Thursday, February 7, 2008

Measuring Gates' Creative Capitalism

Last month’s World Economic Forum provided a good setting for one of Bill Gates’ parting speeches as a Microsoft employee and his personal reflections on the role of capitalism in the modern world. Speaking to global industry and political leaders, Gates urged his audience to find a way to ensure that capitalism serves the world’s poor. Labeling this vision “Creative Capitalism,” Gates advocated a twin mission for corporations: make profits and improve the lives of those who do not currently benefit from market forces. As Gates shifts to management of his $39 billion foundation, he will encourage the world’s largest businesses to design products and services that address the needs of the poor. He suggested that, when profit is not feasible, corporations should be motivated by the recognition that comes with serving the poor.

While “Creative Capitalism” may gain currency as a new buzz word, the concept is not new. Many large multinational corporations (MNCs) have tried to find the right mix of pure philanthropy, market development and business development in poor countries. HP’s e-Inclusion program, AMD’s 50x15 initiative and Cisco’s Networking Academies are (or were) pioneering programs that merge self-interest with service. With a new spotlight on this type of business approach, it is worth noting the most common reason for failure – the challenge of measuring results. While Gates stressed the value of recognition, he did not explain how business managers can measure it. To garner the support of shareholders and ensure long-term company commitment, all forms of value should be quantifiable.

Gates’ spotlight on business in new markets will surely increase public pressure on MNCs to demonstrate efforts in this area. This presents an opportunity for MNCs to apply rigorous business practices to their emerging-market effort. MNCs that are committed to becoming recognizable leaders in the developing world will ensure that programs designed to capitalize on new markets are fully incorporated into the company’s main lines of business, rather than lumped into a soft basket of corporate social responsibility (CSR) initiatives. By developing new methods for quantifying abstract values, business managers can see both the immediate and long-term value of investments in new markets. If companies react to Gates’ call by beefing up their CSR programs, they will be missing out on the lessons learned long before “Creative Capitalism” showed up at Davos.

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