Opportunity in Disguise

In the latest issue of Harvard Business Review, Michael Porter and Mark Kramer call for nothing short of reinventing capitalism by “reconceiving the intersection between society and corporate performance.”

“Capitalism,” they write, is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth. But a narrow conception of capitalism has prevented business from harnessing its full potential to meet society’s broader challenges.

“The purpose of the corporation,” they continue, “must be redefined as creating shared value, not jus profit per se.”

[EXPAND More]And what exactly does “creating shared value” entail? According to Porter and Kramer, it involves generating “economic value in a way that also creates value for society by addressing its needs and challenges.” 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 center.”

For instance, they cite “food companies that traditionally concentrated on taste and quality . . . refocusing on the fundamental need for better nutrition.” Intel and IBM, they add, “are both devising ways to help utilities harness digital intelligence in order to economize on power usage. Wells Fargo has developed a line of products and tools that help customers budget, manage credit and pay down debt. Sales of GE’s Ecomagination products reached $18 billion in 2009—the size of a Fortune 150 company.”

This passionate call by Porter and Kramer is, in our eyes, right on the money. In fact, Peter Drucker was calling for the very same thing more than 50 years ago. “It is management’s . . . responsibility to make whatever is genuinely in the public good become the enterprise’s own self-interest,” Drucker wrote in his 1954 landmark book, The Practice of Management.

In his 1973 book, Management: Tasks, Responsibilities, Drucker cited examples of companies, including Sears and Ford, that had figured out how to build a business by taking on social ills. And late in his life, Drucker was still singing the same song. “Every single social and global issue of our day,” he declared, “is a business opportunity in disguise.”

But this long history also begs the question: Will the corporate world ever truly embrace the idea of shared value, or will this remain a relatively minor movement in the scheme of things? What might spur more companies to create shared value?[/EXPAND]