Sunday, February 6, 2011

Reinventing Capitalism - Michael Porter's idea of making a virtue of a necessity

A critique on 'How to reinvent capitalism - and unleash a wave of innovation and growth' by Michael E Porter and Mark R Kramer, in HBR

This article appeared on the HBR, Jan-Feb 2011. The article is an interesting read - Interesting because, it shows that there are people out there sitting tall and tight who can dish out such stuff and not just get away with it , but probably also get accolades for it ..... Please read the article and read on...

a) Looks like Porter is now acknowledging that his model needs a revisit - adding the sixth and most important force - society / the local environment - something that a lot of people I have met have spoken about ( He still however does not admit it in this article)

b) From whatever little I have seen of this corporate world, I think this idea of shared value will be spoken for some more time for sometime now - with nothing tangible ever happening - before the next new idea to talk gets written about.

c) The cause and effect issues in the examples he suggests are not convincing. For instance, if Intel and IBM are devising wayw to help utilities harness digital intelligence in order to economize on power usage - it , to my mind is not out of any shared value concept - it is simply because power costs are going up and it makes simple economic sense to address this. This is a segment in the market that is being addressed. If Intel and IBM dont do it - somebody else will.

If Nestle worked with farmers directly, to increase productivity of coffee beans - it is out a necessity to get good quality and assured supply of beans ( that is what the sugar mills in India have been doing for decades) is not out of some higher and enlightened idea of shared value of capitalism. Not sure why there is an attempt to make a virtue of a necessity.

Some of the examples are simply ludicrous and others unbelievable. Marks and Spencers has overhauled its supply chain, and this is supposed to save the retailer GBP 175 million annually by 2016. Fine. But to take credit for reducing carbon emissions by doing this is my mind , a rather interesting way to look at things !

It talks of a service in India by Thomson Reuters , which provides a monthly service for farmers who earn an average of USD 2000 per year at a fee of USD 5 per quarter, which provides them weather and crop pricing information and agricultural advise. This service reaches 2 million farmers and early results apparently suggest that it has increased the income of more than 60% of them - some cases even tripling incomes !!! Wow....

d) Net net - a valiant attempt at tweeking Capitalism. This 'ism' needs to be relooked and (re) built - tweeking, tinkering and repainting will not help it run for long .....