Creative capitalism: Profits plus philanthropy

Bill Gates

Bill Gates has challenged companies to engage in "creative capitalism" that delivers profits and helps the poor. This "capitalism for the 21st Century" had to improve the lives of those who did not benefit from market forces. The Microsoft founder said capitalism only worked for those who could pay, so firms had to find out "how the power of the marketplace can help the poor".
Gates made his appeal to some of the world's most powerful business leaders at the World Economic Forum in Davos. It was his last speech in Davos while still a full-time employee of Microsoft. Gates later left the company to focus on the philanthropic work of the Bill and Melinda Gates Foundation. Gates said the world was constantly "getting a lot better, in significant ways", with life expectancy rising, and the lives of women and minorities improving.
Many improvements had been triggered by advances in the fields of science, technology and medicine. But while he was an optimist, he also was an "impatient optimist".
"The least needy see the most improvement, and the most needy see the least improvement, especially those that live on less than $1 a day," Gates said. Climate change, meanwhile, had "the biggest impact on those people who have contributed least to its causes".
Gates, who by some calculations is still the richest man in the world, said the genius of capitalism was that it made self-interest serve the broader interest of society. However, there was one drawback.
"As wealth rises, the financial incentives to help people rises, as they get poorer, it falls," and the world's poorest were losing out. Where profits were not possible, companies should be happy to receive recognition instead. "We need a creative capitalism where business and nongovernmental organisations work together to create a market system that eases the world's inequities," Gates said.
He pointed to the Red campaign, launched two years ago in Davos by rock star and anti-poverty campaigner Bono. Companies like Converse, Gap and Armani co-branded their products with the Red brand, and in return hand over a share of their profit to a fund fighting poverty and Aids in Africa. This year, Red hopes to raise $100m this way, and two new branding partners -- computer maker Dell and Microsoft announced, for every computer sold, the two companies will pay between $50 and $80 to the Red campaign.
Now, let's talk about brand strategy -- standing out amid a massive chorus of competitors is a challenge for any company in today's business climate. Want evidence? Look at any magazine, TV show or surf the internet. The number of offers and sales pitches one receives on a daily basis is simply staggering and increasingly ineffective. It's no wonder, then, why businesses are seeking new and more effective ways of increasing the influence of their brand strategy in the marketplace. A strong brand strategy can increase the awareness of a company and its offerings in such a way that establishes strong feelings and reactions and a favourable view towards the company as a whole. To create this sort of “brand awareness” in your market, it takes skilful Brand Strategy know-how. Successfully out-branding your competitors is a continuous battle for the hearts and minds of your customers.
The proposition your brand strategy makes must be very compelling, attractive and unique among competitive offerings. The proposition must also be consistently reinforced throughout all phases of an organisation, from senior executives to customer service, research and development, business development and even your business partners. What entails a comprehensive and effective “Brand Strategy process?” That's a much longer answer than what we have space for here, plus it varies from industry to industry, and there are some very basic guidelines about what makes a good Brand Strategy. Not unlikely, these guidelines are guided by social investment by corporates'.
Great brands meet or exceed consumer expectations. This has always been true. But as the marketplace has gotten more sophisticated and competitive, marketers have realised that what motivates people to buy products is far more complex today. It is not just function, efficacy, or availability. Nor is it simply price or positioning. It is a host of contacts, impressions and emotional connections, along with function, that drive consumer behaviour. We call this 360 Degree Branding. In our experience, everything that touches the consumer creates the brand: from style and design, to packaging, news coverage, delivery trucks and service experience. Everything from hearsay to history counts. To market in Bangladesh, in fact, is to enter a social contract.
What's new is that this social contract is rapidly moving beyond the promise to make good things and provide reliable service. Nowadays, customer expectations encompass other areas of corporate responsibility, such as safety and health issues, environmental practices, and labour relations. Clearly, this moves brand building beyond just typical marketing.
It entails taking responsibility for the way your entire business affects society, and understanding, in turn, that the fate of your brand can depend on people who may not use your products or services at allstakeholders as diverse as government officials and regulators, analysts and editors, NGOs and activists, community and religious leaders. Recognising that a meaningful, coherent and cost-effective corporate social responsibility (CSR) programme is a branding exercise may be entirely new in Bangladesh.
Companies are facing the challenges of adapting effectively to the changing environment in the context of globalisation and in particular in the export sector. Although Consumer Rights Movement, enforcement of government regulations and a structured view regarding the economic importance of CSR are not yet so widespread in the corporate world in Bangladesh, companies have gradually attaching more importance to CSR in the local market as well. They are increasingly aware that CSR can be of direct economic value. Companies can contribute to social and environmental objectives, through integrating CSR as a strategic investment into their core business strategy, management instruments and operations. This is an investment, not a cost, much like quality management. So, business organizations can thereby have an inclusive financial, commercial and social approach, leading to a long-term strategy minimizing risks linked to uncertainty.
We believe that branding and CSR (or Gate's creative capitalism in the other words) have been on parallel, but separate tracks in Bangladesh. There are explanations for this. Many executives in the region equate branding with selling. They are understandably, and often rightly, reluctant to trumpet good works or exploit marketing programs with social agendas. Moreover, much corporate philanthropy has traditionally been associated with company founders and generally based on the sort of close-knit relationships that characterise Bangladesh's family-controlled corporations. Considering branding and social responsibility as separate activities not only misses the point, it is missed opportunity.
Finally, unlike many advocates of corporate responsibility, Gates recognises that there are limits to what firms can accomplish on their own. In many cases, governments have a critical role to play in realigning corporate incentives. But what he overlooks is the critical role that firms themselves can and should play in realigning these public incentives. For example, arguably one of the most important ways in which developed countries can promote global economic development is by opening more of their domestic markets to imports from developing ones.
The modern concept of CSR is evolving gradually despite several hindrances. Driving forces behind this evolution is pressure from various stakeholders while slow progress is attributed to lack of good governance, absence of strong labour unions, consumer forums and above all lack of understanding by business houses, specifically non-exporting ones, that CSR is not charity but is rather an instrumental PR investment which creates strong brand positioning in the market.
Salman Haider is assistant vice president and brand manager of IFIC Bank Limited.