DAVOS, January 2017 (ANA) – The sheer size of and power of big business was proving alien to consumers, a discussion at the World Economic Forum in Davos, Switzerland, has found.
“That we are discussing this topic today is a clear message that something has gone wrong in the last 10 years. Suddenly, we have started question: Is big good or not?” said Sunil Bharti Mittal, Chairman of India-based Bharti Enterprises.
Tidjane Thiam, Chief Executive Officer, Credit Suisse, Switzerland, said: “The biggest risk we run is to lose our mandate. We had a licence for a time, society wanted companies to grow; that mandate is getting weaker and weaker.”
During the session, Size Matters: The Future of Big Business, the panel discussion found that the giants of world business were being challenged to manage their enormous scale, and to create new products and contribute to society
Recent populist votes in the US election and Brexit reflected a criticism of big business, with figures showing that fewer than 10% of public companies worldwide accounted for 80% of all corporate profits.
The panel agreed that big business needed a new narrative that articulated its contribution to society. “What percentage of the world’s companies have 80% of the jobs? That’s the narrative. SMEs are thriving around us, every job I create makes another five,” said Andrew N. Liveris, Chairman and Chief Executive Officer, The Dow Chemical Company in the US.
The discussion also called for the creation of environments where innovation could prosper in gigantic companies, which in turn could spawn new structures.
“Our number one priority is leveraging the benefits of scale and size – that goes against trying to maintain entrepreneurialism and innovation in large companies,” said Sir Martin Sorrell, CEO of WPP in the United Kingdom.
The solution, he said, was that business needed to be both big and small. He called for companies to be split into units and then “the challenge is to figure out how to get them to work together”.
However, innovation required a focus on the long term, especially in terms of investment.
Ruth Porat, Senior Vice-President and Chief Financial Officer of Alphabet in the US, said: “We are continuing to invest for the long run. Unless you stay focused on innovation, you can be disintermediated.”
Sorrell said the financial crisis of 2008 had worked against the longer term approach, saying “there has been more emphasis on short-term performance because the system is focused on the short term”. As a result, investments made were incremental and not the fundamental ones in innovation and branding, he added.
“Incrementalism leads to irrelevance; the short-term view is the problem,” added Porat.
All agreed that the phenomenon of gigantic corporations was here to stay. Liveris argued that companies would become like nation states, while fellow panellists predicted that 10 years from now, fewer companies will generate a higher proportion of profits than today.
New forces, however, could alter this landscape, with Mittal saying subsidies for small business would become a force for change, while Porat argued that the concentration of profit-making in a few companies would be lower because technology would allow for improvements in small business.
– African News Agency (ANA)
