The study of business, or our general understanding of business and its role in society, is sometimes confused and mistakenly made directly synonymous with more specific job professions within finance, consulting or any other field you may be familiar with. In fact, we should consider business in its broader sense and appreciate this breadth and all its comprising industries. From thereon, it is much easier to go into depth about what constitutes business, how it works, why it works, and where it is actually heading. Of course, specific business industries rightfully deserve their own detailed analyses but we often underestimate larger characteristics and trends that transcend industries as well as geographical locations. So let’s have a look at business, from a past, present and future perspective.
Back to Basics
Business, in simple terms, is when a person or organisation profits by providing goods and/or services in exchange for money – engaged in commercial, industrial or professional activities. Pretty straight forward, right? Well, because this definition is so broad it is clear to see that it encompasses many different forms and types of business. It is also important to note that business structures vary, with the four primary ones being sole proprietorships, partnerships, corporations and limited liability companies. These distinctions are crucial, not just in terms of defining business goals and performance, but also for legal and tax purposes. A sole proprietorship is a business that is owned and operated by a single person and so there is no legal separation between the business and the individual. This also means that the business owner is liable him- or herself for profits and losses. A partnership is similar to that of a sole proprietorship, but this includes operations amongst two or more owners. Generally, the benefit of that is that more resources can be shared and liabilities are spread across more owners. A corporation is when a group of people act together as a single entity. Most commonly, owners of a corporation are shareholders of that company. Incorporating a business in this way means that owners are not personally liable for financial or business obligations, but corporations still tend to have unfavourable taxation rules. As such, corporations may choose to become limited liability companies (LLC): a private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested. While all of this may seem like crossing the border into dry legal jargon, it is important to be able to make distinctions between businesses as it helps to understand what business actually constitutes. Perhaps more interestingly, it is worth looking at where business stems from and whether it has changed at all throughout its existence in its purest form.
Business as we know it can be tracked back 3,000 years to India and China where companies – with structures resembling sole proprietorships, partnerships and corporations – began entering into contracts and owning property… essentially setting up the basic frameworks of business that we use today. From 1500 AD we see the first few government-backed companies, like the Dutch East India Company and British East India Company, taking on global business challenges and exchanging goods far away from home. After the Industrial Revolution in 1790 business began to change every 50 years or so, shaped by new inventions, trade and changing consumer habits. When infrastructure in many parts of the world began to evolve and improve, transportation costs were lowered and the business world saw an exponential increase in global trade – today it is unimaginable that a business would have to be constrained solely within the borders of a single country. Eventually, business management took off as a career for people to pursue and throughout the 1900s the business potentials began to appear endless. That being said, business has not always been smooth sailing throughout history. The Great Depression in the 1930s and the financial crisis of the 1970s are just some examples of global economic set-backs that slowed down the progress of business. Even so, these set-backs shaped the way people thought about business, its risks but also its potential. Clearly, businesses have played a vital role in human history and in society, and it is undeniably going to continue to do so in the future. The question remains, however, what it is that we can actually expect in the future?
I would argue that there are two primary factors that will shape business in the future – in fact, they have started to do so already. What we can expect, therefore, is that they will continue to play a much bigger role worldwide. Firstly, we need to consider the impact of digital transformation. This sounds like a rather big word and maybe it might appear to lack any real meaning, but it is perhaps the best way to capture the role of technology in business and society. Digital transformation essentially refers to the novel use of digital technology to solve traditional business problems. These digital technologies enable new types of innovation and creativity, rather than simply supporting traditional methods. Think artificial intelligence, e-commerce, fintech, entirely new business models… the list goes on. You have probably already experienced the digital transformation without even knowing it, for instance when you purchase clothes online and your package is delivered within a day or two. This is groundbreaking stuff and it is only the beginning. Businesses are constantly researching and looking into new ways of operating, interacting with customers and driving innovation.
There are so many possible business trends that may surface within the next 5, 10 and 100 years
Another major trend in the business world is the notion of Corporate Social Responsibility (or CSR). Corporate social responsibility is a self-regulating business model that helps a company be socially accountable — to itself, its stakeholders, and the public. This is a wider response to growing concern and knowledge about the role of businesses in society. They are sometimes very big actors, and as such ought to be held accountable for their actions – whether good or bad. CSR can mean anything from the impact that a business is having economically, socially, politically or environmentally. In other words, it is when a business operates in a way that enhances society and the environment, instead of having negative effects on them. There is an increasing number of regulations regarding CSR, but some CSR policies are brought forward by the companies themselves. Examples of CSR may include a clothing company committing to not use child labour in any part of its supply chain, or any company vowing to source its raw materials only from ethical sources. Take Starbucks, for example. This coffee giant has always demonstrated a keen commitment to corporate social responsibility, community and well-being. It has ensured that 99% of its coffee beans are ethically sourced, it is vital player in environmental consciousness particularly in its building of stores, and has encouraged its employees to partake in community service. CSR is a growing trend and companies nowadays will have a hard time avoiding it due to an increase in consumer awareness and demand for societal and environmental accountability. There are so many possible business trends that may surface within the next 5, 10 and 100 years – some may even be impossible to conceive of now. But that is the wonderful nature of business innovation and creativity. Can you think of possible factors that might dramatically change the world of business anytime soon?