Islamic business model Monash University Conference
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SME – Entrepreneurship Global Conference, Melbourne 3-4th July, 2008
Murray HunterSME Unit
University Malaysia Perlis (UniMAP)
Towards an Islamic Business Model: A Tawhid Approach
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Images of Islam
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The Islamic world today
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The Islamic world today
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December 26 2004 More than 180,000 Indonesians are killed and over 600,000 listed as missing and homeless after a massive undersea earthquake off Sumatra triggers a series of tsunami
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February 21 2005: A landslide sweeps through two West Java villages near a garbage dump on the outskirts of Bandung, killing 96 people
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March 28, 2005: More than 900 people are killed after a quake of magnitude 8.7 hits Nias on the coast of northern Sumatra. Around 500 more are injured and 2,000 left homeless
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July 20, 2005: Indonesia confirms its first deaths from bird flu. Tests on a father and his two young daughters, who lived in Tangerang on the outskirts of Jakarta, show they contracted the killer virus
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Sept 2005 – February 2006 More than 200 people killed in Flash floods and Landslides
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January 2007
More than five
hundred people die in ferry
disaster
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February 2007 – Heavy rains cause major flooding in Jakarta more than 50 people die over 300,000 have to move from their homes
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December 2007/January 2008 Floods and mud-slides in Central Java leave 130+ dead, thousands homeless
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Need for an Islamic Model
The nature of man
The amoral society
The underdevelopment of Islamic societies
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Islam Espouses a Market Economy
“He who brings goods to the market is blessed with bounty,
he who withholds them is cursed.”
(Ibn Majah & Al Hakim)
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A Market Mechanism Is Espoused
“Do not chase after those who are going to the market before
they reach the place.”
(Al-Bukhari & Muslim)
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Islam also prohibits price manipulation
“Anyone who withholds goods until the price rises is a sinner.”
(Muslim).
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Faith in one God and a commitment in the teachings revealed by God and His Messengers. Iman affects our world view and daily practices.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
The path shown by Allah (SWT). The divine law.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
A holistic life where one looks after worldly comforts and also prepare for the
hereafter.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
An individual’s obligation to perform one’s religious
duties.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Knowledge. Three sources based on Iman, a) intellect (‘aql), experiences and revelations
(wahy). Guided by Iman.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Work and deeds, pious practice, orientated to Allah, turning away from all weakness and evil. Amal is
based and guided by Iman and Ilmu.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
A collective responsibility for both social and spiritual development
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Toyyibaan & Halal
• This day are (all) things good and pure made lawful unto you. The food of the people of the Book is lawful unto you and yours is lawful unto them. … If anyone rejects Faith, fruitless is his work, and in the Hereafter he will be in the ranks of those who have lost (all spiritual good).
Al-Ma’idah5:5
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• O you people! Eat of what is on earth, lawful and good; and do not follow the footsteps of the evil one, for he is to you an avowed enemy.
Al-Baqarah 2:168
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• From the land that is clean and good, by the Will of its Cherisher, springs up produce, (rich) after its kind; but from the land that is bad, springs up nothing but that which is niggardly: thus do we explain the Signs by various (symbols) to those who are grateful.
Al-A’raf 7:58
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• O ye who believe! Eat of the good things that We have provided for you, and be grateful to God, if it is Him ye worship.
Al-Baqarah 2:172
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Clean
Healthy
Non Exploitive
No Najis/Haram
Sustainable
Community Benefit
Toyyibaan
Substances and deeds that are good, healthy, pure, clean and lawful.
Prohibited by Allah in the Al-Qur’an
Permitted by Allah in the Al-Qur’an
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Mutual consent
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
A business partnership;a) Shirkah: where two or more individuals pool financial
resources and share profit and loss on an agreed ratio and held liable to the
extent of their capital,b) Syari’ah: each partner is able to operate other
businesses, independent of the principal businessc) Mudarabah:Partnership
where one manages the partnership and another supplies the financial resources.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Worship. Relates man to Allah through spiritual acts. The manifestation of Amal salih
(pious actions).
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Piety
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Recognition of the right and proper place and station, condition in life and to self discipline in
positive and willing participation in enacting one’s role in accordance with that recognition and
acknowledgement. Its occurrence in one and society as a whole reflects the condition of
justice.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Trust by God in man in the all encompassing concept of nature
(tabi’ah)
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Inclination towards destruction
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
The concept of Al-Falah requires Muslims to win and be successful in both this world and the hereafter.
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Ad-Din
Al-Ilm
Al-Iman
Al-Amal
Syar’iah
Fard’ain
Fard Kifayah
Halal Toyyibat
Tahwid
Ibadah
Amanah Al-Falah Ummah
Musharakah Al-Ta’awun
Al-Fasad
Shu’ra
Adab
Islamic community
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Tahwid: A relationship with Allah which excludes a relationship with anyone else.
The focus of all man’s reverence and gratitude, the only source of value, where what
Allah desires for man becomes value to him. Man who commits his will to Allah,
recognises no other authority other than His. Comprises Iman, Ilmu and Amal.
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1920
1910
1930
1940
1950
1960
1970
1980
1990
2000
Economic Thought Production Thought Strategic Thought Organisational Thought Management Thought Leadership Thought Creativity/ Cognitive Thought
Pre 1800s
1800s
1900
Richard Cantillon (1725) Self Employment & Uncertainty
Vilfredo Pareto (1897) The Pareto Principal
F.H. Knight (1921) Role of Uncertainty
J.A. Schumpter (1934) Role of Innovation
F.A. Hayek (1937) Entrepreneur as an agent of change
P.W. Andrews (1949) Competition of the firm
E.F. Schumacher (1973) Small is Beautiful
Frederick W. Taylor (1903) Scientific Management
Henry Ford (1923) Mass Production
W. Edwards Deming (1950’s) Statistical Quality Control Joseph Juran (19950’s) Quality Management
Philip Crosby (1979) Quality is Free
Hayes & Wheelwright (1984) Manufacturing Competitive Advantage
Womack, Jones & Roos (1990) Lean Production
Alfred Sloan (1963) Functional Management
Champy & Hammer (1993) Re-engineering
Sun-Tzu (500 B.C.) Art of War
Igor Ansoff (1965) Corporate Strategy
Bruce Henderson (1963) BCG Matrix
George Steiner (1979) Strategic Planning
Michael Porter (1980) Competitive Advantage
Kenichi Ohmae (1982) The Mind of the Strategist
Henry Mintzberg (1994) The Rise and Fall of Strategic Planning
Fons Trompenaans (1993) Cultural Diversity
Asma Abdullah (1995) Going Glocal
Philip Kotler (1980’s) Marketing Management
Procter & Gamble (1931) Brand Management
Thomas Watson Sr. (1950’s) Customer Orientation
Ted Levitt (1960’s) Market Orientation
Jerome McCarthy (1960) 4Ps of Marketing
Chester Barnard (1938) Shared Values
Burns & Stalker (1961) Organic Organisation
Joan Woodward (1965) Technology & Organisation
Fu-Tzu [Confucius] (551-479 B.C.) Moral & Ethics in Organisation
Max Weber (1900’s) Bureaucratic Organisation
The Al Qur’an, the Hadith & the Prophet Muhammad (S.A.W.) (571 A.D.)
Henri Fayol (1912) Management Principals
Mary Parker Follet (1924) Employee Contribution
Elton Mayo (1933) Group Dynamics & Motivation
H.A. Murray (1938) Murray’s Needs Theory
Abraham Maslow (1954) Hierarchy of Needs
Douglas MaGregor (1960) Theory X & Y
Frederick Herzberg (1959) Hygiene & Motivation Factors
Henry Mintzberg (1973) The Nature of Management
Rensis Likert (1967) Four types of Leadership Styles
Mills & Friesen (1995) Empowerment
Gary Hamel (1998) Strategic Innovation
Ned Herrman (1995) Four Quadrant Thinking
Peters & Waterman (1982) In Search of Excellence
Koo, Kao & Jing (2006) Corporate Entrepreneurship
Peter Druker (1954) Management by Objectives
Niccolo Machiavelli (1469-1527) Political Leadership
I.P. Pavlov (1900) Conditional Learning
Ronald Lippet (1934) Leadership Styles
Rensis Likert (1950) Supervision
Ohio University (1958) Continium Leadership
William Reddin (1970) 3-D Model of Managerial Effectiveness
Blade & Mouton (1966) Managerial Grid
Warren Bennis (1989) Modern Leadership
Vroom & Yetton (1973) Managerial Normative Model
G. Polva (1945) Heuristics
Edward de Bono (1967) Lateral Thinking
William Gordon (1961) Synetics
Alex Osborn (1953) Brainstorming
Peter Senge (1990) The Fifth Discipline
De Vries & Miller (1984) Cognitive Organisational Dysfunction
Reg Revans (1979) Action Learning
Argyris & Schon (1976) Double Loop Learning
Kleiner & Roth (1997) Learning History
Rosabeth Moss Kanter The Change Masters (1984) When Lions Learn to Dance ((1989)
Peter Druker (1985) Entrepreneurship & Innovation
K. Harrigan (1980) Strategic Alliance
Emery & Twist (1965) Organisation & Environment
Kenneth Boulding (1956) General Systems Theory
Charles Perrow (1970) Organisation & Technology Change
Andrew Pettigrew (1973) Organisation as a culture
James Thompson (1967) Structure & Technology
Gareth Morgan (1979) Organisation as a paradigm
Lawrence & Lorsh (1967) Technology & Organisation
H.A. Witkens (1977) Field Dependence
Fred Fiedler (1967) Effective Leadership
Erik Berne (1964) Game Theory
Table 1.X: The Evolution of Thinking on Management and Entrepreneurship
Newman, Summer & Warren (1972) Creative Techniques
Kirzner (1973) Incremental Innovation
Geert Hofstede (1991) Dimensions of Culture
Bruce Tuckman (1965) Group Dynamics
David Kolb (1984) Experimental Learning
Steven Covey (1989) Seven Habits of Highly Effective People
David McClelland (1960) Achievement, Affiliation & Power Needs, Achievement Learning
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