And by that I don’t mean that Facebook is the blueprint for business in the 21st century.It’s funny how big ideas always come in droves. A few years back for example there was the wave of behavioural economists storming the world, fuelled by the success of Freakonomics. In early 2011, the (really) big idea in business seems to revolve about doing better. For society, not necessarily Wall Street, it should be noted.
Eminent business scholar Michael Porter published an article in the latest issue of the Harvard Business Review setting forth the idea of ‘shared value’:
The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the centre. We believe that it can give rise to the next major transformation of business thinking.
Not all profit is created equal. Profits involving a social purpose represent a higher form of capitalism, one that creates a positive cycle of company and community prosperity.
At around the same time, rogue thinker Umair Haque published a great book, New Capitalist Manifesto, outlining his idea of constructive capitalism, revolving around ‘thick value’. I’ve rarely read a business book that resonated with my own ideas and views as much as this one does. It’s a challenge to do fundamentally, vastly better:
the fundamental challenge of 21st century economics is creating more value of higher QUALITY, NOT just low quality value in greater QUANTITY.
20th century capitalists build strategies. 21st century capitalists begin, instead, with philosophies. Philosophies express the “first PRINCIPLES” of authentic, enduring value creation, NOT just near-term PLANS to capture or extract value. They are the key to shifting past scale—to resilience.
Haque manages to put forth a radical idea, and sketch a framework of how we might go at building a business in its image. He has moved beyond the idea and draws a blueprint for constructive capitalism that makes a lot of sense. It means that we need to rethink why we are in business, how we do business, and what it is that our business does. The fact that he bases his theory on anecdotal evidence from a handful of companies is irrelevant – the points he makes are all the clearer for it. This is where Porter is really left short: big words, but all still very abstract.
Apart from the obvious differences in style (Porter the professoral, slightly fuzzy writer, more corporate in outlook, Haque the rebel with a cause, more rallying and concrete) these ideas are very similar. And they’re not exactly coming out of the blue. A few years back, we had sustainability – everything had to be green. Then every corporation was saying that “being green makes perfect business sense, because we saving soooo much on our energy bill”. Next thing, CSR came around. So we’ve been on a slowly cresting wave towards a greater consciousness that it’s time for business to change its ways.
The difference is between this conviction being in the fibre of the organisation vs. being mostly a PR ploy.
Because that’s where these ideas are so radical: they propose a way of thinking that is fundamentally different from run-of-the-mill capitalism which will lead to a more social way of doing business. They are attacking the problem at the root, in stead of chasing symptoms like we’ve been mostly doing so far.
To me, all of this falls perfectly into place with the upcoming movements practical idealism, social entrepreneurship design thinking, business model innovation, service-dominant logic, brand driven innovation and more of such frameworks, which in one way or other, describe a way of doing business that’s fundamentally good for the customer, and built on top of a core set of beliefs that guide the organisation, rather than just profit maximization.
The one big difference between Porter and Haque is that Porter is obviously betting on the big corporations and institutions to drive this development, whereas Haque directs his plea to ‘revolutionaries.’ Indeed I too think it’s much more likely that the really groundbreaking work is going to be done by upstarts and small, nimble groups who are unencumbered by vested interests and boards of directors who are still solidly grounded in the last century.
Finally Anand Mahindra, vice chairman and managing director of Mahindra & Mahindra, comes through for his former professor. Mahindra recalls taking Porter’s course on competitive strategy 30 years ago at HBS. “Every morning I’d get up ready to joust and do battle,” he says. “I felt like that again this morning.” He goes on to declare that the concept of shared value was crucial to understanding how big Indian companies can overcome distrust among the public and do a better job of serving customers. “Our own company in January came out with new brand positioning saying the businesses we choose to do are those that allow our customers to rise. We found that we were doing that anyway, we’ve simply put our fingers around it.”
Says Porter when Mahindra is done: “A. You get an A.”
Ouch. Here is a guy dismissing porters big idea as positioning, a 30 year old marketing idea where creating ‘value’ was certainly not the point, and Porter is cheering him on.
Conversely, the heroes in Haque’s book still have a long way to go, but their initial baby steps do paint a clear picture of where we need to go, and how very tough it will be to clear all of the improvements that he suggests. But at least he sets the bar high.
So my money is on Umair Haque. I like his idea, I like his style. And I fundamentally agree with him. Every business one way or the other has to figure out how it can bring something valuable to its customers at the least possible cost to the world. Because really, that’s the only way to act if we’re going to be comfortable for much longer.
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