Capitalism at the Crossroads: Aligning Business, Earth, and Humanity

The people of the world need new ideas if industrial development is evolve into something other than the rich getting richer, the poor getting poorer. These strategies leave nature - and by implication all of us - suffering and funding the collateral damage Stuart L. Hart challenges today's corporations with a new manifesto are being challenged to rethink their worldwide strategies. Managers will have to harmonize concerns for the planet with wealth creation. Citing case studies and practical advice, he argues unlimited opportunities for profitable business growth will find those companies that apply innovative technology and solutions to the world's social and environmental problems. The management professor at Cornell's Johnson Graduate School of Management, argues "one-size-fits-all" "command and control" approaches to production and supply are done. They need to be replaced by locally-responsive, locally-responsible and sustainable solutions based on local knowledge. Only companies with the right combination of vision, strategy, and structure will succeed in developing more inclusive forms of commerce that lift the entire human family while at the same replenishing and restoring nature. To address the world's ills, Hart argues effectively in this ambitious book, economic opportunity must be in tune with local economies. The days of being in conflict with them are over.

Professor Stuart Hart's thoughtful treatise on sustainable and accessible economic growth provides a nice complement to his mentor's similarly themed study, C. K. Prahalad's "The Fortune at the Bottom of the Pyramid", which I read myself last month. Both tackle an intriguing premise, though I think Hart is more successful in developing more realistic solutions to the world's economic ills. From Cornell's Johnson School of Management, the author goes beyond standard globalization theories by recognizing the need for companies to move beyond transparency towards "radical transactiveness", i.e., a willingness to engage and learn from people who hold fundamentally different world views. He adeptly describes how the macroeconomic shift that brings capitalism and environmentalism together mirrors his personal and not uncommon shift from distrusting capitalism to respecting its power to leverage positive social change. The "greening" revolution of the 1980s demonstrated that companies could profit by employing more environmentally benign processes, such as recycling or waste reduction. But greening, we learn, continues to be a myopic approach, and it became apparent in the last decade that reducing the environmental impact of existing business models would prove insufficient to address the imminent environmental and social crises. Hart was among those who promoted moving "beyond greening" through "creative destruction" of environmentally and economically wasteful processes, replacing them with environmentally (and economically) beneficial processes. The primary business strategy that promises to arise from the ashes of creative destruction is the BOP ("Bottom of the Pyramid") approach of serving the needs of the poor in ways that are culturally appropriate, environmentally sustainable, and profitable. One key to leveraging the BOP market strategy is for multinational corporations to become more indigenous to the culture and people they support locally. The example of Nike's World Shoe is instructive. The US sports shoe company saw clearly that China's consumers presented an enormous potential market for trainers priced at $10-$15 a pair. The company, however, made a fundamental mistake in choosing to use the same factories, business partners and channels used for its $150 Air Maxx. The result is that the bargain shoe never took off. At the same time, the fact that Nike made the attempt is laudable. With careful scrutiny and ample evidence, the author questions whether many multinationals have the skills to discern the unexpressed needs of consumers in distant, developing economies. Moreover, even if they have recognized the opportunity, these same companies need to transform their business models to be readily available to deliver the right products and services in these markets at an appropriate price. Hart's penetrating book touches upon its most controversial aspect in applying his reasoning to the problem of terrorism. He considers terrorism a s

Is the business sector more then just a entity that creates products and jobs? The author of this book believes that the corporate sector can be the catalyst for a force of global development. The author argues that there is no conflict between making the world a better place and make a profit. He does believe that business leaders need to maintain a principled commitment to civic responsibility, for if nothing else then to keep your company out of the spot light of issues that could arise from actions that are less then ethical. The author presents a book that gives the reader a scenario in which business can generate growth and satisfy social and environmental concerns. Given the 4 billion people that live in the third world, the author believes there is an unbelievably large and hungry market for all that business can bring. Business owners can reap incredible growth while sowing tremendous improvement in people's lives. It does sound like a win win situation that is believable in its scope. Overall I enjoyed the book. It was well written and informative. The author might be called an optimist to the extreme, but it is the dreamer that makes big change happen. The book is a fast read that is well worth your time.

This is an important, but flawed, book. Capitalism at the Crossroads is that rare book that compellingly describes new paradigms with powerful examples . . . but with which almost every reader will find fault in several ways. At the same time, I doubt if many readers will fail to change their viewpoints and actions at least in some ways as a result of reading and thinking about the material in this book. The book is comprised of three basic lines of inquiry. First, environmental problems that threaten us all will not be overcome by continuous improvement of reducing pollution of the sort that is being done now. You have to create entirely new business models that are built around the concept of long-term environmental sustainability. Second, most of the environmental challenges will come in the parts of the world inhabited by the poorest two-thirds of the population. To deal with their economic needs and environmental challenges, you need to solve the problems from their perspective. Third, new leadership and management paradigms are needed to change the way that organizations operate themselves that allow for the innovative sparks and direction to come from stakeholder interactions in the most difficult environments. Most authors would feel like they could retire satisfied if they proposed even one of those ideas and explained the idea well. Professor Hart should take great pleasure in having helped give birth to three such important ideas. Packaging the three ideas into one brief book, however, turns out to be an overwhelming challenge for Professor Hart. He doesn't quite carry it off. That's where the reader disagreements come from. Let me give you some examples. Professor Hart places the entire burden for solving these problems on business. Now, I agree that business can do a lot . . . and needs to do more . . . but there are other organizations that can play pioneering roles. The U.S. government has played a positive role in encouraging the development of very important technologies in the past (such as the predecessor to the Internet, funding research into making biotechnology feasible, and creating advanced materials). Individual inventors have produced remarkable breakthroughs in the past (such as Jacques Cousteau and the aqua-lung). Charities have funded research to stop dangerous diseases (The March of Dimes and polio vaccine). And so on. As raw materials and essential resources become scarcer and more expensive, most businesses will be doing a lot of thinking about how to keep operating. In some parts of India today, it's hard to get electricity for about 9 hours a day. Many Chinese plants run on their own generators. Simple initiative will create many of the solutions. This book suggests that only large multinationals can play a big role because they can afford to develop major new technologies. I would argue that large multinationals are not likely to be the largest source of new technologies . . . ca

Nobel prize winning physicist Richard Feynman coined the phrase, "There's Plenty of Room at the Bottom." He used it to describe the many possibilities and advantages of making machines nanometers in size. That phrase can also be used to describe the business opportunities put forward in this book. Hart notes that most business strategies are designed to serve only a small percentage of the people on Earth, those with large disposable incomes. The remainder is poor and largely ignored, and he refers to them as the base of the pyramid (BOP). This means that approximately four billion people are not a significant part of the business plans of most multi-national companies (MNCs). The conventional wisdom is that since their disposable income is so low, the products of the MNCs are beyond their economic capability. However, that is in many ways a false assumption, and the case studies cited in this book prove that conclusively. One simple example concerns poor people making telephone calls. On the surface, the idea that someone would spend several days' wages for a telephone call appears absurd. However, if that person must obtain the information and the only alternative is to spend more by making a trip, then that "expensive" phone call is in fact a bargain. Therefore, providing cell phone service to remote villages has proven to be profitable to the provider and beneficial to the villagers. Hart also takes the leadership of the MNCs to task for their emphasis on the short term rather than the complete long term. By complete long term, he means that corporate leaders should include social and environmental consequences when making decisions. He is also emphatic in explaining how environmentally friendly "green" technology can be profitable. Since so many aspects of an environmentally friendly policy is the elimination of waste, almost all such policies lead to lower expenses and higher profits. He also derides some of the MNC whining and disingenuousness that has occurred when the MNC was faced with complying with an environmental regulation. With four billion people in the BOP, if their incomes were to increase by even five dollars a week, the world economy would rise by over a trillion dollars, not including multiplier effects. This is where the real potential for economic growth is and I applaud Hart for writing a book containing such convincing arguments for making the attempt. It is time to end the age of exploitation and begin the time of economic opportunity for all. When poverty and a sense of helplessness make people hate you, killing them will not solve the terrorist problem. It will only create a new group that will hate you more and that has learned not to repeat the mistakes of their predecessors. Therefore, the only effective weapon in the fight against the cycle of terrorism is economic opportunity that is in tune with other societies and not in conflict with them. That is the main point of this book and Hart drives it home with a