Redefining the Purpose of Business in Society

The business world is not living up to societal expectations and needs to be reset, says Ignacio de la Vega. The Dean of EGADE Business School on redefining the purpose of business in the context of the Covid-19

Over the past six months, as survival instinct dictates, almost every country in the world has directed its energy inside its own borders to address the triple emergency – health, social and economic— sparked by the Covid-19 pandemic.

Paradoxically, while focusing on domestic affairs is urgent in the short term, the definitive solution to this multi-faceted crisis requires us to look beyond the end of our nose because the challenges are global. We have an uncontrolled virus that is travelling without a passport, a globalised economy on the brink of ruin, a long-announced environmental debacle, and a population that is getting poorer by the minute (and that could be heading towards mass migration). In recent history, the global effect of this pandemic is comparable only to the Second World War.

Devastated by war, the world’s leading nations back then laid the foundations for a new world order, with the reconstruction of societies, reactivation of the economy and promotion of multilateral organisations as the priorities. This led to the creation of the UN, IMF, World Bank, European Union and the Organisation of American States, institutions that populist governments are now endeavouring to discredit.

However, the interdependence of economic, social, environmental and technological systems is clearer today than it was 75 years ago. The risks affect us all and produce a scale effect that calls for closer international cooperation. Are the leaders of today equal to this enormous historical responsibility?

Why the world needs transformational leadership

We are experiencing one of the worst crises of leadership in our history. The void of leadership to face today’s complexity, in both governments and companies, was already here before the pandemic. We were immersed in a profound environmental and social crisis that was gradually eroding citizens’ confidence in globalisation, democracy and a shareholder capitalist model that, while generating growth and opportunities, also exacerbated inequality and caused practically irreversible damage to our planet. The pandemic will have also deepened inequality and injustice.

Our societies and organisations need and deserve transformational leaders who can bring communities together while promoting inclusion and a sense of belonging. These leaders should also be able to make meaning out of the crisis, reimagine the future and communicate it effectively to shareholders.

In the absence of a clear political leadership, civil society demands actions that will not just repair the damage, but also lay the foundations for a new world. One of the most outstanding, and plausible, proposals is ‘the great reset’, put forward by the World Economic Forum and comprising a set of strategies for building a more resilient, inclusive and sustainable society. This initiative brings together the private sector, its stakeholders, civil society and communities, since collaboration between all actors, including the public sector and universities, should be the cornerstone of recovery.

Preparing for a new reality

In Mexico, the challenges we face reflect a far from negligible gravity. The tragic loss of human lives is coupled with a catastrophic economic impact, an extremely high social cost and a latent environmental vulnerability. With a sense of urgency, EGADE Business School, Tecnológico de Monterrey, has fostered collective learning in relation to this multidimensional crisis that has come to fruition in the form of the recently published Decalogue for the Economic and Business Refounding of Mexico (Decalogue).

As a Business School, we are aware of the leading role companies play in articulating economic growth and solving the country’s challenges, but, for decades, we have also witnessed a business model that has not properly lived up to legitimate social expectations. In the new economy, companies will have to abandon their orientation towards short-term benefits and think about the long term – environmental and social sustainability, limited natural resources, and the relevant communities. We should move on from the capitalism of shareholders to a capitalism of stakeholders. Today, companies that invest in their communities perform better. In this ‘new reality’ we will need a great deal of true innovation, and to design new business models for the majority of sectors that have already been disrupted, or that will be sooner or later. We also know that the fourth industrial revolution has been accelerated as a result of the pandemic, and we must place all these technologies at the service of humankind before it’s too late.

The future of work will be defined by automation, AI, and talent operating in the gig economy. To thrive in this environment, creativity and innovation will be key. Organisations will need to make sure that their talent has the competencies and knowledge required to be competitive. 

Turning crisis into opportunity: the role of Business Schools

Universities and Business Schools have a critical role to play in shaping the leaders of these organisations. They need to focus on the development of competencies such as critical thinking, teamwork, civic responsibility, ethical and human values, resilience and adaptability, emotional intelligence, and humanistic business and organisational management, among other key skills for integrating human work with AI and automation in VUCA environments.

In Mexico, there are four long-term trends that are shaping a new competitive environment and impacting business exponentially: technology, talent, new ways to learn, and purpose. Think of the exponential growth of new technology – the phone industry took 50 years to get 50 million users, while the teleconferencing app, Zoom, took less than a month to add 100 million users. Talent development is also going to witness this pace of change. Talent is not only the real competitive advantage for organisations, it is also the only way forward to address the challenges of the future.

With the fourth industrial revolution, countries that are already unequal, like Mexico, risk becoming even more unequal as technology differentiates sharply among winners and losers. But technology can also enhance human potential and create opportunities. To address this challenge, we must prepare leaders to be agile and take risks in new forms of endeavour that we cannot imagine today. Leaders will, of course, need a deep understanding of the fourth industrial revolution, but, above all, they must have the skills to leverage its benefits to create a more sustainable future – skills such as disruptive leadership, strategic thinking, holistic innovation, social entrepreneurship, business intelligence, and digitisation of the value chain, among others. This crisis gives us an extraordinary opportunity to redefine our purpose as human beings and the role of businesses in society.

The prospects for Mexico
Mexico is in the process of aligning universities with the new economy and the new technological contexts. The country is focusing on the development of local talent to gain competitive advantages based on innovation and technology rather than relying on the comparative advantages of labour and geographical proximity. Many international companies are founding laboratories and innovation teams in the country, due to its global connectivity and regional integration, but above all, due to the potential of the local talent.

Also, Mexico has an enormous opportunity for reindustrialisation and to diversify its trade, strengthening and growing the export market that is heading towards the new treaties signed with the US and Canada (USMCA) and the European Union (FTA EU-MX). With supply chains driven by technological innovation rather than cheap labour, business competitiveness depends on the ability to link technology with talent, new ways of learning and purpose – which means connecting with the aspirations of employees and customers of the new generations with regards to the building of a better world.

Mexico is at the heart of Latin America’s tech revolution and it is also positioned to become an education hub, not only for local talent, but also for global executives who seek to make a positive business impact on a region that has a unique set of challenges and enormous opportunities at the base of the pyramid.

At EGADE Business School, we empower ‘omnipreneurial’ leaders, who create shared value and transform society. We are convinced that the new business paradigm needs to put positive impact on communities and the transformation of society first. The conversation around the purpose of organisations is not new. Many organisations in recent years have decided that shareholders are not their only priority, and that they should instead generate shared value for communities and all their stakeholders.

From our Center of Conscious Business for a Sustainable Future, we understand that companies’ strategic efforts should put employees, clients, providers, supply chains and the communities they serve at the heart of organisations. They need to develop them and provide them with competencies for growth because this is our responsibility as organisations, and as human beings.

With the aforementioned Decalogue, we are offering society, and the private sector in particular, a guide to 10 key aspects for reactivating the country through a more conscious model of doing business, and strategically taking advantage of the opportunities that will arise after the Covid-19 pandemic, in favour of Mexico's progress.

Article published by Ambition.

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