Social challenges to business are opportunities, not threats

Kathryn Bice - AAP

6 minute read

Inequality, poverty, corruption, labour exploitation, discrimination - these are not just problems, but opportunities, says Ian Williamson, professor at the Melbourne Business School.

Companies now recognise the challenge of adapting, surviving and thriving through periods of disruption.

Prof Williamson told the World Business Forum in Sydney on Thursday:

"We are accustomed to disruption emanating from digital technologies, demographic change, shifting customer preferences and regulations."

But "social challenges" should also be treated as a disruptive force that companies can anticipate, and respond to and profit from. Resisting, ignoring, or taking a charity approach to such issues is not only fruitless, but also a missed opportunity.

Prof Williamson holds the Helen Macpherson Smith Chair of Leadership for Social Impact at MBS, where he is also the Director of the Asia Pacific Social Impact Leadership Centre.

Social risk surfaced in Bangladesh when a factory fire killed 400 garment workers and it was revealed the workshop was making products for global brands.

Shortly afterward, Disney pulled out of Bangladesh because it perceived manufacturing there presented a reputational risk.

What can help businesses respond to such challenges? Ian Williamson identifies three:

  • awareness
  • motivation
  • capability

Awareness 

Awareness is more than information. A person or organisation needs to accept that information 

Williamson cites the case of the Costa Concordia, which crashed off the Italian coast on a calm, sunny day and sank, killing 32 people.

The captain - now in jail - said during the investigation:

"I had sailed the route before, but this time I ordered the turn too late and I ended up in water that was too shallow. I don't know why it happened."

Compare that to decisions made at Kodak to invest in digital technology too late, or at Sony to invest in MP3 too late, and you can see how the lesson of the Costa Concordia applies more broadly.

If a social challenge arises in a market, such as a developing country, companies tend to react with a hierarchy of attitudes.

  • resistance: It's too hard, we don't want to change, it's better to withdraw from the market. 
  • compliance: It's just a matter of doing the minimum, following the rules and getting by.
  • legitimacy / moralism: It's our moral responsibility to contribute to this society. 
  • social impact as a firm strategy: If we can solve the problems that underlie the issues, such as bad poor levels of education, we will improve the market for our products and services.

Williamson suggest that the strategic response is to ask: What are the social issues faced by the communities your organisation serves?

Further: What opportunities might be created for your firm by addressing the "market failures" created by these social issues? 

It's worth remembering that when it comes to value creation, "the bigger the problem you solve the more money you make".

Workforce diversity in Australia

It is not only in developing countries that social issues present challenges and opportunities for organisations, Williamson says.

Australia talks about creating a knowledge economy, but if we want this, we need "a lot of smart people who live and work for a very long time."

Older individuals, indigenous people, migrants, women, unemployed young people, and people with disability are an underused pool of talent - one that corporations cannot afford to ignore.

Moreover, research shows that a diverse workforce is more creative, better at solving problems, and better at servicing the diverse communities from which they are drawn.

Lessons from the grocery aisle

Prof Williamson talked about his experience running grocery stores for ALDI in the US. In some communities, the population was relatively homogeneous and so was the workforce in the stores. These stores were easy to run because the workers could accurately anticipate the needs and preferences of their customers.

In another store, the older community had changed and new people had moved in, but the workers were drawn from the previous population, and the mismatch created tensions and undermined sales.

In a third, both the community and the workforce were diverse, and although it was complex to run, it made the most money.

The lesson, says Prof Williamson, is:

"If you solve more problems for more people, you make more money."

Motivation

To find a compelling motivation for addressing social issues, an organisation should ask itself two questions, Prof Williamson says.

  1. How do social issues impact your firm's business processes?
  2. How can addressing social issues create value for your firm and the communities you serve? 

Capability and innovation

Prof Williamson argues that "innovation stems most often from the combination of complementary expertise." The best way to find this combination is to cultivate multiple stakeholders who come together to create and implement innovation.

Experiences with organisations as diverse as Australia Post, recruitment platform Seek and Etihad Airlines illustrate the gains that can be made by bringing in this "complementary expertise".

It's challenging times for Australia Post. It faces major technological disruption: people just aren't posting letters so much, so they need new products and new markets.

Yet the national post service has a very strong commitment to its communities. It explored strategic partnerships with not-for-profit organisations that 

It has partnered with the Go Digi! platform, a NFP dedicated to bridging the digital divide and helping people realise their online potential.

Australia Post has also partnered with Social Traders, a Victoria-based not-for-profit that operates an incubator for small and medium-sized social enterprises. Together they developed Good Spender, which provides shipping services to SMEs.

Prof Williamson quotes research showing that at any one time, one in five people in any workplace are dealing with a mental health issue.

Moreover, work is a major contributor to mental health issues and, in turn, workplaces suffer from absenteeism, disengagement, and illness.

Taking an active approach to the issue, Seek partnered with National Disability Services to establish programs that pre-empt and respond. 

Etihad, a profitable state-owned airline based in the United Arab Emirates, had difficulty establishing call centres in the UAE.

Why? First, people can get better pay in the government sector than in the private sector; and second, women have very low rates of participation in the labour market, despite being highly educated.

Etihad partnered with a local not-for-profit that understood social attitudes and customs to set up an all-women call centre that has vastly expanded its capacity to respond to customer inquiries and sell seats.