Helene Finidori

Reassessing What Value Means

The New Capitalist Manifesto by Umair Haque

I have been following Umair Haque’s work for a while, and I must say that everything I read from him just hits home. He connects powerful dots and lays out the future of business and capitalism in sharp terms that I profoundly relate to.

For one because I have spent these last 15 years living around the world, literally watching from a ringside seat several bubbles inflate and pop (1997 in Indonesia - monetary crisis, 2000 in Sweden - IT Internet crisis, 2007 in the USA - housing bubble seen transformed in the GFC in 2008 from Australia…).

And also because I have been convinced for many years as a marketer and strategist that the most effective way for a business to make a difference, thrive and grow, is through vision and meaningful interactions based on trust between empowered employees and an organization’s stakeholders, the brand being the expression of the culture that enables it.

The New Capitalist Manifesto confirms that this type of approach spans far beyond the realm of marketing and branding and touches the very essence of doing business.

The end of the industrial era

The New Capitalist Manifesto starts with the realization that the industrial era capitalist model has long lived. We cannot deny that the 20^th century, mining and burning its way into mass production, mass consumption, mass agriculture, has brought some form of prosperity to many areas of the world, and provided access to food, health and comfort to a significant number of people… At the same time it has produced an economy based on what Umair Haque calls thin value: value that has generated unpaid debts of harm to people, communities, society and the natural world, not to mention future generations. This was reinforced by an exacerbated ethic of individualistic self-interest based on maximizing output and expectations that has overidden traditional values of togetherness, empathy and solidarity.

The 20th century industrial era business models hinging on exploitation, command & control, fierce competition, short term profit, leveraged growth, has left climate changed, resources depleted, markets commoditized, infrastructures in ruins, a finance system on the verge of bankruptcy, an unengaged and stressed workforce, and corporations struggling to maintain competitiveness under pressure of accelerating cycles...

Rebooting capitalism

The New Capitalist Manifesto is a call to reboot capitalism and reassess what value means. Because Umair Haque believes that building disruptively better businesses can change economics, he explores new paths for producing, interacting, and competing; striving to create authentic value and quality profit aimed at shared prosperity now and in the future.

He leads us through the design of constructive strategies based not on acquiring competitive advantage or finding unexplored niches, but on authenticity, interaction and mindfulness, the paths to making a real difference. The kind of strategies that help organizations and their whole ecosystems thrive by creating thick and meaningful value for all stakeholders while minimizing losses incurred by the community, society, the natural world and future generations. The old model is shifting while a new one emerges, based upon renewal and regeneration, participation and co-creation, interactions and collaboration, resilience and evolutionary edge, outcomes and meaningful growth. Umair Haque’s endeavor is to accelerate the emergence.

Constructive advantage based on sustainable value

Beyond the whole new vocabulary that makes business as we knew it obsolete, the book provides practical insight and examples: Apple, Google, Interface, Nike, Lego, Unilever, Walmart, Whole Foods, Nintendo… a few of whom have come back a long way from exposed unsustainable practices…

What Umair Haque develops in the book is a productivity and efficiency model based on what he calls constructive advantage and sustainable value. This is achieved through:

• Shifting focus from operational efficiency (minimizing internal costs) to socio-efficiency (minimizing external loss and replenishing resources). This includes the adoption of cradle-to-cradle value cycle approaches which focus on embedding the minimal use/replenishing of resources/reclaiming-disposal of the product at conception, and on moving production as close as possible to consumption.

• Giving up the principle of one-sided value proposition to adopt participation and co-creation, internal and external, involving customers and other stakeholders. The idea is to give a voice and ear to develop responsiveness, and the agility to come up with better decisions faster.

• Moving from strategies of competition and dominance of the market place to an intentional purpose based philosophy enabling the perpetual (re)discovery of value creation, ensuring resilience and an evolutionary edge. (Incidentally, this is what the best brands are made of!)

• Corollary to the previous, developing the capability of expanding the market place through creative disruption, rather than protecting one’s position and market.

• Last, shifting from differentiating products or services (as output) to making a meaningful difference (in outcome) to people, communities and society in human terms, through value that makes people better off. Socio effectiveness is about a shared interest in better outcomes in terms of physical, social, mental, economic wellness.

Sustainable value is one that lasts beyond production and consumption, that creates meaningful and positive impacts on people’s lives, empowering people. This generates greater loyalty, credibility, legitimacy and ultimately is the driver for growth, profits and economic value.  

Umair Haque believes, like me, that the power to act and change the world resides in each and all of us. It is our call to create the future. Let's do it!

How to stop the treadmill and create thick value?

cartoon: http://www.polyp.org.uk/ see animated version

Umair Haque’s New Capitalist Manifesto is all about building disruptively better businesses that create thick value by focusing on social effectiveness based on trust, purpose and meaning: the new levers of constructive capitalism.

The majority of CSR and transformation efforts concentrate on convincing CEOs, boards, marketers. But not much is changing at the coalface. Same old, same old discourse… unengaged employees and executive: no one believes much that corporations can change, or that there is a way out.

Many books, reports are published with a positive note and suggestions of effective solutions with solid rationales, but how do you bring the message to coffee machine and cafeteria conversations in offices, universities, schools?  How do you start one-to-one empowering conversations showing possibilities and achievements?

Please share your suggestions, start the buzz and keep me posted here or @HeleneFinidori   

The Story of Stuff - We can do better!

That's old stuff but... well, at the scale of economic models and management theories longevity, it's still quite a new provocative way of seeing things, and worth repeating here and again. And it doesn't look pretty. It seems that what we have learned as the recipes for success need to be unlearned.

This video is an animated documentary on consumerism and the life cycle of consumer goods. It connects the model of consumption-based growth to a huge number of environmental and social issues, and underlines the absurdity of running a linear process of extraction, production, distribution, consumption and disposal on a finite planet.

It seems that the founders of micro economics, by taking the "economy as a science" route have dehumanized economics, divorcing it from its ethical component and reduced it to a mere triggering and reinforcing the weakest sides of human nature. Imagine our businesses had a conscience, imagine if rather than playing on humanity's weak sides we started looking at how "virtues" create more effective, meaningful and durable value. Look at this animation as a wake up call.

What can each of us in our companies do to stop being the bad guys and continuing this nonsense that is joepardizing the world our children will become adults in? We should know and do better than that!

There are solutions to make things better without putting the whole system down!

The Survival of Capitalist Democracies

Capitalism and democracy, can the two co-exist? The question I answered on another forum is indeed provocative.

I believe capitalism and democracy can successfully coexist in the long run only if economic actors become mature enough to police themselves in the way they conduct business, in “exchange” for freedom of market and reduced regulation.

In a democracy the people entrust a government to defend their individual freedom & rights and their interests as a society or nation, and to preserve a social order in a long term perspective.
Capitalism is based on the inalienable right to ownership and profit, and on the principle of a free market.
Conflict between capitalism and democracy occur when the exercise of freedom jeopardizes the rights and interests of the people and the interests of society at large.

In the past 30 years, many economists and management theorists have pushed the concept of freedom of enterprise and free market to a point where any intervention of the state or attempt to regulate the economic, social or environmental field is qualified as “socialism”. At the same time the world has seen more and larger frauds, scandals, crisis, and yoyo bubbles than ever, all in the name of free markets – including wars for democracy-, far from bringing the “equilibrium” expected.

Capitalism and free markets are not to blame here, but rather the behavior of economic actors. A free market does not confer the right to do anything at any cost, regardless of the impacts on people, societies or the generations to come. It can’t be a free ride to grab everything you can as fast as you can. In a democracy, freedom comes with duties and responsibilities. What is true at the individual level is also true for corporate economic actors. For democracy and its social contract to survive in a free market, the economic actors, whether individuals or corporations, must assume their social role (i.e role in society, not “socialistic” role) and take their part of duties and responsibilities. The counterpart of a free market and absence of regulation is the adoption of self imposed rules and principles for the conduct of business as an actor of society, and the accountability thereof. This proactive approach is what I believe Corporate Social Responsibility is ultimately about. When economic actors are not able to police themselves, they misuse the freedom they have been granted, and “the people” will legitimately want to impose more rules, or topple the system.

Proactive Corporate Social Responsibility is the safeguard that will prevent capitalist democracy to fall into socialism, anarchy or the reign of plutocracy…

Sweden -that I had the opportunity to observe for a few years- is probably ahead in its approach of capitalist democracy and practice of proactive CSR. The Swedish democracy is monitored and nurtured. It is the object, together with the cohesion of society, of continuous attentions though a long term engagement in democracy policies, because  nothing is ever to take for granted.

To conclude, I would like to share a quote of Jean Jacques Rousseau that I particularly like:

“What man loses by the social contract is his natural liberty and an unlimited right to everything he tries to get and succeeds in getting; what he gains is civil liberty and the proprietorship of all he possesses. If we are to avoid mistake in weighing one against the other, we must clearly distinguish natural liberty, which is bounded only by the strength of the individual, from civil liberty, which is limited by the general will; and possession, which is merely the effect of force or the right of the first occupier, from property, which can be founded only on a positive title.
We might, over and above all this, add, to what man acquires in the civil state, moral liberty, which alone makes him truly master of himself; for the mere impulse of appetite is slavery, while obedience to a law which we prescribe to ourselves is liberty.”
Jean Jacques Rousseau -The Social Contract - Book I, Chapter VIII                                              

Defining Responsibility in CSR

People tend to make business cases for Corporate Social Responsibility or debate the validity of CSR without realizing that each individual probably puts a different meaning behind the words, especially when it comes to defining what this responsibility actually is, and which values it proceeds from… 

One of my respondents on another forum suggested that there was no actual shared and universal definition. He quoted a 2006 white paper by Norwegian academic Dahlsrud who analyzed a total of 37 definitions and found out that none of those actually defined the social responsibility of businesses, but rather described its operational dimensions. While trying to find this paper, I came across the following fundamental principle:

“that a company is responsible for providing more benefits than just profits for shareholders. It has a role to play in treating its employees well, preserving the environment, developing sound corporate governance, supporting philanthropy, fostering human rights, respecting cultural differences and helping to promote fair trade, among others. All are meant to have a positive impact on the communities, cultures, societies and environments in which companies operate.”

Such a loose definition does not serve CSR in my opinion, as it enables its detractors to benefit from the confusion and concentrate their attacks on the elements that are the easiest to dispute. I think in particular of Milton Friedman and his followers who associate CSR initiatives to philanthropy, and restrict responsibility to compliance. By doing so, they obliterate from the discussion what I believe is at the core of CSR: accountability for the impacts corporations may have on societies and environments. 

In my personal view, CSR has a lot more to do with the consequences of doing business freely, and the duties that come with this freedom than with charity and philanthropy…

Wikipedia defines CSR as:

"A concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large."

The real challenge is how to get from a compliance approach (compliance to law or pressures) to a voluntary approach (self imposed code of conduct).
Some cultures -I think of Scandinavia that I know quite well- rely as much on the "collective" sense of responsibility and "conscience" as they do on the strict application of the law, and they are already close. Others, where a belief that anything that is not forbidden by law -or subject to risk of litigation and rising insurance premiums- can be done is ingrained, have a longer way to go. The response to external stakeholders' pressure is a step in the voluntary direction. I believe education -from kindergarten to university- has a tremendous role to play, but this is another topic...

What other definitions and views do we have out there?

Corporate Social Responsibility: how far are we from the tipping point?

Harvard Business Review Jonathan Lash and Fred Wellington devise this month on the effect of climate change on corporations and on their ability to handle the various related risks: regulatory, supply chain, product & technology, litigation, reputational, physical… and turn them into competitive advantages.

Are we seeing a change in economic and management theory embracing corporate social responsibility? Will CSR become mainstream as a corporate value any time soon?

Technically, it seems that directors are mandated by US law to put their shareholders' interests above the interests of any other stakeholder. Henry Ford himself received a supreme court ruling in 1919 when he vowed to reinvest his surplus profits in cutting the prices of his cars and hiring more workers to "spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes."

In his book The Corporation*, Joel Bakan claims that corporations relentlessly pursue their own self interests regardless of the harmful consequences they may cause to others. A concept promoted by Nobel Prize Milton Friedman who titled a New York Times article in 1970 The social responsibility of business is to increase its profits, a stand he confirmed in a 2005 Businessweek interview. For Friedman, Social Responsibility goals are to be pursued exclusively at the individual and personal level, and should be considered as a misappropriation of corporate assets and “fundamentally subversive” if pursued at the corporate level.

The controversy over Friedman's theories also sparked the US academic world. In a remarked white paper, the late management education guru Sumantra Ghosal explained a couple of years ago how the "oversimplifying" sets of ideas that have shaped management theories for the past 30 years have freed students –today's actors- from any sense of responsibility, influenced social and moral behaviors, and have led, in a self-fulfilling process, to the worst excesses -see one of my previous posts on this subject. Ghosal entrusted the academy to promote pluralism and alternative theories and reverse the trend. With success it seems given all the articles white papers, podcasts and conferences on the subject of CSR and global warming.

Has a page been turned since Friedman passed away, and are we close to the tipping point? Large corporations -including Walmart- are starting to embrace the concept,  customer and public pressure have a visible effects, and policy makers are on the job. Let's be optimistic.

*Many thanks to Lauchlan Mackinnon for  pointing me to this resource.

Let's think ahead of tomorrow's Dow Jones

We live in a world driven by short term goals and rewards, at the expense of future generations. Do we really want to continue encouraging bad management practices and behaviors?

Day to day variations vs. yield or patrimonial perspective
The fact that capital gain has taken predominance over yield and long term revenue has affected mentalities and changed the relationship between the stockholder and the corporation in quite a cynical way. With a focus on next quarter's bottom line and the share value tomorrow, who sees the overall wealth creation over 5 years? Who is the guardian of a company's perspectives, reputation, liability and potential profits and wealth at say, 10, 20, 50, 100 years?

Short term money in emerging sectors
Ages ago, I learned that long term investments shouldn't be financed by short term money. Huge capital is available in western countries waiting to be invested: short term/volatile capital rushes to finance “hit hot” markets -i.e. most of the time growing markets that require long term investments to consolidate. Of course, everyone wants a share of the same cake, that’s how bubbles build up, making these markets riskier than they should be -see Businessweek Too Much Money-. At the first blip, the rush is to pull back and the whole thing collapses, throwing the baby out with the bath water. I saw this first hand in South-East Asia in 1997, with all its implications on local people's lives. When the IMF stepped in, conditioning its loans to a total and immediate deregulation of what was locally perceived as a social aid -i.e. subsidies on household energy, you got riots and unrest... Joseph Stieglitz explained this very well. Then came the internet... a perfect opportunity to place the cash divested from Asia...

No more investments in infrastructures
The maximization of short term profit is detrimental to long term investment and infrastructure: rare are those who invest in the US railroad or electrical distribution network, ROI is too far away, as a result, the power grid is in a terrible condition -and probably also a cause of energy waste- and the prospects of a Chicago New-York high speed train connection in 3hrs is not for tomorrow. What about the internet, could it have been created by the private sector today? Who will finance the infrastructures needed for its growth tomorrow.

Dilapidating assets and increasing liability
Last, and to put this issue in a financial perspective: our generation happily jeopardizes at no cost the assets of future generations. No "provisions" whatsoever are made today for the risk and cost our children will incur tomorrow -health, environment, natural resources...-. In addition our states live off “leveraged” deficits that future generations will have to finance…

Win/win has to be put into perspective, it's not just here and now...

The Art of Management

What many in the academic world have been thinking in silence, or expressed behind closed doors in the aftermath of the Enron scandal, is now voiced openly and creates some turmoil in business education circles: Bad management theories are destroying good management practice!

In a 17 page article published posthumously by the Academy of Management Learning & Education, the late management education guru Sumantra Ghoshal explains how the sets of ideas that have shaped management theories for the past 30 years have freed students from any sense of responsibility, influenced social and moral behaviors, and have led, in a self-fulfilling process, to the worst excesses. Read full paper and related comments in The Economist, the Financial Times plus a second FT article.

The issue is highly political. For Ghosal, the desire to make business a science encouraged the adoption of Milton Friedman's oversimplifying individualistic and pessimistic vision of liberalism. In her response to Ghosal, Prof. Moss Kanter of Harvard agrees that these theories are "just too simple and leave out too much". She lays a great part of the responsibility for exesses on managers themselves and law schools and describes the predominance of maximizing shareholders' interests as a result of the victory of capitalism over communism. "Valuing all stakeholders, being socially responsible and caring about people, she adds, sounded a little 'pinko' to business managers when the world had so roundly rejected socialism in any form. Greed was legitimated as producing a better society, not just better companies".   

Ghosal claims that teaching ethics is not enough, and only a change of paradigm and the promotion of pluralism and alternative theories will reverse the trend. Unfortunately, he passed away and we will never know what alternatives he had in mind.

Harvard and many other Business Schools have introduced courses on Ethics in their MBA programs, and accreditation bodies are pushing to make them mandatory in the curriculum. Will this be enough? How will the Academy further take on the mission that Ghosal entrusted them with?