Crisis, innovation, sustainability, neo-liberalism, liberalism, affluent society, management, values, culture, ethics, norms

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Innovation of Measurement of Success

Conditions, which the usual economic success measures used to match, changed essentially. The economist Mencinger (2009) is right: 'the basic economic laws became unreliable'. So is the sociologist Mali (2009): 'a new development impetus will be difficult to attain without help from science and technology' and: 'the paradigm of the converging technologies erases the traditional discipline-based boarders in scientific communication'; 'this is why more care should be paid to networking of natural, technological, social, and humanistic knowledge'. Sociologist Beck (Korade, 2009) has been warning for many years that the 'industrial society is leaving the stage of the world history' and 'today it is not worlds that are being destroyed, but the monopolies of the industrial society'. The Nobel-prize winning economist Stiglitz (2009a) is still thinking in the framework of the industrial society, but also working on new measures of economic success (Stiglitz, 2009b). Anthropologist Edmonds (Ferkov, 2009) opens another viewpoint: ‘only the rich ones like modesty, the poor ones prefer luxury'. But let us not forget the biologist Kolar’s insight (Maličev, 2009): 'The story on the Planet Earth is probably over. The style of so far can last no longer.'

Contributions by Hustič (2009), Šarotar-Žižek et al. (2009a, b, c, d), authors in proceedings about the issues discussed here (Mulej, editor, 2009), and in IRDO’s proceedings about social responsibility (Hrast et al., editors, 2006, 2007, 2008, 2009) and other references show that the answer about the direction whereto to go, depends essentially on tools of measurement of what is going on. The innovation expert, engineer and economic analyst Kos (2009) showed very well economic innovation indicators of the newer, i.e. East and Central European EU members, but his (normal state of the art!) measures say nothing about, e.g.:

- The future and sources for it (e.g. fish stock remaining in oceans after fishing);

- Exploitation and abuse of nature by humans (e.g. fields turned to towns, and roads, etc.);

- The usual practice of subsidizing the ruining of the natural preconditions of human existence (e.g. the cost of maintenance of a healthy natural environment is not covered and included into transport's, goods' and other prices, but laid off and piling up into an unbearable burden of our children and grandchildren, quite possibly of our-selves, too (Stern, 2006), etc.);

- The practice of a partial only insurance of humans against health and old-age troubles, poor rewarding of people for their preventive care for their own health; etc;

- Shortening of working hours based on productivity increase resulting from technological innovation, while needs are being reduced (because population is aging, and the products' quality and durability is growing, etc.);

- Humans' well-being and happiness being the reasons for economy and IIDP to exist.

Psychologists Diener and Seligman (2004), sociologist Hornung (2006) and the above quoted economists etc. (Božičnik et al., 2008; Brown, 2008; Korten, 2009; Stern, 2006; Taylor, 2008; etc.) encourage us to think about innovated measures of economic success. For a summary of these measures see Šarotar Žižek et al. (2009a, b, c, d).

The GDP, which directs the industrial economy, hides the essence (Stiglitz, 2009b; etc.). It does not say much about success and productivity, and even less about well-being, happiness and sustainability of the human life; though, economy should serve them. GDP addresses only the amount of market exchange and cost (e.g. GDP calls a road accident with many persons sent to hospital or cemetery more beneficial than growing one's own salad in one's garden). It must be replaced by something more suitable to the current practice of affluence and closer to humans. E.g.: the British 'New Economic Foundation' suggests 'Happy Planet Index': above the fraction-line they put ‘life satisfaction times life expectance’, and below it the ‘ecological footprint'. The worst country (178th) is Zimbabwe, Russia is 172nd, USA 150th, and similarly bad are results of other industrial countries, while the number one is Vanuatu (Korten, 2009). Similar new measures abound today (Taylor, 2008; etc.). They matter because they direct our actions that we measure with them.

The real measure of wealth is, hence, life, not money. The most important forms of a high-quality life have no prices and cannot be bought in the market, although humans used to call it omnipotent (due to the neo-liberal fiction). They include healthy and happy children, loving families, caring communities, beautiful and healthy natural environment. The real richness includes also many items with inner artistic, spiritual, or applied value, which is essential for us to maintain various forms of a rich life. Some items have a market price, some do not. We mean healthy food, fertile land, clean water, caring relationships, loving parents, education, opportunities to happily help, time for meditation, etc. For this end we must create an economy meeting six criteria of economic health (Korten, 2009):

  1. Provide everyone with opportunity for a healthy, dignified, and fulfilling life.

  2. Bring human consumption into balance with Earth’s natural systems.

  3. Nurture relationships within strong, caring communities.

  4. Honor sound, rule-based market principles.

  5. Support an equitable and socially efficient allocation of resources.

  6. Fulfill the democratic ideal on one-person, one-vote citizen sovereignty.

12 actions suggested by Korten (2009), read:

  1. Redirect the focus of economic policy from growing phantom wealth to growing real wealth.

  2. Recover Wall Street’s unearned profits, and assess fees and fines to make Wall Street’s theft and gambling unprofitable.

  3. Implement full-cost market pricing.

  4. Reclaim the corporate charter.

  5. Restore national economic sovereignty.

  6. Rebuild communities with a goal of achieving local self-reliance in meeting basic needs.

  7. Implement policies that create a strong bias in favor of human-scale businesses owned by local stakeholders.

  8. Facilitate and fund stakeholder buyouts to democratize ownership.

  9. Use tax and income policies to favor the equitable distribution of wealth and income.

  10. Revise intellectual property rules to facilitate the free sharing of information and technology.

  11. Restructure financial services to serve Main Street.

  12. Transfer [from Wall Street] to the federal government the responsibility for issuing money.

This looks idealistic and futuristic, but it will become attainable once humans perceive that the 2008- crisis is only information showing the top of the iceberg – the real network/synergy of 2008- crises. It is high time for humankind's transition from the feudal to the real market capitalism without monopolies of big enterprises and networks and countries over everything. In the model of so far humankind forgot its interdependence with nature instead of power over nature. If in the coming single decade we do not diminish emission of carbon dioxide for 80%, we will have no place to live, nothing to drink, eat, and breathe. Technical solutions are in the quoted books; we have no room here to describe all of them. We will rather address another crucial viewpoint of the 2008- crises.

The Affluent Society - the Phase after Innovation and before Decay – is here

The affluent societies (James, 2007), in which the 2008- crises have surfaced have more resources than needs, especially the material/economic ones. The currently practiced tracks mentioned above suggest that governments should encourage demand/consumption by easy loans, but their success is obviously limited. This may differ from the previous crises and development phases. The human tendency to resolve the lack of resources relative to needs has namely brought humankind from (1) the phase in which competitiveness was based on possession of natural resources, via (2) the phase of investment into a better exploitation of natural resources, and (3) phase of innovation aimed at even better exploitation of limited resources and investment, to (4) the phase of affluence. Affluence is not only the best accomplishment of human desires for good life, but also a blind alley because resources are no longer limited and motivation for hard work disappears (Porter, 1990). Baumol et al. (2007) cite a world-top businessperson saying that only fanatics still work hard once they are rich. Enterprises therefore encourage people for work and shopping by changing their felt needs to greed for things that are not needed in reality and contribute less and less to well-being and happiness. But this ruins humankind’s natural basis of survival rapidly.

In other words, for at least the most advanced 15% of humankind who lived before the 2008- crisis in affluence, i.e. on more than six or even on several thousand US$/day, the basic of economics are no longer valid (except the economic-technology related ones). Neither are they valid for other humans without ambitions to work hard in order to have more things. Public media are clear: the 2008- crisis surfaced exactly in affluent societies; their governments provide huge money in order to increase demand, as they are advised by economists, who fail to see nature and its limitations. But in the first several months the increases in shopping are reported to be poor. Amount of economic activity keeps diminishing; products can hardly be sold, because there is no trust and demand, or no need in general, at least not for things on offer/supply. They sold e.g. more cars in Germany, but this caused employment of car maintenance shops to diminish seriously, and the next period is expected to see many less cars sold. Thus, the economic benefit of the entire German society is not essentially bigger, neither is the one of producers/countries supplying the German producers/consumers. In (Mulej et al., 2009b) we summarized the following conclusions:

- Conclusion 1: Demand does not depend on money only, but also on humans’ decision what do they really need. This has changed. Needs for things are covered; decades of competition by total quality (and hence a long-term usability of products, services, and procedures), while the non-material aspects of life show less good quality, aging of population, etc., diminish the material needs and shopping. More family time etc. is required. The issue 'What makes sense?' is surfacing, as the philosopher Tine Hribar has been announcing for many years. The crisis has accelerated surfacing of such new VCEN.

- Conclusion 2: Businesses need new bases and methods taking in account new VCEN of humans, including their personal and personality's development, leading both humans and businesses to their own requisite holism. The often one-sided and opportunistic enterprise policy of so far has aimed to satisfy only the short-term and narrow-minded financial interest of enterprise owners; it is obsolete now due to change of VCEN of other humans. This is proved by the 2008- crisis as its consequence. The social responsibility of enterprises, governments, and humans as persons is therefore ever more important. This causes the enterprise policy to have to become more holistic and focused on meeting (requisitely holistic!) interests of all stakeholders, not only of enterprise owners. Enterprises with such a responsible policy take a long-term development attitude. It requires enterprises to search for new opportunities and to meet new VCEN, too, as a part of meeting interests of all enterprise stakeholders; they strive on this approach (Esposito, 2009; Quinn, 2006; cases in Hrast et al., 2006, 2007, 2008, 2009; etc.). Hence, we are entering the phase of innovation of enterprise policy focusing on a more socially responsible enterprise policy (about a responsible or opportunistic enterprise policy see Belak 2002). Business planning as a technique of foreseeing the future economic processes based on past experiences has perhaps sufficed in times with no prevailing of innovation over the old routine, but it prevails.

- Conclusion 3: It is time to eliminate the neo-liberal definition that economy is something self-standing, self-sufficient rather than aimed at well-being and happiness of people. Halimi (2008) summarizes this definition when he cites Gary Becker, Nobel Laureate for economics from the neo-liberal school of economics. Gary Becker was very un-holistic when saying: 'The advanced countries exaggerate with protection of workers and environment. Free trade will destroy some of these extremes, because it forces everybody to stay competitive when importing from developing countries” (Halimi, 2008). Becker mixed up profit and survival, price and value, as well growth and development; he forgot about the longer-term and broader aspects (Rihtarič, 2008). The same assessment holds concerning enforcing of the contemporary globalization (Rihtarič, 2009). This behavior expresses a lack of holism and social responsibility with which professionals work on topics of a broader/social importance, not only narrow ones. The neo-liberal economic theory and practice has spoken for the lack of holism and social responsibility, since it had accepted, unlike Adam Smith's liberalism, the non-transparent and non-local economy, while practicing – in the form of shareholding and limited liability companies – also the divorce of the influential humans' rights from their responsibility (see: Toth, 2008). This teaching prohibited also the humans’ care for humans’ natural preconditions of survival. Therefore, neo-liberalism is a serious practical danger to existence of the current society.

- Conclusion 4: Innovation is needed that reaches beyond technology to VCEN of humans. Technological innovations are for sure complex and deserve big respect, but they are much less complex than innovation of VCEN; otherwise history would not show the 2-generation, i.e. a some 70 years cycle – the period of time for innovation of VCEN over the recent centuries – as mentioned above. With conscious innovation of VCEN the cycle can be shortened, cases demonstrate. If VCEN are left aside and only technology is focused in innovation, the Einstein’s assessment of the current times becomes true: humans have wonderful tools for unclear objectives (Thorpe, 2003).

- Conclusion 5: Unclear priorities (Thommen, 2003; Belak, 2008) make unclear the political level of the enterprise's governance/management process (its planning and formulation of vision, mission, objectives and basic goals) with unclear objectives (and entire policy). Managers of such enterprises have too much work facing the problems of satisfaction and attainment of their economic and technical rationality (i.e. effectiveness and efficiency) to have any time for problems of meeting social responsibility, socio-economic rationality, their roles in their social and natural environments as well as other stakeholders-related responsibility. If they work following an unclear enterprise policy (and objectives as its components) and plan forming of VCEN on the bases of desires only, unclear objectives and interests of key enterprise stakeholders – owners and managers – surface and make them unable to well conceptualize and define VCEN of their coworkers, enterprises, and society. This situation causes their failure to have the necessary requisitely holistic personal attributes and bases for requisitely holistically planning of enterprise's VCEN. This is crucial because innovation of VCEN is a long-term process and a far-away-into-future reaching objective, which must anyway be clearly defined and expressed in interests of the enterprise’s key stakeholders (Belak, 2008; Belak, Mulej, 2008).

- Conclusion 6: The definition that we now live increasingly in a knowledge society is not accurate: we live in knowledge-cum-VCEN society, more or less friendly to innovation, requisite holism and social responsibility. Employment of knowledge depends on VCEN crucially. The 2-generation cycle of VCEN of 'feudal capitalism’ is ending (Goerner et al., 2008; Mulej et al., 2009c). VCEN call for ethic of interdependence and creative cooperation for requisite holism/wholeness of innovation and creativity as the basic content of both leisure and work time, now. All three concepts from the French revolution – freedom, equality, and brotherhood – rather than freedom only, are required. This is the message from protests, strikes, local and international terrorism. This is also the message in international documents speaking for social responsibility (EU, 2001; Hrast et al, ed., 2002, 2007, 2008, 2009).

- Conclusion 7: Success makes people sleepy (Whittaker, Cole, 2006) and forget how rare it is (Nussbaum et al, 2005).

- Conclusion 8: What is needed is innovation of human resources management in order to make it and them based on increasing social responsibility and humans' subjective and objective well-being. Bulc (2006), especially the contribution by D. Kovač in Supplement 2 of her book offers an interesting approach to this innovation, which should be completed up with the mentioned aspects. This addresses personal attributes of the influential humans.

The Necessary Personal Attributes of the Influential Humans

Humans in influential positions – government, governance, management, opinion making, teaching, informing through public and inter-personal media, etc. – should innovate their management/influence style (Mulej, 2007b) to save humankind by leading humans out from the 2008- crises. Three sets of attributes – below – have proven more efficient in practice than bosses’ issuing orders without listening and making synergetic syntheses:

      1. Seven S cover consideration of the governance’s and management’s duty to master the organizational strategy (which carries into effect enterprise policy (mission, purpose, and basic goals, and results from vision, including phases of learning, preparation, search for strategic possibilities, and economic etc. evaluation and selection of strategies); structure (depending on, and adapted to, processes, of course), and synergies/systems of tools – as the three hard variables – with support from four soft variables including shared values, skills, staff (i.e. coworkers as multi-dimensional humans), and style of management in line with the situation and co-workers' attributes.

B. Decades of experience have shown one-sidedness of the rationalistic claim that only hard variables matter. Now there are less and less humans working only as attachments to machines such as assembly line without their own impact; attention is moving to the soft variables as success factors – knowledge and VCEN. We summarize them as eleven F:

B.1. Focused (= on what we know how to accomplish);

B.2. Fast (= speed in implementation of sense-making novelties as innovations to become useful routines);

B.3. Flexible (= creative adaptability to new conditions);

B.4. Friendly (= good relationships with business partners, including all coworkers; all have their contracts);

B.5. Fit (= physical and psychical capability of standing the efforts of the current rapid and radical changing of conditions of life and work-life);

B.6. Free (= freedom from pressure from work without chances to use one's creativity, like being a tool with no own head);

B.7. Fun (= based on created results and requisitely pleasant and challenging way toward them, fun at and outside work is precondition for good work).

B.8. Founders (= establishment of advantageous circumstances; every start-up enterprise (and also other enterprises) need first-rate businesspersons, prepared to motivate their co-workers and oriented toward innovation).

B.9. Forever innovating (= all stakeholder need to be tireless innovators).

B.10. Flat (= entrepreneurial organizations have as few as possible managerial levels – this is the best way to make reconciliation and creative cooperation as easy as possible).

B.11. Frugal (= they decrease their costs with low administration costs and high productivity).

C. The above two sets of attributes of entrepreneurs/leaders/managers and their policy, strategy, and tactic are easier than otherwise to realize, if the these persons are innovative and have the following seven L attributes (named for Linden, 1990, in Mulej et al., 2006), which can be learned:

C.1.: Strategic long-term developmental thinking and action rather than short-term and narrow-minded ones;

C.2.: Persistence about goals and making room for coworkers to find their ways to realize their share of goals and tasks;

C.3.: Creating of the feeling – of one-self and others – that we need requisitely holistic innovation instead of routine-loving and complacent behavior to survive;

C.4.: Starting with concrete steps – instead of 'paralysis by analysis' – one should take action and analyze in parallel based on a framework plan of learning, routine and innovative working, including all types of innovation (in Table 1);

C.5.: Use of structural change for organizational structures to provide for requisite room for creative, innovative and constructive work, lateral and parallel thinking, cooperation and innovation based on requisite holism/wholeness;

C.6.: Consideration and mastering of risk, rather than avoiding the risk (the latter is very risky in an innovative society requiring efficiency and sufficiency covered by social responsibility allowing for no abuse of coworkers, partners, roader society, and natural preconditions for humankind's survival, hence based on requisite holism/wholeness);

C.7.: Use of political skills – for persuasion, acquiring of partners and coworkers in innovation, perception and blocking of enemies of innovation and requisite holism/wholeness in time, etc.

The three sets of attributes are best used with one more attribute that is easier to have by nature than to learn, but it can be strengthened, at least, by learning and experience: confidence in the agreed-upon objective, persistence and will to realize it with neither giving in nor stubbornness if it is wrong (e.g. like on Titanic facing iceberg).

For know-how to realize these principles see e.g. Mulej et al., forthcoming; Mulej and Ženko, 2004; Mulej et al., 2006; Mulej et al., 2000; Mulej, 2007b; Likar et al., 2006; Bulc, 2006; etc.

Troubles are unavoidable, if VCEN are not innovated, which they can be (Collins and Porras, 1997; Collins, 2001; Florida, 2005; etc.).

For all these and related suggestion to become reality on the personal level too, we suggest the principles of VCEN and strategy to include social responsibility with ethics of interdependence and creation of any content. They should become the central attributes of human life and be supported with a shortened working day (not week!) and related lower prices – to become a new general practice. This should replace the practice of the fictitiously rather than requisitely holistic innovative society (details in: Mulej et al., 2008; Mulej et al., in press).

Concerning the personal incomes we are repeating the suggestion of two decades ago:

  • Every adult human is shareholder of the entire society to have the minimum survival income according to USOP, i.e. Universal Stock Ownership Plan;

  • Every employed human is shareholder of the organization of her employment according to principles of Mondragon cooperatives and ESOP, i.e. Employee Stock Ownership Plan;

  • Every employed person has a pay for her regular work and innovation-based income when she (co)creates innovations;

  • Retirement incomes are available following the Mondragon model;

  • Every child is financially covered in her family;

  • Every ill person is entitled to social security, if contributing to it and able to prove that illness is not caused by her wrong rather than illness-preventing behavior

(Avsec, 1987; 2009).

Our model for governmental support to implementation of this model, in its elaborated version, of course, was also published (Mulej, 2007b): government should not direct the economic and other public life with redistribution of money through taxes and subsidies only; the entire public sector – being as a whole the biggest buyer – buy only from suppliers proving to be best of all bidders in criteria of requisitely holistic innovation, business excellence, and social responsibility.

Some Conclusions: Victory over 2008- Crises is Possible with Radical Innovation of VCEN

Humankind of today is facing the toughest crisis since WWII. This crisis cannot be solved with means of so far that have caused it. Conditions are too different, namely:

  • The market is fuller than ever, supply reaches far beyond demand;

  • Life cycle of needs can no longer grow in order for humankind not to destroy its natural preconditions of survival, unless IIDP/innovations become completely sustainable;

  • Non-material needs of humans are felt more important than earlier.


  • The problem of existence of the current civilization requires change from un-sustainable and sustainable development to development of sustainability – as an essential component of human social responsibility;

  • Social responsibility reaches far beyond the old definition limited to some nice and beneficial charity – to the end of owners' right of abuse of property and related humans and nature;

  • The concept of 'process owners', giving employees the right to use without the right of abuse, is extended to enterprise owners and all other influential humans, too.

Details are above and require a quite radical innovation of VCEN. Many entrepreneurs practice the modern VCEN with clear business benefits; their criteria of benefit are not only short-term and narrow-minded.


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