Future First

How Successful Leaders Turn Innovation Challenges into New Value Frontiers

Alice Mann

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781783538058
• eBook ISBN: 9781351262064
• Topic: Business
• Subtopic: Business General
• Index: Business

Future First is a practical guide for any business leader who wants to build, expand, or reinvent their company by finding new value in global challenges. Traditional companies often view issues like income equality, global warming, and resource scarcity as "problems." By contrast, future first leaders understand them as opportunities, as innovation challenges.

Through real-life business examples ranging from Nike to Opower, this book lays out how to identify and adopt the future first leadership mindset and business capabilities required to achieve lasting and integrated performance results. Future First examines how leaders from companies including Unilever, Etsy, Revolution Foods, Method Products, and others have adopted this mindset toward innovation and people practices, accelerating business ecosystem transformation.

Alice Mann, an organizational psychologist with twenty years of experience consulting and coaching on executive leadership, organization design, and business transformation, interviewed scores of business leaders to understand how their companies are expanding into new value frontiers. Future First makes a convincing argument that successful partnerships and alliances among big global companies and small mission-driven ones can reshape the global ecosystems of apparel, food, automobiles, and energy, and remake the future of our world.

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1 The power to change everything

When I was working at JPMorgan Chase in 2004, the CIO made a telling slip of the tongue while presenting the bank’s annual technology budget. Instead of referring to the “company’s annual expenses,” he called it the “country’s annual expenses.” It hit me then how apropos his comment actually was. After all, we were spending more than the GDP of most small countries on technology alone. The leaders of that bank had the power of corporate kings.

With total assets of $2.42 trillion, JPMorgan Chase and Company is the largest bank in the US and the world’s most valuable bank according to its market capitalization.¹ The bank’s global conglomerate structure, which encompasses five subsidiaries, evolved from numerous mergers and acquisitions over the last twenty years, including the two I supported with Chase Manhattan Bank and Bank One. But the outsized national influence of JP Morgan, the man, is nothing compared to the global economic power of his namesake company and all its offshoots today.

Massive consolidation of economic power has become more the rule than the exception worldwide. This is true outside of the financial sector as well. In 2015, there were roughly 45,500 companies listed in public markets worldwide. Out of those, the top 500 largest global companies, or 0.01 percent, were responsible for nearly half of the $70 trillion of the total value of the global markets.² Within certain industries, such as financial services, transportation, energy, and agriculture, the power of a few huge corporations is extremely concentrated, and highly interconnected and distributed throughout the world. The globalized nature of today’s markets not only gives large corporations power all over the world, but enormous leverage––and much larger budgets––than most countries.

The good, the bad, and the possible

All this global wealth and influence has presented corporations with a remarkable capacity to reshape societies and the environment. The results of this consolidation of power in the private sector have been mixed. Business and technological innovations should get much of the credit for the unparalleled rises in material wealth and lifespans over the past few hundred years. At the same time, this economic activity has produced a number of negative impacts, such as pollution and wealth inequality, at an unprecedented global scale.

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Until relatively recently, it was easy to argue that, on a macro level, contemporary globalized corporate economies produced more positive impacts than negative ones. Pharmaceutical companies, for example, created drugs that saved lives, and improved the quality of countless millions more. Web-based companies provided new access to information and cultural resources. But, today, we are rapidly approaching a tipping point in which our most common ways of making things, providing services, and creating wealth are dragging us toward a crisis.

Admittedly, these sorts of claims have been made repeatedly, but this time it’s different for several reasons. For one, the resistance to traditional corporate economies is coming from the left and the right. In the midst of all its nativism, cynicism, hyperbole, and theatrics, the outcome of the 2016 US presidential election was about an erosion of confidence in the political and economic center. Among the three top vote getters in the primaries––Sanders, Clinton, and Trump––one actively identified as a socialist while the winner repeatedly criticized virtually every institution in American society, vociferously attacking free trade agreements that have been at the core of global commercial expansion for more than two decades. In the UK, a similar dynamic had played out months earlier with the Brexit vote to withdraw from the European Union. Far right parties across Europe have ridden similar disillusionment to success in the polls, although the French election of 2017 took a notably different turn.

While certain indicators of economic health—most notably stock markets––are still at record levels, the current disenchantment with economic realities worldwide is certainly related to the 2007–08 economic crisis. Whatever complicated political passions shaped recent popular votes in the industrialized world, the fact is that GDP growth between 2008 and 2015 averaged an anemic 2.231 percent.³ This is an historic downturn. As an article in the New York Times on August 6, 2016 put it: “Economic growth in advanced nations has been weaker for longer than it has been in the lifetime of most people on earth.”⁴ But some believe that the massive economic growth of the 20th century, boosted by two world wars and the explosion of the fossil-fuel energy market, is not repeatable, let alone sustainable.

Bringing externalities back inside

Companies set out to turn a profit, not to create global problems. But reviewing these global challenges is the preface for a pressing question: How do business leaders separate the positive impacts of for-profit business activity from the negatives?

One answer lies in the traditional accounting used by businesses, which is often able to make the negative impacts of a company’s activity disappear. The invisible part is often referred to as “externalities,” any costs or benefits created by commercial activity that affects a party who did not choose to incur them. A beekeeper, for example, gets a benefit if her hives are next to an orchard where the bees can feed. Likewise, a residence or commercial facility that runs on solar power puts renewable energy back into the grid for local electricity consumers to use instead of traditional electricity.

But externalities are most often discussed as net negatives. For example, the effluent that is produced by an industrial hog farm that runs into nearby rivers not only kills fish and plants, but also creates costs that include local cleanup efforts, lost revenue from commercial fishing or tourism, and a lower quality of life for people who live nearby. Externalities aren’t limited to local issues either. A glass factory that burns large amounts of greenhouse gases contributes to global warming everywhere. Neither are externalities all environmental. Offshoring a call center will take a toll on the people and area where the jobs used to be, including increases in household debt, drops in consumer spending, and less local tax revenue.

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Despite the wide range of costs that effluent runoff or offshoring customer service creates, none of them ends up on the spreadsheet. Accounting is limited to “internal” costs, like labor, marketing, research, HR, production, and the supply chain. Even if a company is aware of the “external” costs created by its activities, its accounting essentially says, “that’s not my problem,” and keeps those costs off the spreadsheet. But, in a world facing multiple crises, we no longer have the luxury to pretend that these costs to the environment and society aren’t there. We can see them everywhere, from overfishing to the declining life expectancy among white Americans driven by anxiety-related drug abuse and suicide.⁵

If we want to create a more lasting and connected globalized economy, we need to stop treating pollution, inequality, resource scarcity, exploding populations, and so on as “problems” to be avoided. Companies must stop forcing these costly problems outside their bottom-line calculations. In fact, business must stop seeing them as problems altogether. They are, instead, challenges and innovating to solve them is the greatest growth opportunity of the foreseeable future.

Valuing transformation

Many businesses have realized the value in seeing global problems as innovation challenges. Pharmaceutical companies, for example, looked at the rapidly aging populations in the industrial world and created a slew of drugs to treat high cholesterol, macular degeneration, and enlarged prostates. Many businesses have adapted practices that reduce or eliminate externalities. Even global companies are not monochromatic. They can be part of a new economy that values so-called externalities in making business decisions.

JPMorgan Chase has paid out enormous sums of money for their involvement in huge corporate scandals like Enron and the subprime mortgage crisis, but it has also had a powerful hand in ventures that have had a positive impact on society. One of the bank’s legacy companies, inherited through a merger, was Hambrecht & Quist (H&Q), a legendary investment bank where I once worked, known for its success in developing Silicon Valley companies like Apple, Adobe, and Amazon. H&Q pioneered the Bay Area Equity Fund, a social impact venture fund started in 1989 that was subsumed by the JPMorgan Chase merger in 2000, and was eventually spun off in 2008 to create DBL (Double Bottom Line) Partners, an early investor in successful innovators like Tesla Motors, SolarCity, and Revolution Foods.

Like many multinational companies, JPMorgan Chase has all kinds of positive impacts that have contributed in non-linear ways to the reduction of negative externalities in major industries like automobiles, energy, and food. In 2017, nearly 1 percent of new car sales in the US were for all-electric cars, and the cost of all-electric cars in the US is predicted to go down below the cost of gas cars by 2022.⁶ Renewable energy sourced 20 percent of the global energy market, and that piece of the pie is only getting bigger.

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Many corporate giants are using their unprecedented size and economic power to solve problems by setting standards for emissions reduction, increasing usage of clean energy, reducing reliance on toxic chemicals, and fairly treating and empowering a global workforce. From Walmart to Google, global companies are converting their power sources to renewable sources of energy because it makes financial sense. Multinationals, like Apple and Nike, are improving their transparency and standards for the fair treatment of workers in their outsourced factories. Other groups, from environmentalists to labor unions to more segmented philanthropies, have made huge contributions to rectify the damage created by business externalities.

And while these efforts are to be commended, they’re still too slow. Traditional businesses too often choose to ignore many externalities, at least until they must face legal action or strikes. Too many companies still act as if externalities are not their problem.

Future first businesses, by contrast, realize that there are no true externalities, whether positive or negative. It is now clear that the earth cannot endlessly absorb pollution and population growth. Likewise, wages cannot continually be depressed by further offshoring; neither will foreign markets guarantee endless growth. There is a limit to things. “Externalities” always return, sometimes in the form of multi-billion-dollar lawsuits or damage to the value of companies’ brands.

Facing unprecedented challenges, from our exploding population to climate change, we are racing against time. And because we need transformations in how businesses operate to happen faster and in a more widespread way, future first leaders are needed as well. These leaders come to the table with a new mindset that confronts externalities without recourse to regulation. They create business models that look beyond the immediate goal of producing a profitable product or service tomorrow. Their businesses survey the current and future material impacts of all their practices. A future first leader can clearly see the shortcomings of past business practices, but they don’t want to make businesses any less powerful a force in the world. Instead they want to use their tremendous influence as a catalyst for positive change.

How change happens now

To update the rules of the global economy, we need new legal, financial, and business models, and new tools for business growth and transformation. Much of what is still taught in business schools––and adopted by business leaders and management consultants today––is outdated material made for early twentieth-century corporations. Not only does it use externality-based accounting, it is also a bad fit for the size, complexity, and reach of today’s corporations.

These antiquated approaches assume that corporations are singular and self-contained systems with a central home base, limited global impact, and a few powerful leaders at the top who can campaign for change across the company. One of my clients was a multinational food corporation. The executive leaders’ task was to redesign incredibly complex and interdependent global divisions––from marketing to IT and Human Resources––in collaboration with each other, while getting the rest of the company to follow along. Once they had coordinated their efforts across all their global functions and brands, they could translate their global operating model from two-dimensional PowerPoint slides into new ways of actually working together around the world.

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Business transformation is a wholly different endeavor now than it was when the field of management began in the early 1900s. Companies of all sizes are embedded within vast complex networks of people, business and government partners, and te...

Table of contents

• Cover Page
• Praise
• Future First
• Title
• Copyright
• Dedication
• Contents
• Introduction: Winning at the Value Frontier of the Future
• 1 The Power to Change Everything
• 2 Embracing Our Biggest Innovation Challenges
• 3 Selecting the Future with Big Questions
• 4 Free Your Mindset
• 5 Future-proofing your Leadership
• 6 Building Future First DNA into Etsy, Apple, and Nike
• 7 The Value of Future First Talent Strategies
• 8 Multiplying your Impact through Ecosystem Partnerships
• Epilogue: Future First in the Era of Backwards Politics
• Acknowledgements
• About the Author
• Index