We've talked about how you think about stakeholders, the importance of purpose, the importance of two principles. The Interconnection Principle, and the No Tradeoffs Principle. I'd like to add a third principle to that, and again this is a little bit counter intuitive, certainly counter intuitive to the old model. To make stakeholder theory really work you need intensive communication and dialogue, and engagement with your stakeholders. And not just those who agree with you. Critics, it turns out, are an important source of value creation, and friction if you like. Where critics kind of rub you the wrong way, friction among stakeholders. Sometimes among values you think you believe, and friction even among your time horizon. Short term, long term, can be a source of value creation. So I want to articulate this principle that I've called the Friction Principle and it goes like this. The conflict between and among stakeholders conflict around values critics, even time horizons, can all be sources of value creation. Now, lots of times we just want friction to go away. It's uncomfortable, it's conflict and in different societies we have different ways of handling it. But we think about value creation in business, understanding friction can be a really important resource. Look no further to an industry other than tobacco and again regardless of what you think about the industry or the companies in it. You can think about the critics of the industry as saying, look until you give us the pleasure of smoking, without the health risk if that's possible, you haven't done your job. the critics can be a source of value creation, or a company like a big insurance company in, in the U.S. called Aetna. Was on kind of hard times and they realized what they saw was their criticism, were hammering them about some of the PR, processes that they had. And it wasn't until they sat down and talked with them. Talked with their stakeholders and understood how to redesign their processes. Another amazing story about the golden arches, McDonald's. Greenpeace started a program against them, because soy farmers were deforesting the Amazon. McDonald's idea was okay, maybe we can do better. They worked with Greenpeace to develop what they've called a zero deforestation plan. This put pressure on other people in the industry, but McDonald's was willing to ask the value creation question. How can we use this critic to get better at what we do. And again, you can like or dislike any of the companies, I'm talking about, the principle of understanding how critics are telling you something about your business is what's important. Much of the stakeholder idea was developed in the 1970s and 80s as I worked with a number of utilities. they for the most part, paid not much attention to their critics. There was a formal process called a rate hearing that happened. And what we began to discover was that the more we met with critics ahead of time. The more we could reorient the services of the utilities around what the critics were saying. Companies could get better and you could avoid the expensive regulatory process. We know dealing with critics, is just good management when we think about, how companies deal with their customers. Everything from, money-back guarantees to incredible rating systems, that we see in places like Amazon and, and others. Gets feedback from customers, so that we could take that feedback and input it into the value creation process. That same idea applies when we think about business as broader than just customers. Getting feedback as to how we can have a better relationship with suppliers. Or, how, if we have a better relationship with suppliers, it feeds a better relationship with cus, customers, or, getting feedback from employees. This is so important, I'm going to talk about this, separately, in a later video. Getting feedback, treating critics, as sources of value creation, enhances their engagement with you. And ultimately means, you're more likely to realize your purpose. So what makes a company successful? You got to have customers whose lives are better because of your products and services. You gotta have employees who engaged and hopefully inspired. You got to have suppliers that want to make you better. You gotta have communities that are supportive, who want to, who want you there, because you make the community better. And investors, who make money. You gotta manage these stakeholder relationships simultaneously. You gotta find the intersection, you gotta avoid trade-offs. You gotta look for friction of conflicting interests of critics to produce innovation. That doesn't sound much like the standard story, but company after company is realizing this story in the real world. What I'd like you to think about in the discussion forums, it is again a personal question. If you feel comfortable talking about it, that would be great. Do you spend your time, most of your time dealing with people who agree with you? I mean, that's always nice. How do you deal with critics? How do you deal with personal critics? That can be a little trickier. [BLANK_AUDIO]
