Could the Coronavirus crisis be a reckoning for the corporate world? Rajesh Chandy, Academic Director of the Wheeler Institute for Business and Development was joined in conversation with Jagdish Sheth, Charles H. Kellstadt Chair in Marketing at Emory University’s Goizueta Business School to discuss how companies are going to have to adapt to prevail in a post-COVID-19 world.
- Companies will need to respect and participate in the communities that they are part of to a greater extent, even if that is at the expense of shareholders in the short term;
- Sheth suggests capital, both financial and human, will come to those companies that have formed a stronger bond with their community;
- To this extent, companies need to be more selective with the types of investors they have a relationship with and instead focus on how they serve society;
- There is a $5 trillion opportunity for companies that can crack low-income consumers across the globe, but their distribution systems are going to have to be reorganised and use digital channels to be effective;
- Sheth believes the Coronavirus will be overcome in emerging markets by deploying the reach, talent and distribution systems of multinational companies, not governments.
If two rival gangs in Cape Town are collaborating to serve the poor, why can’t businesses also cooperate with each other?
Jag Sheth has made it clear in his conversation with London Business School’s Rajesh Chandy, and in his article, ‘What Can Business Do To Combat Coronavirus’, that “the purpose of business is more than business”; instead, companies need to focus on making money by serving the society they exist in. Sheth foresees a world where capital is more benevolent and enlightened. This will lead to more companies being privately owned and looking after their stakeholders to a greater extent, in a move against their recent obsession with shareholder value creation. Otherwise, the wave of populism which swept the political landscape across the globe will also attack the business community.
Sheth believes the crisis caused by COVID-19 “will be a reckoning” for companies that do not prioritise society, and they will have to change in line with the approach he outlined in his 2007 book ‘Firms of Endearment’. In this, he cites proof that companies that are stakeholder-oriented, employee orientation, supplier orientation, community orientation and customer orientation outperformed in the market over a 15-year period. Accordingly, companies will have to de-orient themselves from a shareholder obsession and focussing on quarterly earnings targets. For example, Sheth considers the shift of the headquarters of many manufacturing businesses from their original founding location to capital cities in the search for capital as a ‘corrupting’ influence. Instead of prioritising investors, companies need to reverse this shift and think about how they interact with the community they are based in, become more human rather than commercial, and consider how they can make the situation a win-win for all stakeholders.
The shape of the global marketplace will change as a direct consequence of COVID-19 and Sheth thinks firms in emerging markets can play an outsized role. He cites examples of multinational organisations that conduct business in emerging markets having extraordinary reach through their networks of agents who keep them in close contact to local communities and overcome infrastructure challenges. This is because businesses in emerging markets are better equipped to reach and market to hard-to-serve places than Governments, they therefore have a critical responsibility when it comes to confronting the challenges of COVID-19 through accessing customers in rural areas. Businesses should allocate resources to doing this, as accessing the informal economies of people below the UN or IMF’s definition of poverty, there is a $5 trillion opportunity for companies that can reach low income consumers across the globe. However, in order to do this, their distribution systems are going to have to be reorganised and they will need to leverage digital channels to be effective. This is already being seen through FlipKart in India, Alibaba in China and Amazon in Europe, reaching communities that have become difficult to access because of the disruption caused by COVID-19. Businesses should prioritise the needs of these societies and provide access to products, especially during the time of crisis, in order to prioritise the communities of which they are part.
Sheth cites evidence of rival gangs operating in townships in Cape Town that have put their rivalries to one side during the Coronavirus crisis in order to serve the poor communities in which they operate as an example of why it shouldn’t be too difficult for companies to also put rivalry, and shareholders aside, to prioritise the society they are part of. Competition authorities also need to be more open to collaboration and cooperation in order to address extraordinary circumstances. He also considers companies need to think from the perspective of servant leadership, where their mission is to accomplish above and beyond their livelihood for their survival.
If you’re interested in following the Wheeler Institute COVID-19 series, check out our next episode, ‘How lessons from the Ebola crisis can be used to improve outcomes during COVID-19‘.
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Rajesh Chandy’s conversation with Jagdish Sheth is part of the Wheeler Institute’s COVID-19 series – bringing together the expertise and experience of our extended community to understand, illuminate and offer solutions to the challenges created by COVID-19. Our differentiating factor is the role of business in addressing these challenges, with a focus on the implications and actions for those in developing countries.
Jagdish Sheth is the Charles H. Kellstadt Chair in Marketing at Emory University’s Goizueta Business School. Also known as “Jag,” Dr. Sheth has published more than 350 research papers and books in various areas of marketing, including consumer behavior, multivariate methods, competitive strategy, relationship marketing and more recently, marketing for emerging markets. Over the last 3 decades, Dr. Sheth has received more than 30 awards as a thought leader in marketing, consumer behavior and emerging markets.
Rajesh Chandy is the Academic Director of the Wheeler Institute for Business and Development. He holds the Tony and Maureen Wheeler Chair in Entrepreneurship and is a Professor and Area Chair in the Marketing Subject Area at London Business School. He also serves as Academic Director of the Market Driving Strategies executive education course at London Business School.