This article originally appeard on LinkedIn.
There is growing dissatisfaction with traditional capitalism. In recent years, the discontent has come not only from antibusiness extremists but also from the capitalist glitterati attending Davos, Michael Bloomberg in his 2019 Class Day address at Harvard Business School and even the blue-chip CEOs who comprise that most establishment of organizations, the Corporate Roundtable. Demands are mounting for enlightened CEOs to hold their teams accountable to a so-called balanced scorecard, which would put equal emphasis for corporate responsibilities on customers, employees, communities, sustainable environment and so on.
I’m willing to entertain the argument that at one time in history, perhaps up to about the early 20th century, maximizing shareholder value was the correct strategy and a legitimate goal of the firm. But with oceans of capital sloshing around the globe in search of a slightly better-than-average return, capital is not the truly precious and constrained resource; it is customers.
Today, targeting the maximization of shareholder returns, especially short-term returns, quickly leads to mediocrity and decline. Why? Because customers easily can shift their business to suppliers that deliver the best experience. What is the constraint to delivering a great customer experience? During this Covid-19–driven employment slump, innovative people with digital workplace skills are a precious and constrained resource, but few of these employees will embrace enriching shareholders as their life’s core purpose. Almost every company is desperately seeking the talent required to move more processes to digital platforms and to take advantage of cloud computing, and we’ve seen ample evidence that this primarily millennial talent pool wish to work for companies with an inspiring purpose.
My take is that the firms that practice customer capitalism—that is, those that put customer interests first—have the best chance of achieving sustainable greatness. When employees understand that their surest path to sustainable personal happiness and fulfillment comes through enriching customers’ lives (and helping their teammates do the same), then we have a strategy for the firm that holds water in today’s world. Indeed, the Harvard Business Review recently did a whole series on the loyalty economy.
Shortly after Apple’s market cap surpassed the trillion-dollar mark, the Wall Street Journal ran an op-ed explaining that the key to Apple’s success was its financial structure and supply chain management. Nothing—literally nothing—was said about its world-class customer-centric growth engine that has earned the company millions of promoters.
At the end of his March 2019 livestreamed announcement of new services from Apple—and just after hugging Oprah Winfrey—Apple CEO Tim Cook reminded the audience that it was not the glitz and glamor that really made Apple special: “At Apple, the customer is and always will be at the center of everything that we do.”
The following day, the Journal ran a piece disparaging the idea that Apple’s relentless innovation, its zealous protection of consumer privacy and its customer-centric values could provide a solid platform for its economic future. It had to be about hard stuff such as finance and procurement.
Nonsense. It's time to let the scales fall from our eyes and acknowledge that financial capitalism is giving way to a new era of customer capitalism, in which the purpose of corporations is to enrich the lives of customers and the leader’s primary responsibility is to help employees live that purpose and thus lead great lives.