Anand Mahindra: Conscious Capitalism

The zero-sum game is no longer valid in the world of business. Companies must learn to collaborate with all the stakeholders in the society and earn returns through the trust they build with them.

Anand Mahindra, Vice-Chairman and Managing Director, Mahindra Group

At a time when tidal waves of shoppers are hitting Apple stores to grab the first iPads, it seems reasonable to presume that an "idea that will change the world" will be a "thing"; some product, device, or gadget. It is all too easy to forget that the "things" that really alter our world are, and always have been, powerful and abstract ideas. Ideas that change the way we think. Ideas that change the way we perceive the world and our role in it.

Gandhi got an entire subcontinent to follow him and achieved a bloodless victory over the powerful British Empire by articulating the startlingly simple concept of "satyagraha" or non-violence. History provides myriad similar examples: Mandela and his vision against apartheid; the concept of human rights; universal suffrage.

Powerful ideas do not always have to occupy high moral ground. They can be practical, such as the late C.K. Prahalad's constructs of "core competence" and "fortunes at the bottom of the pyramid." They can be scientific, without being unquestionable fact, such as the theories of evolution and the subconscious. They can be inspirational and empowering like the rallying cry of American presidential candidate Obama--"Yes, we can." Or they can simply be a global wake-up call, like the film "An Inconvenient Truth," which probably created a more enduring legacy for Al Gore than a potentially bland and lackluster presidency!

Is there an idea you believe can change the world? Describe it in the comments section at the bottom of this story, and Forbes could publish your idea.
 
The kernel of a new and disruptive idea can emerge from the ashes of a previously venerated idea, and there is evidence of that today. We are witnessing, I believe, the breakdown of a very powerful and pervasive idea that has shaped the credo of commerce until now. This is the notion that the core purpose of business is to maximize returns to shareholders, to the effective exclusion of all else.

I remember, more than a decade ago, Tata Steel deployed an advertising tagline that declared "We also make steel." Their ads extolled the virtues of their corporate social responsibility and seemed to imply that making steel, and money, was a means to an end. The ads became a subject of amusement, and Wall Street devotees quickly pointed out how old Indian companies were not ruthlessly--and appropriately--focused on financial returns, which was why they lagged in global competitiveness and were not investors' favorites.

Perhaps there was some truth in the contention that large Indian businesses were oligopolistic and sleepy; like alligators basking in the sun that needed to be rudely awakened and forced to glide back into the fast flowing river with reptilian aggression.

However, there are signals of the birth of a new idea, one that is not a single manifesto, but an amalgam of beliefs that have been under construction for some time. There has been a widespread perception for a while--even before the great meltdown--that a new mindset was called for. With news of Enron, Madoff, Ramalinga Raju and Lehman, we all knew something was not quite right. The Rolling Stone article that referred to Goldman as a "giant vampire squid" was exercising poetic license to its fullest, but it did indicate a groundswell of discontent.

Business schools responded to this sentiment with initially desultory efforts to draft an ethics code, or to teach integrity in the classroom. But I do not believe such exercises effectively acknowledged the call for a new zeitgeist, one that proposed a new and expanded role for business in the context of the wider community.

There is an evolutionary argument for such a role modification. Commerce was begun when the world was a much more hostile place, and societies still functioned much like their "hunter-gatherer" precursors. In his book Conflict Resolution, James A. Schellenberg says that "… socio-biologists believe that human nature has been profoundly shaped by the competitive conditions under which it emerged as the present species. They don't all see this as producing a general human instinct for aggression; but they do see mankind as faced with a wide range of conditions for which aggression may be a very natural response." I suppose this would account for why phrases such as "killer instinct" and "take no prisoners" form part of the corporate world's core vocabulary.

That's why despite growing messages being relayed to business--first by semaphore, then more explicitly--that consumers and communities wanted to see a new ethos in companies, these signals were greeted with disbelief and resistance. Businesses continued to believe that community activities were kosher only if couched in the garb of "enlightened self-interest," leading, ultimately, to enhanced shareholder returns.

Of course, the need for financial returns is, and always will be, self-evident. A healthy bottom line is not just what shareholders require, it's a resource enabler for all other good things.

But it's also time to move on.

The world has shrunk considerably, and resources are so excruciatingly finite, that not just governments but businesses also need to change their vocabulary and move to a more collaborative approach. Competition will remain fierce, but a zero-sum approach to competitors and a "hunter-gatherer" interface with the environment is no longer sustainable.

We need to confront the changing order more squarely. Collaboration with our wider communities is not just one more way to build a brand or gain subsidies, or curry favor with customers; it is the ONLY way to do business. That's what customers, I believe, have been trying to tell the corporate world for some time, and earning their trust is now going to be a hygiene factor for all companies.
 
We, in the world of commerce, will not earn that trust simply by adopting a set of community activities, all the while believing that these are tools for enhancing shareholder returns. We need to intrinsically believe that the 21st-century company will be comprised of a different genome sequence altogether.

We have to recognize that success will not be defined just by quantitatively measuring the aggregate of our CSR activities. We have to believe, instead, that integration with our local and wider communities is the sine qua non of our existence. And that we will rise only if our work helps the fortunes of all our stakeholders to rise with us.

The interesting thing about this idea is that it requires not one messiah, but a multitude.

Anand Mahindra heads the $6.3 billion Mahindra Group, a conglomerate that specializes in automotive products, information technology and infrastructure. Mahindra graduated from Harvard College and then completed his MBA from Harvard Business School. Under his leadership the Mahindra Group has strengthened its position in almost all the business in the group's portfolio. Mahindra speaks eloquently and is a frequent contributor to debates on business issues and government policy. He was chosen by CNBC TV18 as the Outstanding Business Leader for 2009.

This article appears in the June 4 issue of Forbes India, a Forbes Media licensee.

Edited by S. Srinivasan & Peter Griffin, 06.15.10, 06:00 PM EDT

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