Do you suspect that there’s something wrong or at least severely amiss with modern capitalism, and by extension the way we outsource, think about value, construct our supply chains and do business? Can’t quite put it into words and context? Umair Haque has many thought-provoking insights for you on the subject.
Haque is Director of the Havas Media Lab and author of The New Capitalist Manifesto: Building a Disruptively Better Business. He also writes a provocative and entertaining posts for the Harvard Business Review Blog Network.
He is no anti-capitalist or Marxist. But he does not like what capitalism has become and would like to see it transformed.
“I’m a staunch believer in capitalism,” he wrote in a recent blog item. “Yet, I do think — and after reading the dismal, dreary headlines every day, not to mention checking the value of your 401K, house, job, economy, society, and future lately, I’d bet you do too — that prosperity as we know it might be lazily circling the glowing inner rim of the burbling event horizon of a massive super-galactic black hole. And when it comes to doing much about it… well, the status quo’s pretty much out of options, out of ideas, and running out of time.”
In recent years, consumers and citizens have become increasingly disgruntled with the implicit contract that governs the rights and obligations of society’s most powerful economic actors: large industrial companies, Haque says. “To many, this contract seems one-sided – it has worked well for CEOs and shareholders, but not so well for everyone else.”
Haque challenges common business beliefs that:
- Customers are end users (rather than full partners in the work of value-creation and value-sharing).
- Customers, who’ve been ignored, manipulated, locked in, duped, or lied to will nurse their anger in private (rather than join forces with fellow sufferers to publicly shame their persecutors).
- Employees are human resources first and human beings second.
- Business is about advantage, focus, differentiation, superiority, and excellence (and not about love, joy, honour, beauty, and justice).
“These beliefs are the real threat to capitalism. They are narcissistic and self-indulgent,” he says, and grow less attractive and defensible by the day.
In short, Industrial Age capitalism needs a reboot for the twenty-first century.
If that is the case – and Haque makes a very compelling argument for this in his book – then the traditional components of capitalism and prosperity also need rebooting, including outsourcing.
Actually, I think of the research and work by the University of Tennessee that has led to the Vested Outsourcing model as a paradigm shift – or reboot if you will – of the conventional outsource model for the twenty-first century. I do this for many of the same reasons that Haque outlines when he talks about the need for establishing a sustainable, constructive advantage, based on avoiding harm and establishing collaborative value cycles, rather than constantly pushing for the competitive advantage that plows through everyone in the way.
The old notions (Haque calls them “cornerstones”) – of what comprised industrial-era prosperity are no longer very relevant – and indeed are limiting and harmful, Haque writes in his book. The great question that twenty-first century economics asks is, “Must profit always require economic harm?” According to Haque, the revolutionary and necessary answer is no – what is needed is a better kind of capitalism “built for a tiny, fragile and crowded world: constructive capitalism.”
He talks about thin value vs. thick value and constructive capitalists able to turn thin value on its head and create “thick value” instead – value that matters, value that lasts, and value that multiplies.
“Think of thick value as value that’s meaningful in human terms, reflecting durable, tangible gains, which aren’t counterbalanced by the two kinds of economic harm” that shifts costs and/or borrows benefits, he says. Thick value is created when companies “generate profits by activities whose benefits accrue sustainably, authentically, and meaningfully to people, communities, society, the natural world, and future generations.”
Thick value minimises harm while maximising authentic, sustainable meaningful value, creating a long-term constructive advantage, as opposed to the more commonplace competitive advantage, in both the quantity and quality of profit.
Haque continues, “The problem with adversarial, zero-sum competitive advantage is that just because you’ve captured a larger share of profit in your industry or sector doesn’t mean that pool of profit hasn’t been earned by shifting costs or borrowing benefits to begin with: it is little guarantee that the profit you’ve earned doesn’t stem from economic harm. In fact, your profits may simply reflect thinner and thinner value that is even more artificial, unsustainable, and meaningless than ever. That’s the story of Wall Street, Detroit, and Big Food writ large. Only when a firm earns more and higher-quality profit than rivals can it be said to have a constructive advantage.”
So do any of these new-fangled, insurgent, constructive capitalists exist? Actually, yes.
“It might surprise you to hear that a new Walmart is shifting from competitive to constructive advantage, through an intense focus on taking both kinds of economic harm out of its enormous, globe-spanning commercial engine. Walmart is learning that, as the world shifts from the economics of a game reserve to those of an ark, competitive advantage is just table stakes.
“It is constructive advantage that fuels twenty-first-century outperformance.”
In addition to Wal-Mart, Nike, Apple, and Google are creating more, higher-quality value, and “leaping to the next level of advantage,” he says.
“Like a strategic superweapon, constructive advantage threatens their rivals – like Sony, Yahoo, the Gap, and Target – that survive by eking out smaller and smaller amounts of low-quality profit, with not just strategic decay, but with institutional obsolescence.”
Constructive advantage can be thought of as how free a company is of “deep debt” to people, communities, society, the natural world, or future generations. Constructive advantage says: “We don’t need to do economic harm to profit; in fact, the less economic harm we do, the more we profit.”
The challenge for us is to reimagine our role as capitalists and as outsource professionals, to leap to the next level of advantage. Or as Haque puts it, create a new generation of renegades.
In Vested parlance, the more we work together for mutual benefits, sharing value and the long-term win-win, the more we’ll profit sustainably and constructively – together. If that means we’re renegades, then so be it.
And that’s the art of being constructive and disruptive at the same time.