New Business Model Proves You Can Please (Nearly) Everyone

As Firms of Endearment nears publication (in April 2006), I will intermittently quote from it in this space and discuss various aspects of sundry discussions in the book.

First, here is my elevator speech describing Firms of Endearment:

Firms of Endearment is a book about a new business model that is displacing traditional business models based on a premise famously framed by Nobel laureate economist Milton Friedman:

“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”

In the FoE business model, no stakeholder comes first. Rather, FoE companies achieve their financial objectives through endearing themselves to all stakeholders by addressing their needs and desires. The five principle stakeholder groups in the FoE business model are employees, customers, suppliers, society and shareholders.

The financial performance of FoEs profiled in this book indicates that corporate culture may be the single best indicator of a company’s future performance, regardless of the story told by its balance sheet and market conditions.

We position the book in its first two sentences:

This is not a book about corporate social responsibility.

This is a book about sound business management.

The book is not another argument for corporate social responsibility (CSR). We see socially responsible behavior as an outcome of sound management that is guided by a corporate culture reflecting conditions in the greater culture.

FoEs profiled in Firms of Endearment include Whole Foods, Costco, LL Bean, Harley-Davidson, Honda, Johnson & Johnson, Caterpillar, New Balance, Starbucks and UPS.

The financial performance of publicly traded FoEs far outshines not only the Dow and all other indexes, but notably the 11 companies Jim Collins touts in his book Good to Great.

Next: How FoEs Perform in the Stock Market

Comments

[Marianne Richmond]

Looking forward to reading more!

Marianne

[Derek Medhurst]

Looking forward to reading more about this latest manifestation of the concept that a broad stakeholder focus (rather than shareholder value) actually works. It appears to align pretty much with the fundamental concepts behind the European Foundation for Quality Management's Excellence Model (and in the US, the Baldrige Award). Research studies on both sides of the Atlantic have already shown that they pay off, so this looks like being some helpful new evidence.