Challenges in Sustainable Value Creation Within Dynamic Systems


This was a talk I had given at the School of Management, Central University of Hyderabad on Jan 19th 2012. The two day seminar titled, “Sustainable Value Creation for Decent Work at The Base of The Pyramid” was hosted at Central University of Hyderabad in collaboration with Uniersitat Kassel, Germany. img0img1

The concept of “Bottom of Pyramid” was the main concern of the seminar and this model explains that the financial status of the vast majority in a society is actually quite low, that of a small portion of the society is not so bad and that of a very small portion is well off. This pyramid model has been rather popular amongst economists for explaining the structure of our society and many people end up concluding from the model that the very few rich and upper class people are meant to preside over the middle and lower class people and somehow money as well as benefits will trickle down from the ruling class to the rest of downtrodden people. The observed reality is that the benefits of economic and industrial activities done by the labor groups at the bottom of the pyramid ends up flowing to the few managers and executives at the top while the pollution generated by each echelon settles at the bottom of the pyramid. Ultimately the labor groups suffer. So are the world economists really daft or our observations really off the mark? My opinion is that economists’ models (especially the ones generated at University of Chicago, Economics Department during the 1960s and 1970s) have been terribly wrong and it is imperative that we come up with new and better economic models, however…

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And with that statement in mind I present here a model for making money. The formula for money is Time multiplied by Effort whole power Creativity minus Risk which yields Value. Of course there is no mention of money in the formula because money is merely a token or gesture for communicating the existence of the created value. There is a separate function which mapps value (abstract concept) onto money (tangible artifacts). This function which maps value onto money is purely by philosophical design and is embedded within the culture of a nation and usually explicated  by the labor department of that nation’s government.

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By understanding the difference between value and money we can move onto a style of thinking which would enable us to concentrate on sustainable value creation. Typically people are preoccupied with that which is and has been. People also end up confusing such meek realities with what ought to be. However, contrary to the thought process of such people, the entrepreneurial thought process is deeply concerned with “what can be” and constantly jabs at bold new realities!

Great leaders are formative thinkers and societal progress is feasible only due to formative thinking engrained into every member of the society.

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However implementing plans for sustainable value creation is particularly challenging within environments where every entity and artifact has a mind of their own.  For this reason  ecological design  is the best available framework for sustainable value creation in complex and dynamic environments.

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When people visit countries like India, specially from western nations, they are usually overwhelmed by the chaos and confusion. One is likely to say that such a country is in disarray and there is no sign of organized behavior. These observers merely end up mistaking dense organization with disorganization. The form of organizational behavior in most of the advanced business enterprises and developed countries is rule based behavior with heavily enforced regularization. Such an organization may give the appearance of profound symmetry and order however it is considerably fragile and lacks resilience. Small and medium sized businesses and densely populated countries where heavy regularization is not feasible have a more adaptive network of acutely localized order. The network seems chaotic and anarchic but this is an essential property of dense networks which can withstand drastically varied natural forces by virtue of being agile and creative.  The laws of nature have evolved such structures and processes. It is a wide spread misconception that we human beings can exist in isolation from natur’s laws and evolve structures and processes by our design which can best nature.

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The bottom of the pyramid is actually the super structure that supports all other forms of organization. Indeed, the bottom of the pyramid is the base of the pyramid. The different types of organizational structures certainly afford various benefits and limitations. By understanding how such structures come to exist and evolve within nature i.e. by studying biomimetics we are likely to find better ways of organizing ourselves and achieving better harmony with our environs. (check out this TED Talk by Michael Pawlyn: Using nature’s genius in architecture)

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For truly achieving sustainable design we must move away from the old model of few suppliers providing resources to some producers who cater to a large consumer base. There are great inefficiencies in such an open loop system and a lot of pollution is generated at each of its stages in the name of progress, economy and industry. We must move towards a closed loop system where we take the byproducts of our economic and industrial activities and convert them into resources. This obviously require great deal of creative and formative thinking! My recommendation is that we work towards prosumption and reduce muda.

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So ultimately what we need to do is flip the pyramid onto its side, let the bottom of the pyramid be the middle (heart) of a vast, cyclic system and make sure that all people, regardless of financial status, are actually conscious of the waste they produce. A societal balance can only be set when philanthropy and entrepreneurship prevail within a society to convert trash into treasure.

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