Which Capital is Most Important? An integrated thinking perspective

I’m a huge advocate of the multi-capital model and have been using it going on 15 years to drive better thinking and communication. So it’s pretty common for people to ask me questions like, “I get that the capitals are important but which one is the most important?” Or, “Isn’t [this one capital] more important than the others?” They might fill in the blank with people or intellectual property or money or information technology, which is invariably their specialty. It’s a pretty natural thing. There are (as there should be) experts in each form of capital. Every organization hires experts in different domains to operate at its best. But these experts can get stuck in silos.  It can be hard for them to accept that their favorite form of capital isn’t somehow more important than others.

The multi-capital model is a good answer to these questions. It takes a holistic view of what it takes for an organization to succeed. This includes traditional assets like money and hard assets. But it also sees people, knowledge, networks and nature as capital.

 

In practice, however, most people tend to overemphasize the kind of capital they know best and underestimate the others. That’s why the study of integrated thinking can be of great value. Integrated thinking is a form of systems thinking advocated by the International Integrated Reporting Council (IIRC).

In business, this kind of thinking teaches us that organizations are complex systems. To work in complex system, you need to understand the components as well as the whole system. The lesson is that every element of the system is important and that the system is only as strong as all of its elements.

I sometimes use these scenarios to illustrate this concept:

Exhausted Improvisers – If you have great people and customers but poor systems, your business can’t scale and you will eventually burn yourselves out.

Lone Rangers – If you have great systems and an organization but you don’t play nicely with others, you cut yourself off from valuable feedback and support from external partners.

Starving Dreamers – If you have great people and products but lack a compelling purpose or business model, you won’t be able to generate the cash to survive.

Walking Dead – If you have good organizational resources but weak people or personnel practices, your days are numbered.

Natural Disasters – If you optimize your business without considering the consequences of your practices on the environment, your community and your brand will suffer.

Your organization is built of a variety of resources. You need people and systems and knowledge and nature.  Each is important. None is sufficient in isolation.  Use integrated and systems thinking to see how all the capitals matter.

Smarter-Companies’ new briefing paper called Systems Thinking Using a Multi-Capital Model expands on this thinking and provides examples from Clorox, ArcelorMittal and Entergy.

Download Systems Thinking now!

Photo: Prawny at RGBStock