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The Journal

Capitalism Needs a Redesign, but Where Do We Start?

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8 minute read

Before the coronavirus pandemic, the promise of a reimagined purpose for business—one that serves a diverse set of stakeholders and society more broadly—had bubbled into mainstream industry discourse. From boardrooms to business schools, a growing chorus argued that our economic system is not only unable to respond to the world’s most urgent challenges, but has excluded many people from the prosperity capitalism promises.

To fix big, systemic problems like inequality and climate change, many called for rethinking how companies generate value and who they generate it for—from shareholders, employees, and customers to partners and the planet itself. This wasn’t just a moral argument that business ought to “do the right thing.” The movement was anchored in an existential understanding that radical forces are changing not just the rules of the game for business, but the game itself.

The multilayered crises we face today offer a powerful moment of reckoning for purpose-led businesses and leaders: will we make good on this rallying cry for a reimagined capitalism or not? The pandemic put stakeholder capitalism to the test: a report funded by the Ford Foundation found that companies that had signed on to the “Statement on the Purpose of a Corporation” fared no better than other top companies in prioritizing worker rights. Though there is clearly the opportunity and will to rethink the purpose of business to address systemic problems, the way forward is often less apparent. Understanding where to begin can help us realize the more equitable promise of stakeholder capitalism.

I’ve long been curious about how forward-looking companies have jumped over this hurdle, so I’ve spent this year learning from dozens of movers and shakers already in the thick of tackling systemic changes, from professors and CEOs to founders and non-profit presidents working across sectors and industries. They’ve shared with me the first steps that helped them break the initial inertia of business-as-usual—and, importantly, the mindsets they’ve adopted to sustain new kinds of activity. I hope their wisdom will be as inspiring for you as it has been for me.

First steps

Set bold targets and innovate your way to reaching them
Even if they don’t know where to start, the changemakers I’ve talked with have put a stake in the ground and set bold targets. But they don’t rely on a big PR splash and then move on: alongside these bold goals is a commitment to a process of brave experimentation and innovation.

The Swedish furniture retailer IKEA, for example, has committed to becoming a fully circular company—one that is restorative and regenerative by design—by 2030. To make good on this future, they’ve invested in a range of experiments, prototyping smaller-format shops in city centers that rely on fewer resources, electric vehicles for home delivery, new products like home solar systems, and buyback and rental programs to reduce waste, among others. Taken together, these many activities are moving IKEA closer to their ambitious goal. But they’ve also enabled fast learning and iteration, so that when the company chooses to scale any of these solutions they have the greatest impact for their investment.

From this example and others, a common method is emerging for how companies can use their scale to unlock change at a systems level: commit boldly to an outcome, design a number of experiments, learn and iterate quickly, and scale what works. Spoiler alert: It’s not going to be one thing.

Create a coalition of partners around a tipping-point problem
From homelessness to climate injustice, our challenges demand unprecedented collaboration across sectors. The UN Sustainable Development Goals provide a powerful framework to rally around, but there are other emerging partnership models that leverage the capital investment, innovation muscle, and ability to scale that corporate partners often uniquely bring to the table.

Take the NextGen Consortium, for example. Managed by Closed Loop Partners and powered by OpenIDEO, some of the most powerful food and beverage companies (including Starbucks, McDonald’s, Wendy’s, the Coca-Cola Company, Yum! Brands, Nestlé, and WWF) are collaborating to create a new cup that will curb the 250 billion fiber cups piling up in landfills each year. The approach of this coalition has been to enable many breakthrough solutions, working directly with founders and stakeholders in the system, to take root in the market.

There are many other examples of convenings—whether official or unofficial—and the power of rallying partners around a shared challenge. Founded by Sam Polk, Everytable is on a mission to bring healthy, affordable food to communities that do not have readily available options. Polk grew Everytable to eight locations and delivered 160,000 meals just a few weeks after launching. Through a philanthropic initiative led by the California government, Everytable partnered with a hotel offering shelter and protection to the homeless during COVID to provide food, eventually facilitating additional partnerships with elder care homes. Everytable is now on track to deliver a million and a half meals, and they’ve added jobs along the way. As Jacqueline Novogratz, CEO of Acumen, shared with me, this is an example of business, government, philanthropy, and individual volunteers, leaders, and donors uniting and busting siloes to address hunger.

Define key performance indicators (KPIs) for stakeholder groups
Despite its recent buzziness, the stakeholder perspective—a fundamental commitment to all stakeholders, including customers, employees, suppliers, communities, and shareholders—is not a new idea. Many companies already consider multiple stakeholder interests in their decision-making. But the problem with stakeholder capitalism as it exists today is that it doesn’t offer a clear compass for how to make decisions in complex scenarios where win-win outcomes for all parties are rarely possible. This brings us to the elephant in the room: not all stakeholders are created equal. Leaders are often forced to pick favorites, and at the end of the day, we know who will always win.

To address this, companies like Airbnb are beginning to hold themselves accountable to new stakeholder-centric metrics. Airbnb sees their stakeholder community as made up of guests, hosts, communities, shareholders, and employees. Their design challenge—Rob Chestnut, Airbnb’s Chief Ethics Officer, told me—was to create a company that measures itself against the value it creates for each. Airbnb began by listening to these groups, establishing principles and metrics reflecting the needs of each. For example, they have committed to treating hosts like partners, and measure their delivery of this through survey data evaluating hosts’ satisfaction and earnings over time, among other things. Airbnb reports their progress and continues to update their corporate governance and compensation to reflect delivery against these KPIs.

This approach isn’t perfect. But doing the work of measuring the value you create with and for stakeholders and institutionalizing accountabilities for delivering that value is certainly a step in the right direction.

New mindsets

Allies over heroes
When it comes to business’ role in the big problems society faces, they are often cast as either heroes or villains. Some see capitalism as society’s savior, especially when governments have seemingly abdicated their responsibility to serve citizens’ best interests. Others see capitalism as society’s villain, the cause of many of its major problems like climate change and inequality.

The leaders I’ve interviewed reframe the discourse entirely. They know that systems change requires bringing together key actors—local communities, nonprofits, governments, businesses, donors, and others—to address unjust systems and solve social problems at scale. So, they see their organizations as meaningful allies in the work of change-making, adopting a partnership-as-leadership approach to their engagement in these issues.

“Greyston’s founder Bernie literally started pulling people off the streets to work for a small cake-baking business he had started to address the problems he saw in Southwest Yonkers...Just as the bakery started growing, [Greyston’s founder] Bernie met two guys named Ben and Jerry. Our relationship with Ben & Jerry’s started out as a serendipitous one, but it’s held steadfast as a strong partnership over the years and has enabled us to employ more folks who would normally be deemed excludable, non-employable.”
—Joseph Kenner, President and CEO, Greyston Bakery

“Cooperation among investors is a key to this progress. More than a third of the world’s invested capital—about $19 trillion—is controlled by the world’s hundred largest asset owners…In principle these investors have enormous power to move the entire economy in more sustainable directions. All they have to do is find a way to cooperate...The rumor is that they look at each other and say, “You go first.”
—Rebecca Henderson, Professor, Harvard Business School and author of Reimagining Capitalism in a World on Fire

Gardeners over architects
As the pandemic unevenly distributes pain and suffering across our society, it’s ever more clear: true systemic change requires a shift in power. That means that a top-down approach to change just won’t work to produce the equitable outcomes we need. We need new voices with new ideas to reimagine our economic system. Personally, I’m inspired by the small business owners who have reimagined the role businesses might play in neighborhoods through creative pivoting—like restaurants now offering CSA boxes and large family meals while their dining rooms are closed. Or Black communities that were forced to develop regenerative economic strategies decades ago, long before these concepts penetrated white-dominated corporate worlds.

These are the imagineers of a more resilient, inclusive, and sustainable society for everyone, and the leaders I’ve learned from believe this, too. Their job, as they see it, is to find the seeds of ideas and nurture them. They play the role of gardener, but instead of a green thumb they have a green ear, tuned to listen and learn.

“We were open to new ideas from anywhere and created new mechanisms to source them. Part of our mantra was the conviction that all the good thinking doesn't come only from people sitting on Fifth Avenue in New York City. We ran competitions, we did global innovation challenges, and we learned a lot from what was going on on the ground.”
—Judith Rodin, Former President, The Rockefeller Foundation

“Purpose is obviously about how a company acts, but it’s also about how they listen.”
—Maryam Banikarim, Chief Marketing Officer, Nextdoor

“And so it's going to be up to the rest of us in the conversation to hold those people’s feet to the fire—to make sure that as we are reimagining capitalism we are reimagining it to actually work for all. And part of that is by creating systems that are actually inclusive and equitable and regenerative because only those things will dismantle a version of capitalism that is just for the elite.”
—Andrew Kassoy, Co-founder and Global CEO, B Lab

An audacious question over an assumption about the answer
Rather than start with an assumption about the right solution, these leaders begin with an audacious question. What, for example, would it look like to be a fully carbon neutral company by 2030, asks IKEA? Melinda Gates’ Pivotal Ventures asks what would a future look like if women’s power and influence was equal to that of men?

By starting with a question instead of an answer, these individuals are searching for far more imaginative solutions. This is how radical breakthroughs happen.

“Business has a huge role to play in designing our future. They can do this by first, stepping back and asking, what are the problems that need to be solved? And how can we make that the purpose of our business? Start with that problem. Then, look at the different stakeholders you engage with and rethink how we might come together around that problem...This is moral imagination—the humility to see the world as it is and the audacity to imagine what it could be.”
—Jacqueline Novogratz, Acumen’s CEO

“For the big briefs we face, we need questions that open up new possibility. We don't need the obvious questions — we’ve got plenty of those. We need questions that reframe how we think about some of these systems, ones that change our perspective.”
—Tim Brown, Chair and former CEO, IDEO

The work of changing systems is hard. Taking any of these first steps might require you to flex new muscles, fit yourself into a mold that isn’t quite perfect, or develop new collaborations that might not go seamlessly. Likewise, adopting any of these mindsets might clash with your business-as-usual culture and process. It’s not for the faint of heart. And yet, we can’t move forward—on equity, on the environment, on social cohesion—unless we roll up our sleeves, start redesigning our organizations, and make room for the voices most affected by these systems. So let’s take some first steps, and prototype them together to help push this work forward.

  • Nina Montgomery

    Design Lead, IDEO San Francisco
    An archaeologist-turned-designer, Nina is fascinated by how we might create new solutions to the complex challenges facing businesses and society at large. She is a Design Lead at IDEO’s San Francisco studio and a PhD candidate at the University of Oxford, where she studies business and systems change.
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