Rethinking business: time for “shared value”

One of the world’s leading business thinkers says companies need to retool their approach to profit by working with society to create “shared value,” and not regarding it as a costly “externality.”

Michael Porter, the famed author of Competitive Strategy, says the business sector has become estranged from the rest of the community, even among those who are pro-business, because of its narrow approach to making profit.

He said in an interview with the BBC that “there’s a widespread view … that business today is actually profiting at the expense of social needs and communities.”

“There’s been this shorter-term view of how to create profitability, and also been this narrowing of what the responsibility of the company is.”

Companies today are trying to “persuade people to buy more, to buy things that they may not need, that may not even be good for them,” he said.

Where businesses once used to consider they had some responsibility for the welfare of the communities where they operated, they are now “trapped in a bubble” and don’t understand that these societal factors “have a profound effect on their proficiency and productivity,” Porter says.

He points to firms such as GE, Google, Intel, Johnson & Johnson and Unilever that are creating “shared value by reconceiving the intersection between society and corporate performance.”

“The purpose of the corporation must be redefined as creating shared value, not just profit per se,” Porter said in a Harvard Business Review essay he co-authored. This means recognizing that “societal needs, not just conventional economic needs, define markets.”

“It also recognizes that social harms or weaknesses frequently create internal costs for firms—such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education,” he writes.

“Food companies that traditionally concentrated on taste and quantity to drive more and more consumption are refocusing on the fundamental need for better nutrition.

“Intel and IBM are both devising ways to help utilities harness digital intelligence in order to economize on power usage. [US bank] Wells Fargo has developed a line of products and tools that help customers budget, manage credit, and pay down debt.

“Sales of GE’s Ecomagination products reached $18 billion in 2009—the size of a Fortune 150 company. GE now predicts that revenues of Ecomagination products will grow at twice the rate of total company revenues over the next five years.”

Many “so-called externalities” actually create internal costs on the firm, such as excess packaging of products and greenhouse gases, which are costly to the company as well as the environment.

“Wal-Mart, for example, was able to address both issues by reducing its packaging and rerouting its trucks to cut 100 million miles from its delivery routes in 2009, saving $200 million even as it shipped more products. Innovation in disposing of plastic used in stores has saved millions in lower disposal costs to landfills.”

Porter says businesses must take the lead in bringing business and society back together.

“The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a ‘social responsibility’ mind-set in which societal issues are at the periphery, not the core.”

Source: Green Channel

Open source status report reveals good health and profits

Over the last 15 years I have been an avid user and “developer” (actually more of a facilitator) of open source software. Having used all manner of open source software to run production systems (mainly applications running on Linux), I have participated in development communities that made open source tools to manage both free and proprietary technologies and beyond that have written extensively, evangelized and distributed millions of copies of that software.

The thing that had held my fascination during that time was the countless hours highly-skilled developers and others donated to producing software that was freely available for download and modification. I also marvel at the impact of these groups to deploy and develop applications with little, if any, financial incentive and more often than not a great sense of pride in producing high-quality applications.

2010 marked the 25th year of the Free Software Foundation, founded by Richard Stallman to promote the universal freedom to create, distribute and modify computer software. In that time the use of free software has become pervasive. I thought it might be interesting to take a look at some open source software usage statistics today. It’s truly amazing the size of the open source software community and the levels of participation in them.

  • SourceForge.net, the popular open source forge site, hosts over 260,000 projects developed by 2.7 million developers.
  • On the social coding site GitHub, 498,000 people are hosting over 1.5 million projects. The vast majority of them fall under an open source license.
  • Google’s open source Chrome web browser holds 8 to 10 percent market share of the web browser market since its release in September 2008 and is growing quickly.
  • Android has surpassed BlackBerry in overall mobile operating system marke share and over the 2010 holiday season, grew faster than Apple iOS, according to Net Applications.
  • The Firefox web browser developed by the non-profit Mozilla Foundation holds about 31 percent usage among web users.
  • According to IDC, demand for Linux servers continues to grow and represented 17.5 percent of all server revenue, up 2.6 percent from last year.
  • According to the December 2010 Netcraft web survey, the open source Apache web server holds 59.35 percent of the web server market share, followed by Microsoft with 22.22 percent, while open source Nginx and Lighttpd held 6.62 percent and .51 percent respectively with 240 million web servers queried.
  • The Fedora Linux project sees over 2 million unique visitors to its site in a given month; over 150,000 downloads; and over 25,000 active contributors of code, documentation, translations and bug submissions per month.
  • Red Hat, the world’s largest open source company, ended its fiscal Q3 in November with over$236 million, up 21% from the prior year and is on track to reach over $1 billion in revenue in 2011. It would be the first open source-focused company to break the billion dollar barrier.

So finally the name of this blog, the Fountainhead, is a reference to Ayn Rand’s novel that asserts ego is what drives human progress and that the moral ideal is an end unto itself, not the pursuit of wealth.  A fountainhead is also an abundant source; in the case of this column I hope it to be an abundant source of open source information. This holds a bit of personal irony as for the last 10 years I have been working on projects that rely heavily on open source success to make money that, depending on the day, overshadows my desire to produce “free” software.

“I don’t intend to build in order to have clients; I intend to have clients in order to build.”
Howard Roark

Source: networkworld.com