I recall once at a dinner party being asked what I did for a living. My first answer, “I make, build and fix brands” was too vague. My second answer, “I’m in marketing” struck a nerve: “Oh, you’re one of those guys who gets us to buy things we don’t need!” (Ouch!) Tempted as I was to respond with, “So, how much did we get you to fork over for that lovely necklace you’re wearing this evening?”, I held back.

This woman’s comment reveals the popular belief that marketers prey upon hapless consumers with insidious tools of mind control, inducing us to wander the mall in a kind of consumptive stupor as we fill our lives with tons of purchases that we don’t need, will never use, and will eventually dispatch to a landfill site to pollute the earth.

Barring the notion of insidious mind control, there is much truth to this state of affairs.  Indeed, it has fueled a virulent strain of anti-consumerist activism over the last few decades. But rather than reject brands for it, author and consultant Bruce Philp makes a compelling argument that brands can be used by consumers to reverse the tide of conspicuous consumption that has plagued us over the last 60 years or so. Recognizing that the power is now firmly in the hands of the consumer, Philp’s book is an  engaging argument for harnessing this power to make brands truly accountable.

When they are accountable for everything from product quality to environmental impact, brands can no longer compete merely on value (i.e., price) but must compete on values. To quote Philp: “When brands are based on values, their power comes from us, and that means they really do have to be who they say they are.”

He extends this notion into a plea for replacing mindless consumption with careful curation. Citing William Morris’ famous exhortation, “Have nothing in your houses which you do not know to be useful or beautiful”, Philp encourages us to turn consumerism into a potential force for good, one that forces marketers to sell us the things we need, not just the things they want us to have. wn

However, we are now experiencing another evolution in Industrial Design as it appears to be reaching the end of an evolutionary plateau, with emerging industrial economies such as China and India set to take over  the way things get made (for better or worse).  It is important to note that Industrial manufacturing will continue to exist, yet it must evolve to keep up with emerging needs of society and the new rules of global responsibility.  In a similar way that Industrial processes in Europe became focussed on premium quality rather than mass-quantity, North American manufacturing will need to re-examine and re-evaluate where their strengths are and what long term potential exists based on examining holistic risks and opportunities.

Since the 1950′s manufacturing expertise in North America has been systematically reduced to ever more efficient assembly lines with ever increasing regulations and manufacturing processes with more emphasis devoted to marketing and advertising.  As a result of this, manufacturers have become increasingly more clever at reducing the number, complexity and cost of manufacturing.  However as we look forward to the next phase of evolution in our emerging world economy, the core Industrial Design skills and manufacturing expertise appears to be set for going open and experiential.

It is this technical know-how that is gradually being re-distributed throughout the Internet and it is allowing new micro-assembly methods for independents, proving a way to bypass traditional investment heavy processes and procedures.  This is proving to be most beneficial for the emerging economies and independents start-ups.  Fisker Automotive and Tesla Automotive are both companies who are touting their independent green credentials, and yet they using the same supplier base from larger OEMs to create their more sharply defined and powerful Premium Electric or Plug-in Hybrids vehciles. Most important to note however, is that these are still early days for these type of innovators.

Already there are other new (smaller scale) business models which are begining to pop up.  As with many innovations, it is not always the originator of an idea who benefits from an idea or technology first.  Sometimes the groundwork that has been laid down by previous business experiments and prototype models leads innovators to other business models with separate and an un-intended technologies and they are able to realize a novel new approach for use in a new type of product.  An interesting example at this end of the spectrum is BPG Motors; an small start-up company born from a highschool science project in which the technology of Segway’s personal transporter was reformatted to fit into a motorcycle style package.  After only a few short years, the company is now experimenting with a fold-up scooter prototype, the UNO III, which can transform itself to save space to be taken indoors and up an elevator.  None of this would have been possible if not for the accessibility of open-source know-how and shared technologies (such as the out-sourced rapid prototyping of aluminum parts).

Are brand names, badges or marques of a manufacturer more important than what the physical product is?  These are questions that I often think about.  I think automotive manufacturers also need to address these kinds question before taking their brands into the realm of experience design.  If a manufacturer of a brand cannot impart a more compelling story beyond what the end customer picks up from their  dealership, then perhaps it is time for an investigation  around what kinds of experiences, journeys and alternative narratives can be provided to consumers.

Industrial Design has often been criticized as one of the most destructive professions due to the resulting industrial waste,  shortened mid-cycle enhancements and associated pollutants with the entire socio-economic, industrial and commercial program.  There are several leading minds in  transportation design and automotive design experts who acknowledge that the only way to improve current and emerging issues related to transportation and mobility is in collaboration with non-automotive sectors.  More importantly there is now an industry awareness and emphasis on designing experiential brands, that take consumers beyond the realm of “yes or no type offerings” or other stand alone products, and instead focuses on delivering a participative experience.  This is the next evolution for Industrial Design as it requires a breadth of knowledge of both product, process and positioning.

So what does all this mean to brand-name manufacturers?    Manufactures can do much more for consumers, and  there are real needs that can be addressed right now beyond simply offering more products.  The short answers could be in developing alternatives to car ownership, and alleviating time wasted for commuters stuck in traffic.  There are many forms this could this take, most obviously transit buses and ride/share programs.  But how could an automotive brand use experiential marketing to provide a premium service?  Would there be anything from a brand to add to the experience beyond simply being an “outstanding, compelling or gotta-have-product”?   Imagine an autonomous limo that picks you and and delivers you your destination, that is piloted by Google, co-branded by Apple and offers passengers an engaging experiences designed by Universal Studios.  Or how about stopping off at Starbucks to recharge your electric hybrid while you enjoy your favorite cup of coffee?

The path forward is not yet clear, and there is still much deliberation about what vehicle architectures, electric infrastructure and vehicle servicing that will be needed in the future.  However, industry already knows about the more immediate and frustrating issues of traffic, pollution and insurance premiums.  If foresight indications are correct, then the R&D groups of large OEM’s need to begin re-evaluating what mobility means, and what role their brands will play in a service oriented economy.   Creative technology environments are generally reserved for work in manufacturing R&D silos, however I know from experience that they can be quite flexible in accommodating new types of design and engineering (see my earlier post here).  In order for OEM brands to gain access to the next evolution economy, the Researching-of and Designing-exercises for consumer experience based offerings, must be opened up beyond the silo of transportation designers.  What is needed now, is a new platform to engage policy makers, urban planners and non-automotive businesses with those in the Automotive Corporate world.

This may get a little technical, but to put this into perspective a 1Mbps connection being used 100% for 1 day is roughly 10GB (really 10.8GB). So 1Mbps connection for a month is roughly 300GB (technically 324GB). Now if you used a 25Mbps connection for an entire month it would utilize approximately 7,500GB. Yea, that is a whole lot of data to be transferred. The issue is that Bell’s limit of 75GB is almost exactly 1% of the capacity of the connection. So in essence Bell is saying that you can use your 25Mbps connection at full speed for 7.2 hours.

This just doesn’t make any sense. With the sheer volume of TV watched on a monthly basis (~153h/month) and a growing shift of these viewers looking to the internet to watch their favorite shows 7 hours is just not going to cut it!

Some people might say “25Mbps is more than people need”. Well here are the bitrates for video (without compression)

• DVD – 5Mbps
• HDTV – 8 to 15Mbps
• Blue-Ray – 40Mbps

We are on the cusp of the needs of video for consumers. Keep in mind this only takes into account the current state of technology. These numbers are only for 2D video. What happens when we have streaming 3D video (remember Avatar the largest grossing movie of all time?). I’m sure that 3D video will require even more data to be transferred.

The reason this really bothers me is that Canadian ISPs are setting up a culture that stifles innovation. I can remember (albeit a long time ago) when Internet providers loved to see what their bleeding edge customers were doing to push the barriers of their technology. Complicated caching and compression technologies were invented, modems were bonded together (to get you 128Kbps!), communities would even bond together to deploy ad-hoc networks- all of these things helped push the technology further. My worry is that new entrepreneurs or hobbyist trying to create the next generation of consumer video services will not even get started (in Canada) if they see that they can only deliver service to customers for 7 hours.

Strangling Innovation

The argument that ‘most’ people fall under these limits infuriates me. This is like saying ‘We have invented this new car. Its best feature is that it can go 180kph. But most people don’t drive over 90kph so if you buy this car it can only drive 180kph once a month’.

I do think that there should be some realistic limits in place for internet usage. I just don’t agree that 1% is that limit. The ideal business model for telcos would be to either charge for the amount of data you transfer (Gigabytes) OR by pipe size (Mbps). Charging for both is double dipping. If the business was based on Gigabytes (which is more in line with the old per minute long distance model) then it would be in their best interest to provide you with the largest possible pipe at all times so that you can download more data.

For the last several weeks, much has been written about Rupert Murdoch’s plans to de-index from Google and put up pay walls for News Corp’s digital media properties.

Variety.com (the Hollywood trade publication) has also announced that it will revert back to erecting a pay wall for its content.  Variety.com had this model in place as recently as 2007 when it decided a pay wall didn’t work.  Well, I guess that was then…

And now, we have three major publishing houses announcing that they will hold back e-book versions of some titles, making them available several weeks to several months after the initial launch of the hardcover.  Hey, movie studios have been doing that for years, right?

Finally, the major music labels have announced that they will cease the production of all recordings, digital or otherwise, and force people to attend live concerts if they want to hear their favorite music.

OK, I made that last one up.

Where’s the innovation?  It’s undeniable that traditional media companies are under a lot of pressure to hold on to their revenues.  Some are fighting for survival.  But shouldn’t such circumstances spark innovation?

Let’s look at publishers’ plans for holding back e-book versions of some of their titles.  Is it really a good idea to force consumers to buy hardcover versions when so many of them have already demonstrated that they want e-books?  Is it really a good idea to artificially prop up the value of a hardcover, at the expense of making an e-book a less attractive product, when the trend seems to clearly favor e-books going forward?

Insights into customer needs (e.g. people want to buy, carry around, and read books conveniently) and foresight into the evolving market (e.g. e-book market is growing very quickly; and every electronics manufacturer and their cousin are readying better, faster, do-more e-readers) should be driving innovations at these media companies.

Instead, they seem to be gripped by the fear that consumers who grow accustomed to paying $9.99 for an e-book won’t want to pay $25 for a hardcover.  That may be true.  But what exactly are they hoping will happen?  That consumers who have already invested in an e-reader, and who have already been enjoying e-books, will be willing to pay a premium for a product they don’t really want?   Or that, by making e-books less attractive for consumers, they will simply forget about them and return to buying big, heavy hardcover books?

The ground around media companies is definitely shifting.  The environment is ripe for innovation.  Some will survive.  Some will not.  But I think the ones that will thrive will be the ones that innovate.  I just haven’t seen any shining examples of innovation from the incumbents lately.

What do you think?  Am I glossing over any innovations from the big media companies?

Marks & Spencer just opened a store on Nanjing Xi Lu, replacing a Muji. Both are established brands in their home country (UK and Japan) and both manufacture and package their own products. Both have a similar product approach in terms of keeping things simple but are different in their design approach. Marks & Spencer is not exactly an exciting retail experience and Muji has far better product design and presentation from functionality to aesthetics. Muji is not doing that well here, as it requires a level of sophistication to appreciate it whereas Marks & Spencer is basically selling British quality and this will win in the short term.

Distribution has always been the greatest hurdle for retailers. The opening of the wholesale sector should lead to major improvements in the distribution environment, but there is a big gap. Strategies that successful foreign enterprises have employed to overcome distribution barriers include developing their infrastructures or partnering with the locals, and both has unique challenges.

In 10 years, its retail sector has been transformed from a simple and inefficient distribution system to a much more complex and highly competitive market-oriented economy. The new retail economy in many ways resembles the contemporary retail economy in the US. It is also exhibiting significant differences with Chinese characteristics but I think eventually it will move towards a different direction. Shanghai and the rest of China is currently suffering from some kind of “Brand Fatigue” as consumers are slowly becoming more sophisticated. The trust and prestige issues carry very different meaning here in China. We are still 5-10 years away from a more predictable consumer behavior and the market evolves.

The ultimate innovation challenge comes to America’s doorstep. It’s knocking, banging, kicking and screaming. Someone give that kid a lollipop and get to work.

But there’s so much to do!

Hmmmm…

• the economic crisis has destroyed banks, jobs, academic endowments, homes and more;
• there’s massive (and growing) federal debt;
• the education system is painfully failing (19th in the UN’s 2008 Education Index just below Lithuania);
• military spending is outrageous (more than $700 billion annually, about 50% of worldwide expenditure);
• the Social Security program is massively criticized (currently the most expensive government program in the entire world);
• the penal system puts 1 in every 18 men in the US behind bars or under surveillance (the highest incarceration rate in the world, about 1 in 30 or ~7.3 million adults are in prison, on parole or on probation);
• and let’s not forget about the impending doom of climate change that is inevitable at the current rate (or lack) of attention.

Wow. Just writing all that was seriously depressing. There’s a lot more of course, such as privacy, significant issues at the Pentagon, corruption in agriculture and gay rights, but I’ll stop here because it’s almost impossible to be exhaustive and frankly it’s a lot to stomach, even for a Canadian. What’s worse is that I haven’t even gotten to healthcare yet. While all of the problems noted above are big (astronomical?) challenges, healthcare is everything.

Last week, Obama held a “town hall-style” event to discuss and address critical healthcare issues. While I’m not a big fan of such functions, I know that they can serve important purposes. I usually object to the ruse, assuming that nearly every detail was planned and designed only to simulate the appearance of impromptu discourse. But it did not bother me this time. The reasons are two-fold: first, healthcare is such a serious topic right now for the US (and a growing fascination of mine), that I’ll accept anything to help the medicine go down (pun intended). Second, I agreed with a lot (not all) of what Obama had to say. Much of it was aligned with progressive thinking on the issues, borrowing ideas from many leading thinkers, both foreign and domestic. A lot of things were said, and overall his perspectives amounted to value-based improvements in healthcare through strategic reinvestment and innovative restructuring. Will it work? Time will tell. It’s massively complicated. But I liked that he is asking new questions and approaching the problems with innovative and integrative solutions. I like that Obama is making healthcare the centerpiece of his domestic agenda. Mr. Change needs to sprinkle some change-dust over the country right now as it braces for impact. Long overdue, “healthcare reform” ought to be relabeled nationwide healthcare rethink.

Without your health, everything fades and becomes somewhat insignificant. Just think of one of the issues noted above, and then consider it in light of a cancerous tumor, heart or Alzheimer’s disease. Sorry to be crude, but it would be tough to buy stocks online, play with your children, grill a hamburger or steer a Ford F250 pickup truck if you can’t lift your arms.

Take care, healthcare!

US healthcare is in shambles. About 50 million people don’t have insurance, which is an embarrassing statistic for such a wealthy country. Unless you’re helpless, a child, or above 65, there’s really nothing you can do but get insurance at an average of 18% of your income. And if you think that’s bad now, just wait a bit. Some estimates predict that 1 in 3 of the next generation of Americans will develop early onset diabetes. That’s 1 in 3. And don’t forget about the baby boom generation of 76 million people born between 1946 and 1964. They are quickly approaching their golden age and will make current socio-economic difficulties seem relatively trivial. The scale of operations that will be required to accommodate their healthcare needs is nothing like what the US has now, and the boomers have just begun retiring. We’ll see how things result thirty years from now. Be sure to read (or upload to your brain) my thoughts on this issue then!

The problems with healthcare are multi-dimensional. Costs are rising, everywhere; files are often poorly maintained; preventative behaviors are barely supported and often countered by adjacent industries; many reports show that pharmaceutical companies spend far more on marketing than they do on research and development; physicians endure malpractice lawsuits at a troubling rate; patients hesitate to get checkups and depend more on the advice of friends than their doctors. These are just brief examples of many pains in the industry. Serious action needs to be taken within all divisions of the US healthcare ecosystem to not only remedy today’s troubles but to properly anticipate what lies ahead. Practitioners, insurance and pharmaceutical companies, public health bodies, patients and the FDA all have work to do. It’s time to step up.

Culture correction: a return to value-based investment

We’re not doing anyone a favor by mincing words. Without clear and accurate language, we will have trouble making progress at our true potential rate (whatever that is). What I’m driving at, is that real healthcare is everyone’s business and is integrated into every aspect of life. The US needs to deploy multifaceted resources to support the rethinking of healthcare. It’s not just something for the politicians to talk about, or insurance companies to sell. healthcare is something to be discussed with children and the elderly alike. It’s something to teach in school, where the insights of prevention and early detection – the golden bullets of treatment – can be instilled in young Americans. Healthcare requires sensitivity training for all, not just industry-related practitioners. It is complex and involves a diverse cast of characters that serve critical roles in an evolving ecosystem.

Some people say that creating real change requires a paradigm shift within a generation of conscious, aware and determined individuals. By facilitating positive and productive discussions of healthcare throughout society, people will be better equipped with the energy and resources required to make the impacts that are so badly needed. Innovation will be required around products, services, business models and organizational structures, and someone’s got to do it.

So Adam, a lot of stuff on this topic is being spoken about, what’s wrong with that? Well dear reader, we often forget the real end-game, so to speak, of healthcare: patient outcomes. This isn’t spoken of enough. This is the notion of real value, as Obama correctly alluded to in his event last week. He spoke of many modern ideas that I heard Michael Porter describe last June at Rotman (the University of Toronto’s MBA school).

For those who don’t know, Porter is a famous business strategist who co-founded Monitor Group, teaches at Harvard Business School and contributed the significant “five forces” model used by academic (and professional) institutions all over the world, among many other notable insights. In his talk, he explained that there is not enough focus on real value when it comes to healthcare. There’s a lot of talk about lowering costs, central patient indices, and universal coverage. However, it is rare that the question is framed properly, taking aim at what the true goal ought to be: improving patient outcomes per dollars spent. This is real value. This is a real goal to strive for. Would we permit (even welcome) higher costs if cures were reliably effective and lasting? Probably. To be distracted by other issues and not focus on illness prevention, reduction, treatment effectiveness and quality is to make a huge mistake for everyone. Twenty-first century thinking about healthcare in the America ought to begin with asking the right questions.

Is that your final question?

Here are a few very wrong questions, in my opinion, as put forth by Karen Tumulty for Time magazine in her article “The Five Health-Care Dilemmas”. (I picked three.) These questions illustrate the misplaced attention that exists on this topic in the US today. (And I’m not going to say anything about her misuse of the word “dilemma”, because life is short and I have to pick my battles.)

“Will there be a big, new government system?”

Oh no! Run for your lives! It’s the big bad government wanting to give you an affordable alternative to private insurance coverage! Ruuuuun! Just the way her question is phrased makes me cringe. This is a great example of a wrong question. It focuses on partisan nonsense that does not address or call attention to the real issues. Here’s my version: Can government-run systems improve the value of healthcare for Americans? Again, value being patient outcomes per dollars spent. Now that’s a real question. I’d like to see that kind of question be asked in Time magazine instead of one that instantly evokes chatter of socialist motives and such.

“How can a nation already deeply in debt afford healthcare reform too?”

Here’s my revised question: How can a nation already deeply in debt not afford healthcare reform? A 2006 article in the Health Affairs journal reports that from 2007 to 2017, total annual US spending on healthcare will grow an average of 6.7%, insurance costs are rising faster than wages or inflation, and about half of bankruptcy filers in the United States cited medical causes in 2001. Healthcare reform ought to lead to lower costs in the long run. The goal is to invest more soundly, more thoughtfully, into better technologies and better structured systems. Rethink the question.

“How will we bring down costs?”

Ouch. I knew this one was coming. There’s no point trying to lower the cost of healthcare that isn’t effective in the first place. I don’t have just one way of rethinking this question, I have several other questions: Do the experts even know which costs to bring down? Why are the costs so high in the first place, and are the reasons valid? Are public expectations of real costs skewed by lack of correct information? Is the current system designed to best meet actual contemporary needs? If a bit more was spent to create more positive patient outcomes, would that lower costs in the long term? Similarly, would benefits be earned in the long run by compensating practitioners based on actual outcomes instead of the quantity of prescriptions filled or patients seen in a week? Why are the administrative costs of private insurance companies so much higher than those of Medicare as a percentage of expenditure if government is so inefficient? Any one of these questions would do. I could go on for hours, but you’ve come far enough. And I thank you for that.

If there’s one thing that I know for certain, it’s that I don’t have all the answers, nor all the questions on this topic. If there are two things for certain, it’s that change is possible, necessary and inevitable, all at the same time. Innovation will erupt of this mess, although it may require considerable investment, deep risk and many mistakes along the way. Obama and the rest of the system won’t be perfect, but I like that they are asking new questions.

Why not see this issue for what it really is? Why delay in making healthcare the defining triumph of the early 21st century? The US has incredible capacity to achieve successful value-adding healthcare reform, but before that can happen, the nature of how it is thought of and discussed needs to be refined and retooled. Healthcare is a complicated issue and ought to be respected as such. Nobody in the world does it really well, but some do it better than others. Americans love competition, and I believe that with some solid rethinking, frank discussions and deliberate investment, they’ll meet and exceed the challenge.

The number 140 is doing magic.  How did they get this magic number?  There’s so much hype about Twitter and you can’t imagine how many times Twitter is mentioned when I’m watching CNN news. The news anchors are actively promoting their tweets. Is TV not enough? I’ve had probably more than a hundred requests for Tweeters but I still have not jumped onto the bandwagon. Sorry, I must have disappointed many.  I just struggle to write in less than 140 characters. I need at least 486 characters in order to say something meaningful. So, I have a problem. Think about it this way, most people who tweet are men (no formal statistic, just my guess) because most men are comfortable in communicating in 140 characters or less. We have fewer words in our vocabulary and usually say things short and sweet. On the other hand, a woman’s verbal capacity is far bigger. Women are better communicators in general and don’t usually get to the point so fast. So, the next big idea may be 300 characters Twitter for women?

Can we milk this 140 idea? I just wonder what will happen if we limit our everyday conversations to 140 characters per message? What about a social network that only allows 140 connections and your friends need to compete or stay active to remain in your network?  What about your wireless carrier sending you your month statement in 140 characters? I hate reading these monthly statements, as they can’t even design one that people can understand. How about Twitter TV? 140 seconds show? What about Twitter music? Here’s the big one…. Twitter Dating! 140 people you can meet in 140 days?

Twitter TV is real, they have teamed with Reveille productions and Brillstein Entertainment Partners to develop an unscripted series based on the site, which invites 140 character postings from members around the world. The show would harness Twitter to put players on the trail of celebrities in an interactive, competitive format. The producers call their proposed series the first to bring the immediacy of Twitter to the TV screen. I think I like the idea of Twitter Dating better.

The collective work of the Frankfort School (Theodor Adorno and Max Horkheimer and their classic 1944 piece “The Culture Industry: Enlightenment as Mass Deception”) provided the intellectual foundation for a consumer critique.. The imperatives of the production side were central, and in both consumption and production consumers were relatively powerless, even “manipulated” and victimized by advertisers. In these accounts, the powerful and active agents were corporations, not individuals. Today, we can see that this changing, with an over abundance of almost everything and the growing influences of social media and networks. Finally, the power is switching back to the mass – powered by social technologies.

The “de-legitimization” of modern liberalism, paternalist state policy and Keynesian economics continued to undercut the consumer critics. The growth of corporate power was accompanied by an ideology that posited the reverse—namely that the consumer is king and the corporation is at his or her mercy.

Even though as consumers we are all trained from the earliest ages to be consumers, and though our identities are deeply bound up with consumption choices, social networks are gradually becoming the medium that define our identities. This is the world we are living in. A TV campaign can only go so far in building a brand. In fact, it doesn’t build brands, it merely build awareness. Social technologies and media enable advertisers to cultivate brand engagement where interactions are take place. Time to reinvent advertising and if you have any of the following on your bookshelf, it’s time to put them away:

Confessions of an Advertising Man by David Ogilvy, 1963
Bill Bernbach’s Book By Bob Levenson, 1987
A Technique for Producing Ideas, by James Webb Young, 1940

Although it might be difficult to establish a clear correlation between the implementation of social standards and profit making, corporations could aim at raising their reputation by implementing social standards, in order to possibly gain profits – or at least not to make losses- from this reputation, at a later point in time.

Let’s be clear there are 2 types of CSR-CSR as marketing tool (British Petroleum) and CSR as part of a business strategy (Patagonia). BP’s marketing campaign, which is all about looking for alternative energy sources, makes the consuming public feel good about purchasing BP products. But if BP had redeployed billions of dollars into environmental investments that yielded no profits, and its stock plummeted, one would certainly expect investor to dump their stocks. And if they don’t invest in alternative energy as they promised on the adv, they will lose credibility with the public, but does it hurt their profits? Is the credibility of an oil company important?

Let’s try to challenge the idea of corporate social responsibility, while it is absolutely reasonable to expect that corporations should be “responsible” such as by creating quality products and marketing them in an ethical manner, ensuring they are trading fairly with their third world suppliers, operating in compliance with laws and regulations and treating minority shareholders and investors fairly. But the notion that the corporation should apply its assets for social purposes, rather than for the profit of its owners, the shareholders, is irresponsible. This is where the challenge is.

B-School 101, a corporation’s goal is to maximize shareholder value return. They can use solar power for the offices or sponsor local charities. But it would be irresponsible for the management of a company, whose stock these investors purchased, to deploy corporate resources for social causes. Here is a litmus test of the market for corporate social responsibility. For example, Nike could sell a pair of sneakers for $90 and another for $120 with the extra $35 goes to promote a cause or provide micro lending etc. This is using the market to decide what’s best. (The problem should that $30 goes to Nike profit instead and $5 goes to a charity?)

If consumers wanted to pay the extra $35, voting with their wallets for a cause they believe in, they could. I don’ think this works. Consumers want to contribute, but want the freedom to decide and want to make it personalize. Otherwise it is called a tax. Consumer wants to have way to decide, socialize and sometimes exhibit their causes, individually and not through corporations. They certainly do not expect the for-profit corporations in which they invest to deploy corporate assets for social causes unless it helps with business performance.

Management’s job is to invest in projects that drive growth, profitability, innovation, and anything else that drives the shareholders’ return. The question is what if a project creates a second or third bottom-lines and as a result slightly reduces ROE? It is not easy to make these calls. I think the line between using CSR as a marketing tool and as part of a business strategy will blur, companies will slowly realize it is absolutely essential for them to practice CSR in order to win the hearts and minds of customers and employees. Making a greener product won’t do the job anymore. They need to apply the 4Ps of People, Planet, Purpose and Profit as the new mantra management.

Image Source: http://www.kenston.k12.oh.us/khs/academics/business/img/harvard-business-school.jpg;

1. It’s just good business to be sustainable Reducing consumption is good for business and good for the environment. Dell is walking the talk with reductions in waste from manufacturing process and packaging. Mattel has reduced unnecessary packaging by redesigning the boxes that toys come in – no longer do they use the little plastic twist ties. Barbie and Ken are held in place by pop out cardboard slits made in the external box.

2. Customers drive requirements
Listening to consumers and solving consumer’s problems came across as the number one priority. Consumers vote for business practice with the dollars they spend. Organizations can use this basic premise to do two things. 1/ Redesign products and services that don’t meet consumer needs from a quality, price and sustainability standpoint. 2/ Look for those needs that are unmet, unarticulated and underserved and solve for x. This is where true consumer innovation takes place.

3. The reduction of risk is a key consideration in any operation – service or manufacturing
77% of Starbucks coffee is procured from free trade sources. While they spend a more for their green coffee, the reduction of supply risk is factored into the business model. Going with a cheaper source doesn’t guarantee translation to the bottom line if there is risk that the source will be cut off. Ben & Jerry’s mission of social and economic justice is well known. They have been a model for sustainability with their cow to cup philosophy. Neither company has sacrificed quality with their practices and as premium brands, can command higher price points from consumers.

Smart companies will find ways to weave sustainability into their operations – inherently lowering cost and delivering consumers economic and experiential value.