In my previous post, I made two claims:
- All companies are going to have to do more than create high utility products and services, they will also have to deliver positive social impact through their core business.
- Corporate employees can be “taught” something important about social impact by social entrepreneurs.
In this post, I’d like to discuss why I believe these claims are valid. The basis for this belief rests on shifts in: 1) the expectations that individuals and society have about the purpose of corporations (i.e., their license to operate) and 2) perhaps as a direct result of these changing expectations, the way that some corporations are beginning to view their relationship to society and their role in the economy.
In early July 2014, David Brooks, a New York Times Op-Ed columnist, wrote a piece on the sharing economy and the evolution of social trust. Brooks suggested that “…[t]here is a new trust calculus, powered by both social and economic forces. Socially, we have large numbers of people living loose unstructured lives…” By “loose, unstructured lives,” Brooks means that many more people are operating outside the confines of large institutional structures for longer periods of time.
As any outsider can attest, the view from the outside is different from the one on the inside. Add to the fact that more people are on the outside looking in, disturbances such as growing economic polarization, generalized global political unrest and the inability of governments to mount effective responses to these and other large, systemic problems. It should come as no surprise that there is growing distrust of large institutions which seem to exist solely to perpetuate their own existence and enrich a lucky few.
Much of this sourness is directed at corporations. To many people, despite all the talk about the importance of their employees, companies appear profoundly unconcerned about them. Employees are treated as just another means of production that needs to be “right-sized” from time to time. Some companies even appear to be unconcerned about customers (as any telecommunications customer can attest).
In this climate, people have come to increasingly value the ability to directly negotiate with other people which technology has facilitated at low cost. The impersonal culture of big institutions is sitting alongside what Brooks calls a “personalistic” culture of peer-to-peer relationships.
Airbnb and Uber might be the two most visible and contentious companies of the sharing economy. They are causing headaches not only for the hospitality and car service industries, but also for city governments and other regulators in their respective industries because the operating model for these companies is a decentralized network which doesn’t easily conform to the structures and processes of centralized agencies and regulatory regimes. But, these sharing economy pioneers seem to not only care about people – both customers and employees – they also “…seem inclined to compromise and play nice with city governments. They’re trying to establish reputations as good citizens…” They are changing the rules of the game and maybe even the game itself.
The emergence of a sharing economy facilitated by peer-to-peer relationships that combine technology-enabled virtual and face-to-face experiences (ultimately, you show up at the Airbnb and meet the host and other guests and you get into an Uber car and meet your driver) with a corporate ethos of being good corporate citizens is bleeding over into the traditional economy. Increasingly, even the most hidebound institutions are feeling the pinch of the “personalistic” culture.
A New Yorker article published in July 2014 tells the story of the enormous difficulties facing parents whose children are presumed to be the ONLY ones with a medical condition. But there is a story behind this story which is about the “personalistic” culture that Brooks describes and its demand that institutions deliver social impact. “One of a Kind” tells the story of how Bertrand Might’s parents, Matt and Cristina, tried to discover what was wrong with their infant son. The Mights traveled from medical institution to medical institution only to have one diagnosis after another proved false and the medical practitioners lose interest when there was nothing more they could do.
When Bertrand turned seven, a DNA sequencing study that had started two years earlier, concluded that his severe disorder was caused by an inherited genetic mutation. However, “…without additional cases, there was virtually no possibility of getting a pharmaceutical company to investigate the disorder, no chance of drug trials, no way to even persuade the F.D.A. to allow Bertrand to try off-label drugs that might be beneficial.” Unless, somehow, more patients emerged. While the medical researchers theoretically could have shared their data with other medical researchers to find these patients, there were many institutional and professional disincentives that made it unattractive for them to do so. Primary among them – not getting exclusive credit for any forthcoming discovery.
So, the Mights decided that they would take to the social network and find others with the genetic defect themselves. Matt, a professor of computing, had developed a following online among both computer programmers and in the more general online community based on a very popular post that he had written a few years earlier. He decided to harness this visibility on behalf of his son. His post, “Hunting Down My Son’s Killer,” became the top story on Reddit less than 24 hours after it was posted. It went viral and its search engine ranking climbed, making it easier to find.
Within 13 months of making the post, the Mights had identified nine more people with the same genetic mutation and medical problems as their son. But they have done even more. Working with another family whose child has the genetic disorder, they have pushed the clinicians and researchers focused on this disease to pool their knowledge and collaborate on developing a clear clinical report on the disorder. The paper has been published. One of the researchers commented on the process, “It’s a kind of shift in the scientific world that we have to recognize – that, in this day of social media, dedicated, educated, and well-informed families have the ability to make a huge impact….Gone are the days when we could just say, ‘We’re a cloistered community of researchers, and we alone know how to do this.” Gone are the days when institutions are free to serve themselves without sufficient consideration of how their core processes impact real people.
As if on cue, McKinsey recently released the results from a global survey on “Sustainability’s strategic worth.” The study results note a marked shift from two years ago when the major reasons that executives gave for engaging in sustainability (which covers environmental as well as social impact) were managing reputation risk and increasing operational efficiency through lower costs. In 2014, executives were far more likely to say that they want to somehow align their sustainability initiatives with their business goals, mission or values. Rather surprisingly, nearly 50% of the CEOs said that sustainability is one of their top 3 strategic priorities and 13% said it was their most important priority. At the same time, capturing the business value from sustainability initiatives is difficult “…because the more that companies prioritize sustainability, the more it needs to be integrated into (and even change) the core business.” Nothing quite like having a McKinsey report to support your beliefs.
In my next post, I will document how these forces – the “personalistic” culture and its demand that corporations demonstrate that they are worthy of social trust in the way that they run their businesses – is playing out in the way that the media portray corporate actions that once would have focused narrowly on the economic returns that companies deliver to their shareholders. The winds of change are blowing, becoming gusty at times.
- “The Evolution of Trust,” David Brooks, The New York Times, Op-Ed column, July 2, 2014
- “One of a Kind,” Seth Mnookin, The New Yorker, July 21, 2014
- “Sustainability’s strategic worth,” McKinsey Global Survey, Shelia Bonini and Anne-Titia Bové, McKinsey & Company, 2014.