Karma Capitalism

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For both organizations and individuals, it's a gentler, more empathetic ethos that resonates in the post-tech-bubble, post-Enron zeitgeist. These days, concepts such as "emotional intelligence" and "servant leadership" are in vogue. Where once corporate philanthropy was an obligation, these days it's fast becoming viewed as a competitive advantage for attracting and retaining top talent. Where the rallying cry in the 1980s and '90s may have been "greed is good," today it's becoming "green is good."

And while it used to be hip in management circles to quote from the sixth century B.C. Chinese classic The Art of War, the trendy ancient Eastern text today is the more introspective Bhagavad Gita. Earlier this year, a manager at Sprint Nextel Corp. (S) penned the inevitable how-to guide: Bhagavad Gita on Effective Leadership.

THE ANCIENT SPIRITUAL wisdom of the Bhagavad Gita seems at first like an odd choice for guiding today's numbers-driven managers. Also known as Song of the Divine One, the work relates a conversation between the supreme deity Krishna and Arjuna, a warrior prince struggling with a moral crisis before a crucial battle. One key message is that enlightened leaders should master any impulses or emotions that cloud sound judgment. Good leaders are selfless, take initiative, and focus on their duty rather than obsessing over outcomes or financial gain. "The key point," says Ram Charan, a coach to CEOs such as General Electric Co.'s (GE) Jeffrey R. Immelt, "is to put purpose before self. This is absolutely applicable to corporate leadership today."

The seemingly ethereal world view that's reflected in Indian philosophy is surprisingly well attuned to the down-to-earth needs of companies trying to survive in an increasingly global, interconnected business ecosystem. While corporations used to do most of their manufacturing, product development, and administrative work in-house, the emphasis is now on using outsiders. Terms such as "extended enterprises" (companies that outsource many functions), "innovation networks" (collaborative research and development programs), and "co-creation" (designing goods and services with input from consumers) are the rage.

Indian-born thinkers didn't invent all these concepts, but they're playing a big role in pushing them much further. Prahalad, for example, has made a splash with books on how companies can co-create products with consumers and succeed by tailoring products and technologies to the poor. That idea has influenced companies from Nokia Corp. (NOK) to Cargill. Harvard Business School associate professor Rakesh Khurana, who achieved acclaim with a treatise on how corporations have gone wrong chasing charismatic CEOs, is writing a book on how U.S. business schools have gotten away from their original social charters.

Vijay Govindarajan, a professor at Dartmouth College's Tuck School of Business whose books and consulting for the likes of Chevron (CVX) and Deere & Co. (DE) have made him a sought-after innovation guru, links his theories directly to Hindu philosophy. He helps companies figure out how to stop reacting to the past and start creating their own futures through innovation. Govindarajan says his work is inspired by the concept of karma, which holds that future lives are partly determined by current actions. "Karma is a principle of action. Innovation is about creating change, not reacting to change," he says.

There are also parallels between Indian philosophy and contemporary marketing theory, which has shifted away from manipulating consumers to collaborating with them. "