Convergence: Technology, Business, and the Human-Centric Future
Deborah Westphal
208 pages, The Unnamed Press, 2021
Though it has been commonly accepted for decades, the notion that the sole purpose of business is to maximize shareholder profit ignores the needs of our broader communities and the environment. As pressure is applied to push businesses to stand up and take an active role in solving systemic issues concerning our global society, we need to redefine what makes a business successful. We are at an inflection point in history, a time that requires us to prioritize creating human-centric organizations to recalibrate how energy is spent on technology and people.
These changes are possible, as I have seen throughout my career consulting for government agencies and Fortune 100 companies, as one of the founding members of Alvin Toffler’s consulting firm Toffler Associates. My new book Convergence: Technology, Business, and the Human-Centric Future explores how the explosion of information technology has forever altered the world of business and how this connectivity gives us the ability to share ideas about issues and problems, voice demands for solutions, and gain insights into actions that leaders are (or are not) taking to meet these demands. Today’s leaders must recognize the many signals of accelerating disruption and take stake or interest in the increasing convergence where people, technology, and business intersect. We all need to know what a human-centric organization looks like in order to know what to advocate for the best interests of community, environment, and indeed our future. Businesses have the incredible capability and capacity to solve the hardest problems, and their potential for social innovation is almost boundless. It's time they acknowledge and address human concerns and needs to meet people where they are. It's time to become human-centric organizations and in doing so, businesses can continue to be profitable while also solving the most complex problems of humanity.
I hope this book will motivate you to join in leading urgent and necessary change. I hope it challenges you to imagine and understand the future in a way that helps shape decisions and actions, leading to a more human-centric future for everyone.—Deborah Westphal
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Dangerous Decision-Making Divergence
A formative and significant divergence is happening within our businesses. There’s been an explosive rise in the use of information technologies to enhance business performance. For the most part, it runs counter to the challenge to be more human-centric. No doubt, these resources, efforts, and intent will collide, shaping and reshaping how strategic and operational decisions get made and measured.
Around the world, organizations and people are generating and tapping into volumes of data in almost real time. Technology can organize and exploit it quickly. That may be why so many of us believe that emerging technologies like AI and machine learning (ML) are critical assets for corporate performance and growth.
It’s true that technology can process quantities of data faster than the human brain. In that way, it is capable of enhancing business performance. But it’s far from a perfect tool. There is a danger in over-indexing on data, AI, and ML and failing to include human system needs in the decision-making processes. Successful use of technology for a resilient human-centric business requires precision, clarity, empathy, and balance.
The challenge is not new. The intoxicating promise of technology has been present throughout history, and it has become more attractive as innovation and change accelerate. The 2020 release of an annual AI survey of more than 2,300 global business leaders illustrates the point. The survey showed a 25 percent increase in the use of AI over the previous year. More of us are looking to bigger data sets and more accurate algorithms to help make better and faster decisions to increase shareholder gains. And the reality is that survey respondents report a return on their investment. More than two-thirds of those asked saw an increase in revenue generation of more than 50 percent. Most of this growth came from implementing AI to help with marketing and sales, product and service development, and supply chain management. They also realized significant reductions in operating costs, much of which came from low-hanging opportunities to automate functions throughout the enterprise.
There’s a balance to consider. While investing in technology that promises to improve business performance and maximize shareholder profits, businesses also are feeling the growing pressure to focus on people, the planet, and their stewardship of both. They are being expected to focus on the bottom line and the wider picture.
We have never been able to resist the allure of promising new technology, and now we can no longer ignore the ESG drumbeat. A new convergence is under way.
Increasingly, socially conscious investors are raising the volume on their call to integrate robust ESG strategies into existing company operations. Investors such as KKR & Co., Roark Capital, and BlackRock are becoming more demanding for companies in their portfolios to make decisions that have the good of the planet and its people at heart. The entrepreneur Eric Ries has launched the Long-Term Stock Exchange (LTSE), the first national securities exchange promoting a long-term focus for investors and companies. The creation of LTSE minimizes the pressure to hit short-term targets and allows for stewardship that stakeholders and society demand. These and other powerful entities are giving voice to our stakeholders. Whether they are employees, customers, or market observers, these stakeholders are assessing the speed and level of the corporate response—and making important investment decisions based on how businesses stack up.
Stakeholders measure businesses on more than earnings reports. They assess value on how well the organization satisfies responsibilities related to global issues such as greenhouse gas emissions, energy efficiency, water management, and waste generation. They look for evidence of healthy, productive relationships with employees, suppliers, customers, and communities. They want details on how the organization considers social issues like human rights, customer privacy, and workplace diversity and inclusion as it makes decisions.
Addressing the broader ESG demands will take new, more expansive data sets. The challenge in meeting this requirement is that much of the data about issues like climate change, water management, and social inequality typically exist outside the organization’s normal channels and purview. Even with emerging technologies like AI and ML promising to streamline the ingestion and management of data from enormous numbers of sources, it’s up to the organization to provide access to the necessary information and to commit to using the analysis it produces to support its stakeholders. This shift is a significant undertaking. It will require leaders to collaborate with experts in fields of study that may never have otherwise been relevant to the corporate intent. It will take a system of systems approach.
All these new demands are changing the role that the business system plays in the global human system. Satisfying the broader expectations means we must be able to trust that our algorithms can inform wise decision-making and do so quickly. Rapidly changing environmental conditions are increasing our need to manage reactions in near (or actual) real time. Staying ahead of the decision curve is next to impossible, and the pressure to perform flawlessly keeps rising. For organizations pushing to satisfy external expectations and their own imperatives, the promise of data and perfect business algorithms is incredibly tempting.
In the face of all this potential for accuracy and speed, we need to be leery of the promise of objectivity. Data is not free of bias. Pressure to manage risks in an increasingly compressed period is fueling the development and adoption of algorithms that can mimic human cognitive processes. While the intentions are good, they have drawbacks and unintended consequences. Algorithms can’t replace humans when it comes to predicting behavior, trustworthiness, and the value of decisions. Because people build and program ML models and AI, the technology output is inherently informed by human behavior.
The burden is on decision-makers to be familiar with the data sets and algorithms we use and the ways in which they were built. Particularly as we take on the pressure to address ESG and CSR issues, it’s vital to understand the tools we use in our response models and to ensure that they accurately represent the breadth of our new focus. To be a human-centric organization, a convergence of information, analysis, and stakeholder primacy must occur.
The Decisions That Matter Most
If we are going to succeed in the near term and the distant future, we have to work hard to overcome any lingering belief that the sole intent of our business is to maximize shareholder profit. We have decades of momentum behind the commitment to deliver profit-based business results for those who have a financial stake in the business. Without first redirecting our focus to valuing the human system most, any technology we add will only serve to accelerate progress in the wrong direction.
That is, of course, unless human-centric leaders like Larry Fink anticipate and call attention to the diverging paths ahead. This is the challenge that matters most. A deliberate decision to serve all people, not only those who hold a share in the organization, must be carefully informed and relentlessly pursued.
We may be seeing the beginning of this commitment. In the summer of 2019, members of the Business Roundtable ceremoniously signed a declaration that the purpose of a corporation has changed. In its “Statement on the Purpose of a Corporation,” the 181 signing CEO members declared that companies need to take a broader view of whom they serve. They concurred that it is no longer enough to serve shareholders. They also must deliver value to customers, employees, suppliers, and the communities where they operate. The agreement is a good start, but it is yet to be determined if it is sufficient or sustainable.
Within six months of the statement being signed and published, COVID swept across the globe. It created historic disruptions to every individual’s way of life, how we work, economies, and geopolitical structures. Many corporations heeded the call, quickly launching initiatives and efforts to support those in need. It’s fair to give credit for those arguably ESG endeavors. At the time of this writing, however, it’s too early to say whether the efforts will subside with the pandemic or if they will be actual movements to new ways of thinking and behaving.
As leaders work to determine if real change is happening, they will have to take deliberate action to state and define new goals and openly communicate measures and metrics of success. Transparency is required. Organizations will be expected to provide information about initiatives being taken to rewire their structure to sustain this new, human-focused direction. Likely, the effort will include incorporating ESG data from network partner sources into business decisions and reporting so measurement is consistent across industries and sectors, and it’s simple to spot the trade-offs happening as organizations widen their aperture to understand and provide for shareholders, suppliers, employees, the community, and humanity.
This effort is not either-or. At the same time as they are extending their responsibilities to meet ESG expectations, these same organizations will have to incorporate analysis and reporting into traditional business reporting mechanisms, including Securities and Exchange Commission reporting requirements for public companies. Some forward-thinking companies already have taken steps to disclose their efforts to address environmental and social (E&S) issues in their annual reports or Form 10-Ks. Until reporting becomes structured and consistent, we won’t be able to measure how well these organizations are improving year over year or performing comparable to the market.
We have crossed the start line. From here, progress will happen as more organizations embrace the systemic disruption in why and how we make decisions. Doing so will position leaders to do the hard work of redesigning the functions and forms of our business for a human-centric future.