How to Fix Capitalism, But Not the Media

In the current issue (January-February) of the Harvard Business Review Michael Porter, the Harvard Business School professor who virtually invented competitive strategy (see The Lords of Strategy), and Mark Kramer have a written a game-changing article titled "Creating Shared Value" that HBR hawks on its cover as an elixir for "How to Fix Capitalism."

labels the article as The Big Idea: "Capitalism is under siege... Diminished trust in business is causing political leaders to set policies that sap economic growth... Business is caught in a vicious cycle... The purpose of the corporation must be redefined around creating shared value." The subtitle of Porter and Kramer's article modestly suggest that their piece is about "How to reinvent capitalism -- and unleash a wave of innovation and growth."

Here's the idea in brief:

The concept of shared value -- which focuses on the connection between societal and economic progress -- has the power to unleash the next wave of global growth.

An increasing number of companies known for their hard-nosed approach to business -- such as Google, IBM, Intel, Johnson and Johnson, Nestle, Unilever, and Wal Mart -- have begun to embark on important shared value initiatives. But our understanding of the potential of shared value is just beginning.

There are three key ways that companies can create shared value opportunities:
  • By reconceiving products and markets
  • By redefining productivity in the value chain
  • By enabling local cluster development

Every firm should look at decisions and opportunities through the lens of shared value. This will lead to new approaches that generate greater innovation and growth for companies -- and also greater benefits for society.

The key notion is that companies can generate profits by creating shared value for their consumers and their communities -- "creating economic value in a way that also creates value for society by addressing its needs and challenges. Business must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success."

Porter and Kramer advance the concept of social entrepreneurship, which is a welcome innovation, but unfortunately the authors did not include in their article a prescription for how media companies should create value for society, or to put it another way, how they should serve the public while serving their stockholders.

Radio and television stations were originally given licenses by the FCC to use a specified piece of the publicly owned electromagnetic spectrum for free in return for serving the public "interest, convenience, and necessity." This obligation was referred to as the trusteeship model. In the 1980s, fervor for deregulation brought on, in part, by the rise of unregulated cable television, the FCC used a new marketplace model that let stations mostly off the hook of serving the public interest.

With no regulations requiring that they view their outlets as a public trust, companies that owned radio and television stations had nothing but their consciences to tweak them to fulfill their obligation to serve the public while also serving their stockholder's interests. We know that conscience was thrown in the gutter and that profit, nothing but profit was the mantra.

On radio, news and public service programming disappeared with the repeal of the Fairness Doctrine in 1987, and rap and urban formats, and conservative talk programming ascended. On television news morphed into entertainment, and in some cases, as on Fox News, news became vaudeville in order to genuflect to the ratings god.

A good public service would be to send the Porter and Kramer HBR article, "Creating Shared Value," to the heads of all the major media companies, or, better yet, like in "The Godfather," to sneak a copy of it at night under the sheets of the media moguls. And when they woke up, they would read the article and then scream in terror at the disgusting idea of creating shared value, of serving the public interest, convenience, and necessity in addition to making a buck for themselves.

However, there are encouraging indications that the public, when their interests are not being served and their values not being reinforced, will not continue to support polluting, non-sustainable, intellectually shallow, and self-serving products.

According to Media Post's January 3, 2011, Research Brief, "a national Capstrat-Public Policy Polling survey found that 59% of consumers consider products' environmental sustainability to be very important in their buying decisions. And 56% noted they would pay 'a little' to 'significantly' more for a product that was environmentally friendly."

Non-commercial NPR radio stations provide excellent news that serves the public interest, convenience, and necessity with "Morning Edition" and "All Things Considered," which in many major markets beat commercial radio stations in the ratings by wide margins -- sometimes by margins over 500 percent.

Desirable, well-educated, affluent consumers are turning to socially responsible products and media more and more. And even though it will be a while before greedy media moguls follow the lead of Google, IBM, Intel, Johnson and Johnson, Nestle, Unilever, and Wal Mart and try to create shared value along with acceptable shareholder returns, eventually they will have to.

But wouldn't it be nice if they started sooner rather than later to consider the public's interests instead of their own? So maybe we should send them a copy of Porter and Kramer's HBR article "Creating Shared Value."