In the 1960s a Stanford computer scientist called Roy Amara told colleagues “we overestimate the impact of technology in the short-term, and underestimate the effect in the long run”. Amara’s Law, as it’s now known, applies equally to paradigm shifts: they can be hard to spot when you’re in them, but dial back out and their impact is clear.
Right now all the signs suggest we’re swimming in the undercurrents of a major paradigm shift — in how we define the role and success of business.
In short, it’s time for new heroes.
The four horsemen that have ruled the modern business landscape — large businesses, profit maximisation, growth at all costs and a ruling class of predominantly white men — are in the process of being dismantled and replaced by something very different. And, I believe, much more powerful.
From large to small
Last month I was invited to join the UK government’s newly formed Small Business Council, whose role is to ensure the voice of small businesses (defined as less than £10m in turnover and/or employing fewer than 50 people) is represented at the very highest levels of government.
Before the kick-off, I was shocked to learn that 99.9% of businesses in the UK are small businesses, that they employ 27m people (65% of the UK’s working population) and that they generate £4.5tn in annual turnover. Yes, trillion.
With headlines dominated by the FTSE100, or the rise or fall of the latest tech unicorn, it can be easy to miss that the backbone of this country truly is our 5.6m small businesses. And with new business creation averaging 5% per annum over the last decade, it’s clear there’s no shortage of entrepreneurial energy here in the UK.
I would also argue (along with the millions of small business owners like me), that the myriad challenges the UK faces — stagnating living standards, anaemic economic growth and complex societal problems — aren’t going to be solved by a handful of unicorns. Instead, they’ll be best solved by those closest to the ground: millions of small businesses.
However, we need to work hard to ensure the full potential of these small businesses is unleashed rather than overlooked. As the old saying goes: “Take care of the pennies, and the pounds will take care of themselves” — and the same applies to businesses too.
From profits to purpose
The second horseman concerns the role of business in society. Since Milton Friedman wrote in 1970 that the “social responsibility of business is to increase its profits”, the majority of companies have wholeheartedly embraced this shareholder-first maxim.
The consequences for the planet have been devastating. That’s because the relentless quest to maximise shareholder returns — in a world where carbon emissions, pollution, biodiversity loss and resource depletion have not been given a price — has resulted in us breaking six of the nine planetary boundaries, leaving humanity on a precarious precipice.
Thankfully the Better Business Act (BBA) and its 2,500+ company signatories believe that business can, and should, be a force for good — for both people and the planet.
The BBA is lobbying to amend Section 172 of the Companies Act to ensure businesses are legally required to give equal consideration to people and the planet, as well as profit, in their decision making.
The BBA’s recent report, The Purpose Dividend, showed that if all businesses were to be run this way it would result in a £149bn boost to UK GDP per annum; a seven-fold increase in R&D expenditure; an £86bn increase in capital investment; and a £5.3bn pay rise to the lowest paid — worth £44 a week for minimum wage employees.
With more and more companies signing up to the Better Business Act every day, and over 1,500 British companies having taken it one step further and received the rigorous B Corp certification, it’s clear that the reimagining of the role of business in society is well underway; and not a moment too soon.
From speed to sustainability
The third horseman coming under intense pressure is the notion of ‘growth at all costs’. When the zero interest rate era came to a grinding halt in 2022, it ushered in a new era: one where “business basics'' are now back in vogue. This has resulted in a whiplash that’s rippling through the business community, leaving leaders grappling with what this new normal means.
I’m yet to meet anyone who doesn’t agree — at least in private — that a focus on business fundamentals is far healthier than the mad race we were in before. But the re-engineering that’s required cannot be underestimated, as every aspect of business needs to be reoriented towards the new north star of sustainable (aka profitable) growth.
Instead of building rocket ships, we founders need to buckle down to the much harder work of building cathedrals: truly sustainable businesses whose impact will be felt for many generations to come.
From white men to everybody else
It’s no great surprise that this paradigm shift in how we define the role and success of business is being driven by a change in who our business leaders are.
Research from internet domain registry GoDaddy last year found that the number of female-led British businesses surged from 36% to 46% over the previous 12 months. Similarly, research released in January this year showed the number of Gen Z UK company directors has jumped by 42% in just a year — from 171k to 243k. And with 12% of FTSE 100 chief executives being from an ethnic minority background — up from 7% in 2022 — it’s clear that this shift in who our leaders are is taking place right across the business spectrum.
It appears this new, more diverse set of leaders can see that so much of our society is broken, from inequality to the climate crisis and everything in between; and they want to be part of the solution, not the problem. For them, this new business paradigm is just common sense.
So here’s to our new heroes: small, purposeful, profitable businesses, with truly diverse leaders at the helm. After all, our collective future depends on them.
