and mistrust grow among employees and customers, it is clear that a new model must emerge—one that prioritizes sustainability, equity, and shared prosperity. This new form of capitalism would reject the zero-sum game in favor of mutual benefit, guided by a higher purpose that inspires leaders and organizations alike.
As McEuen suggests, the new business norm requires capabilities such as leveraging social networks for collaboration, deeply engaging knowledge workers, and cultivating personal customer relationships. Organizations can build trust, foster loyalty, and create a foundation for sustainable growth by aligning business strategies with human motivations and values.
The need for change is urgent. The old way of doing business is no longer viable. Only by embracing this new paradigm can businesses thrive in the face of modern challenges and contribute meaningfully to a better future for all.
Final Thoughts
You can read more about my views on this subject in my book, Virtuous Leadership: The Character Secrets of Great Leaders.