“The present state of affairs is really a perversion of the proper working of capitalism. It is all wrong to have millionaires before you have ceased to have slums…If we do not find some way of correcting that perversion of capitalism, our society will break down” said Spedan Lewis, the founder of the John Lewis Partnership, the UK’s largest department store group, during a talk on the BBC in the late 1950’s. These words still echo loudly today. There is much that is positive about capitalism and as Spedan Lewis also noted “Capitalism has done enormous good and suits human nature far too well to be given up as long as human nature remains the same. But the perversion has given us too unstable a society.” The industrial revolution changed everything and has brought millions of people out of poverty, delivered education on a mass level and liberated the role of women in society. But there are also perversions that distort the proper workings of capitalism: Perversions like pollution; perversions like the boss who doesn’t respect or treat customers and co-workers well; perversions like soul destroying jobs and working environments; perversions like directors getting paid huge salaries and bonuses while we still have people living in poverty; and, perversions like relentlessly driving suppliers costs down then turning a blind-eye and not caring about the ingredients in your burgers until you get caught out in “the horsemeat scandal”.
Spedan Lewis recognised these perversions and addressed them by creating the John Lewis Partnership (JLP) which he described as a experiment in democratic capitalism. It’s an experiment that has proven hugely successful. Today the John Lewis Partnership is the UK’s most successful retail group. The Partnership’s model is simple. Workers at JLP join as Partners from the get go (JLP does not have employees) and success is shared amongst Partners , suppliers and even customers.
The Partnership model represents the roots of a new form of capitalism that Harvard Business School and strategy guru Prof Michael Porter calls Creating Shared Value (video). The idea of doing business in a manner that benefits society as well as making profits is taking hold and as Spedan Lewis said it’s an idea that “makes work something to live for as well as something to live by. Here may be the new source of working energy of which our country is in such grave need.”
Five reasons why addressing the “perversions of capitalism” will give you a competitive advantage
In fact we will go as far as to say that if your business advertently or inadvertently attempts to build ‘advantage’ based on perversions (many of these perversions are attractive options as cost and performance pressures mount) you will go out of business. Here are five reasons why:
1) The Internet and Social Media now make it impossible for businesses to hide. Those leaders who build short-term profits at the expense of the societies and communities around them will be found wanting. The horse meat scandal is a great example.
2) The “war for talent” is being won by ethically minded and value creation companies. There is a new generation of Gen Y talent who want to be part of the solution not the problem. To attract them you need to be creating not extracting value.
3) Employees / Partners are more motivated to deliver extra value. The recognise that they are part of something bigger and the contributions they make to society make a real difference.
4) New business models and mindsets are emerging. Leaders are discovering they can make lots of money from addressing and finding solutions for the perversions mentioned above. IBM’s smarter planet initiative seeks to address some of the world’s greatest problems by finding solutions to things like pollution, congestion and energy thereby delivering great benefits to society, oh and they make a lot of profit too. Nothing wrong with that.
5) When delivered with transparency and authenticity building your business around delivering benefits to society first will reap positive returns plus loyalty and goodwill far in excess of any marketing or sales campaign. It will cost you less to as word of mouth takes off across social media networks. The key word is authenticity, it’s what makes sharing value so much more powerful than a bolt on CSR strategy.