Corporation in the 21st century

Every once in a while a book comes along that transcends disciplines and changes the way the world looks at a subject. Peter Drucker Corporation concept written in 1946, is one such classic book.

John Kay Corporation in the 21st centuryalready shortlisted Financial Times Business Book of the Year is in contention for this league.

It touches on economics, business strategy, philosophy and, dare I say it, anthropology, challenging our view of the modern corporation.

Economics and philosophy are close cousins ​​anyway, but Kay bears two additional honors, having been Dean of Oxford’s Said Business School and held a chair at London Business School. So, he effortlessly crosses three verticals to substantiate his fascinating dissertation. Business versus society

The book begins by examining the dual relationship between big business and society, represented not only by consumers but also by investors, employees, associates, associates and other stakeholders. He captures this succinctly in the chapter title, “Love the Product, Hate the Manufacturer.”

This complex love-hate phenomenon can best be understood through the investment banking and pharmaceutical industries. Think Goldman Sachs and Pfizer. Now this can easily be extended to the mixed feelings people have about what Wall Street called the “FAANGs” – Facebook (Meta), Apple, Amazon, Netflix and Google (Alphabet).

As Kay writes in the introduction, “Business has evolved, but the language that is widely used to describe business has not changed. The global economy is not controlled by a few multinational corporations; such corporations for the most part were unable to control even their own industry for long.”

He refers to his earlier bookFundamentals of Corporate Successwhere he outlined a theory of what he called the “nexus of contracts”—which in layman’s terms means: a firm is a collection of relationships between people. But now he realized that these relationships were not transactional in nature, but had a broader social dimension.

Intellectual capital

As intellectual capital has taken over financial capital, command and control has given way to collaboration, employee involvement in decision-making, and a shared sense of purpose.

The cliché, “Our people are our greatest asset,” was literally true for slaveholders in the West Indies and the Confederate States,” says Kay. Today it means “the commercial value of collective intelligence developed within a corporation.”

An asset is the ability of individuals and teams within a business to solve problems and develop and deliver new products. Collective intelligence is the basis of the competitive advantage of most successful corporations.

Thus, new economy companies are based on human rather than financial capital. Most successful companies today, such as Apple, outsource almost everything that actually involves the use of physical or financial capital. “Capitalism without capital” is the new mantra.

By the end of the book, he comes to the conclusion that business also follows Darwin’s theory of evolution.

“Adaptation with selection, the fundamental mechanism of evolution, is the process by which collective intelligence evolves and the means by which successful firms find products and business processes that meet the needs of their customers.”

From here he goes on to develop a theory of “disciplined pluralism” that allows freedom to experiment but quickly ends failed experiments in the cutthroat world of business. This is where private enterprise succeeds over government-owned giants that are unwilling to change.

Disruptive Innovation

The situation is even worse with giant corporations that have succumbed to the violence of proclaiming failures as successes. That’s why, he says, disruptive innovation comes mostly from outside.

This is not your average business book. Some readers may find it heavy. This is not a “self-help guide” or a simple explanation of how modern corporations earn huge profits or achieve astronomical stock valuations. And this is not a rant about “How capitalism fuels inequality, damages our well-being and destroys the planet.”

This is an intellectually challenging book for people who read popular science or history (hence anthropology and evolution), and for those who look at business for more than just financial rewards.

Finally, this is for those who believe: “ambiguity is a feature (of life and business), not a bug.”

(The reviewer is the Managing Director and CEO of Birla Corp.)

Check out the book on Amazon.