I’m on vacation, reading a fascinating book by Umair Haque entitled “The New Capitalist Manifesto.” Its gist is that too many businesses are creating profits based on what Haque calls “thin value,” value created by stealing benefits from and imposing unmeasured costs onto current and future generations. These businesses will fail in the 21st century when their “deep debt” comes due.
Haque argues that our business models, formed in the industrial age of the 20th century, are based on a hunting mentality that assumes no end to the riches in the forest. As a result, businesses create thin value that is:
- Artificial, as the business creates gains for some (e.g., shareholders) at the cost of harm to others (the environment and future generations);
- Unsustainable, as the business abuses environmental and labor resources to extract profits; and,
- False, as the business fails to make people better off in sustainable and meaningful ways.
Thin value is best reflected in product examples like the Hummer with its perverse environmental impact, the Big Mac with its obesity effect and the sub-prime mortgages with the economic harm they caused many as others reaped fortunes originating, bundling and selling them.
According to Haque, despite the pervasiveness of the thin value business model, in today’s increasingly transparent and commoditized world consumers increasingly select brands offering the thickest value. Your business can create thick value by adopting one or more of the five new cornerstones for economic success in the 21st century:
Loss advantage is secured by shifting from value chains to value cycles. Reuse of disposed products lowers materials costs, creating opportunities for increasing returns over time. Nike (athletic shoes and apparel) and Interface (carpeting) are reaping great returns from closing the loop between raw materials and customers’ and competitors’ worn out products.
Responsiveness grows by moving from value propositions to value conversations. Let your customers (versus business leaders) decide what is wanted, as Threadless does with great success. The online company manufactures t-shirts (designed by members of The Threadless Community) that receive the highest votes. Gap, a once trend-leading clothing company that’s been in decline for years, could learn some lessons here.
Resiliency emerges by moving from strategies that protect markets to philosophies that ensure continued product evolution. Google’s philosophy includes doing no harm and keeping markets open, principles that have led to continual evolution in its offerings. By way of contrast, when a business primarily protects market positions, its employees stop making products the best they can be. Haque argues that Microsoft’s focus on protection precluded notable improvements in Microsoft Office.
Creativity grows by moving from protecting markets to completing markets. Companies focused on protecting markets over-invest in incremental offerings to customers whose needs are already mostly met. Completing a marketplace on the other hand focuses on meeting the needs of high-need groups that have never been served or poorly served. From Tata Motor’s focus on creating a car for low-income households to Apple’s transformation of phones into mobile commuting devices, the future belongs to those who forget incremental improvements and go after the impossible.
Difference is secured by creating outcomes that matter in human terms versus selling merely differentiated goods. You must produce “betters” – bundles of products and services that improve people, communities, society, the natural world and future generations – to win on the best outcomes. Unilever, for example, sells more than products. It offers women in developing nations micro-loans, training and wholesale pricing so that they can serve as distributors of Unilever products, solving the women’s need for income. Over forty-five thousand entrepreneurs in fifty India villages enabled by Unilever have extended Unilever’s reach to over 30% of the rural market.
“The most disruptive, profitable, and valuable path to advantage isn’t differentiating stuff, but making a difference to people, communities and society,” the book concludes. In our increasingly interdependent world, the right mentality for building this kind of business is one of captain of an ark at sea, with every resource counting for a long journey ahead according to Haque.
“The New Capitalist Manifesto” offers an insightful road map for those seeking to design businesses for where the world is ideally headed, versus from where we have come.