Financial capitalism is intellectually moribund. Companies are not for maximising the return on shareholders’ investment. When one of the terms of the equation is maximised, the other variables are always affected. In the business world, when financial capitalism is carried out, those who get harmed are employees, clients, society and environment. Financial capitalism, when performed by fundamentalist minds, is intrinsically short-termed, egoistical, predatory and speculator-like.
Collateral damage resulting from maximising return to shareholders is there for everyone to see: unmotivated employees with no contact with their job, clients disloyal to the company, social rejection towards mercantile institutions, asocial behaviour on the part of directors, and appalling urban development and environment. Paradoxically, collateral damage reaches as well the very shareholder supposedly benefitted from financial capitalism. There is no empirical evidence that financial capitalism maximises the shares value in the medium term; furthermore, it injects a systemic risk in the way business is made. The 2008 crisis is a good example.
Clients’ capitalism is a good alternative to financial capitalism. Its starting point is a simple axiom: the raison d’être of a company is to have more clients and keep them. For that, it is imperative to improve the client’s experience, to make innovations in the value proposition, to do a follow-up of relations, to create more aspirational value in the brand, to draw the working group together, to transform the business model, to adapt to the changes in the market, to opt for reliability and reputation, etc. All the ingredients of clients’ capitalism are real economy elements. Ground-level things. The problem with spreadsheets and financial planning, in fact, is the risk of making directors ‘levitate’ and lose the sense of market reality. When based on speculation, economy takes nowhere.
The aim of clients’ capitalism is to increase the recurrence of attracted clients. And, naturally, to attract lots of clients. Recurrence means to add years to the average duration of the relations with the client and to improve the profit margin per client. More clients and more recurrence result in higher and more stable income. More stable income and a costs model designed in a realistic way, thinking about income, generate sustained economic value for investors.
Clients’ capitalism practice implies leadership with a wider overview, thus with greater capacity for integrating in an innovative way the various elements of company success in the medium term. In addition, clients’ capitalism requires managers having a certain ‘soul’ and ‘feeling’, with a motivation to work hard, beyond the money they may get for doing it. In this kind of capitalism, clients and employees are not numbers, but people they have to win over, understand, listen to, collaborate with, etc.
In order to practise clients’ capitalism, it is essential to put clients’ interests at the same level as those of the company when designing both business activities (design of the value proposition, processes, sales and after-sales, supplier management, market intelligence, brands, etc.) and management systems (budgetary process, organization, culture, directors’ emoluments, operating control, training, etc.). These are critical areas where either deep changes are made, so as to centre business around the client, or we will continue to earn all the disadvantages of financial capitalism.
Convictions, and not only ideas, move the world. A conviction is an idea endorsed by lots of intellectual (we believe them true), workable (we believe we can accomplish them) and emotional (we want them to happen) subjective references. The transformation of the entrepreneurial world demanded these days will be performed by those executives sharing strong convictions based on clients’ capitalism.