Capitalism at the Crossroads: Aligning Business, Earth, and Humanity (2nd Edition) (Paperback)

~ (Author), Al Gore (Foreword)
Key Phrases: fringe stakeholders, sustainable global enterprise, competitive imagination, New York, Stuart Hart, United States (more...)

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http://www.socialfunds.com/news/article.cgi/article1596.html

 

Book Review--Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems
    by William Baue

According to author Stuart Hart, sustainable global enterprise holds the key to reducing poverty, reversing environmental destruction, and even counteracting terrorism.

SocialFunds.com -- Cornell and University of North Carolina Business Professor Stuart Hart's Capitalism at the Crossroads perfectly complements University of Michigan Business Professor C. K. Prahalad's The Fortune at the Bottom of the Pyramid, perhaps even surpassing it in significance. The two professors collaborated from 1998 through 2002 on the seminal article that gave birth to the "bottom of the pyramid" (BOP) concept that Prof. Prahalad explains so eloquently in his book (see related book review). The BOP market theory holds that multinational corporations (MNCs) can simultaneously profit and help reduce global poverty by serving a market they have largely ignored until recently: the 4 billion people in the world living on less than $2 a day.

As good as Prof. Prahalad's book is, however, it leaves unanswered the question of how the BOP theory fits into the larger context of sustainability, particularly environmental sustainability. Prof. Hart's book not only answers this question, but also presents a comprehensive and compelling argument that capitalism cannot afford to ignore sustainability--indeed, that capitalism will thrive by embracing sustainability (and vice versa).

"This book takes the contrarian's view that business--more than either government or civil society--is uniquely equipped, at this point in history, to lead us toward a sustainable world in the years ahead," writes Prof. Hart. "Properly focused, the profit motive can accelerate (not inhibit) the transformation toward global sustainability, with nonprofits, governments, and multilateral agencies all playing crucial roles as collaborators."

Prof. Hart introduces the book describing how the shift in the relationship between capitalism and environmentalism from antagonistic to (sometimes) complementary forces mirrored his own 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.

However laudable the greening approach is, it became apparent in the 1990s that reducing the environmental impact of existing business models would prove insufficient to address the imminent environmental and social crises, according to Prof. Hart. He was among those who at that time promoted moving "beyond greening" through "creative destruction" of environmentally and economically wasteful processes, replacing them with environmentally (and economically) beneficial processes.

"Unlike greening, which works through the existing supply chain to effect continuous improvement in the current business system, 'beyond greening' strategies focus on emerging technologies, new markets, and unconventional partners and stakeholders," writes Prof. Hart. "Such strategies are thus disruptive to current industry structure and raise the possibility of significant repositioning, enabling new players to establish leading positions as the process of creative destruction unfolds."

The primary business strategy that promises to arise from the ashes of creative destruction is the BOP approach of serving the needs of the poor in ways that are culturally appropriate, --This text refers to the Hardcover edition.

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"Capitalism at the Crossroads is built on strong theoretical underpinnings and illustrated with many practical examples. The author offers a pioneering roadmap to responsible macroeconomics and corporate growth." -Clayton Christensen, Professor of Business Administration, Harvard Business School and author of The Innovator's Dilemma "I hope this book will be able to influence the thought processes of corporations and motivate them to adapt to forthcoming business realities for the sake of their own long-term existence. Besides business leaders, this is a thought-provoking book for the readers who are looking for solutions to capitalism's problems." -Muhammad Yunus, Founder and Managing Director, Grameen Bank, Bangladesh and 2007 Nobel Peace Prize recipient "Capitalism at the Crossroads is a practical manifesto for business in the twenty-first century. Professor Stuart L. Hart provides a succinct framework for managers to harmonize concerns for the planet with wealth creation and unambiguously demonstrates the connection between the two. This book represents a turning point in the debate about the emerging role and responsibility of business in society." -C.K. Prahalad, Ross School of Business, University of Michigan, co-author of Competing for the Future and author of The Fortune at the Bottom of the Pyramid "Stuart Hart was there at the beginning. Years ago when the term 'sustainability' had not yet reached the business schools, Stuart Hart stood as a beacon glowing in the umbrage. It is clear commerce is the engine of change, design the first signal of human intention, and global capitalism is at the crossroads. Stuart Hart is there again; this time lighting up the intersection." -William McDonough, University of Virginia, co-author of Cradle to Cradle "Professor Hart is on the leading edge of making sustainability an understandable and useful framework for building business value. This book brings together much of his insights developed over the past decade. Through case studies and practical advice, he argues powerfully that unlimited opportunities for profitable business growth will flow to those companies that bring innovative technology and solutions to bear on some of the world's most intractable social and environmental problems." -Chad Holliday, Chairman and CEO, DuPont "Capitalism at the Crossroads clearly reveals the essence of what sustainability means to today's business world. Hart's analysis that businesses must increasingly adopt a business framework based on building sustainable value speaks to the entire sustainability movement's relevance. Sustainability is more than today's competitive edge; it is tomorrow's model for success." -Don Pether, President and CEO, Dofasco Inc. "Stuart Hart has written a book full of big insights painted with bold strokes. He may make you mad. He will certainly make you think." -Jonathan Lash, President, The World Resources Institute "A must-read for every CEO--and every MBA." -John Elkington, Chairman, SustainAbility "This book provides us with a vast array of innovative and practical ideas to accelerate the transformation to global sustainability and the role businesses and corporations will have to play therein. Stuart Hart manages to contribute in an essential way to the growing intellectual capital that addresses this topic. But, beyond that, the book will also prove to be a pioneer in the literature on corporate strategy by adding this new dimension to the current thinking." -Jan Oosterveld, Professor, IESE Business School, Barcelona, Spain Member, Group Management Committee (Ret.), Royal Philips Electronics "Capitalism at the Crossroads captures a disturbing and descriptive picture of the global condition. Dr. Hart constructs a compelling new corporate business model that simultaneously merges the metric of profitability along with societal value and environmental integrity. He challenges the corporate sector to take the lead and to invoke this change so that the benefits of capitalism can be shared with the entire human community worldwide." -Mac Bridger, CEO of Tandus Group "Stuart L. Hart makes a very important contribution to the understanding of how enterprise can help save the world's environment. Crucial reading." -Hernando de Soto, President of The Institute for Liberty and Democracy and author of The Mystery of Capital "Stuart Hart's insights into the business sense of sustainability come through compellingly in Capitalism at the Crossroads. Any businessperson interested in the long view will find resonance with his wise reasoning." -Ray Anderson, Founder and Chairman, Interface, Inc. "This stimulating book documents the central role that business will play in humanity's efforts to develop a sustainable global economy. Professor Hart presents an attractive vision of opportunity for those corporations that develop the new technologies, new business models, and new mental frames that are essential to a sustainable future." -Jeffrey Lehman, Former President of Cornell University "The people of the world are in desperate need of new ideas if global industrial development is ever to result in something other than the rich getting richer and the poor getting poorer, with nature (and potentially all of us) suffering the collateral damage. Few have contributed more to meeting this need over the past decade than Stuart Hart by helping to illuminate the potential role for business and new thinking in business strategy in the journey ahead. Capitalism at the Crossroads challenges, provokes, and no doubt will stimulate many debates--which is exactly what is needed." -Peter Senge, Massachusetts Institute of Technology, Chairperson of the Society for Organizational Learning, and author of The Fifth Discipline: The Art and Practice of The Learning Organization New Foreword by Al Gore Brand-New Second Edition, Completely Revised with: *Up-to-the-minute trends and lessons learned *New and updated case studies *The latest corporate responses to climate change, energy, and terrorism Global capitalism stands at a crossroads-facing terrorism, environmental destruction, and anti-globalization backlash. Today's global companies are at a crossroads, too-searching desperately for new sources of profitable growth. Stuart L. Hart's Capitalism at the Crossroads, Second Edition is about solving both of those problems at the same time. It's about igniting new growth by creating sustainable products that solve urgent societal problems. It's about using new technology to deliver profitable solutions that reduce poverty and protect the environment. It's about becoming truly indigenous to all your markets, and avoiding the pitfalls of first-generation "greening" and "sustainability" strategies. Hart has thoroughly revised this seminal book with new case studies, trends, and lessons learned-including the latest experiences of leaders like GE and Wal-Mart. You'll find new insights from the pioneering BoP Protocol initiative, in which multinationals are incubating new businesses in income-poor communities. You'll also discover creative new ways in which corporations are responding to global warming and terrorism. More than ever, this book points the way toward a capitalism that's more inclusive, more welcome, and far more successful-for both companies and communities, worldwide. *Paths to profitable sustainability: Lessons from GE and Wal-Mart *Shattering the "trade-off" myth *New commercial strategies for serving the "base of the pyramid" *What enterprises have learned about doing business in income-poor regions *Becoming indigenous-for real, for good *Codiscovering new opportunities, cocreating new businesses with the poor *Learning from leaders: 20+ new and updated case studies *Best practices from DuPont, HP, Unilever, SC Johnson, Tata, P&G, Cemex, and more About the Author xii Acknowledgments xiii Foreword: Al Gore, Former Vice President of the U.S. xxiv Foreword: Fisk Johnson, Chairman and CEO, S. C. Johnson & Son, Inc. xxvii Prologue: Capitalism at the Crossroads xxxi PART ONE: MAPPING THE TERRAIN Chapter 1: From Obligation to Opportunity 3 Chapter 2: Worlds in Collision 31 Chapter 3: The Sustainable Value Portfolio 59 PART TWO: BEYOND GREENING Chapter 4: Creative Destruction and Sustainability 87 Chapter 5: The Great Leap Downward 111 Chapter 6: Reaching the Base of the Pyramid 139 PART THREE: BECOMING INDIGENOUS Chapter 7: Broadening the Corporate Bandwidth 169 Chapter 8: Developing Native Capability 193 Chapter 9: Toward a Sustainable Global Enterprise 223 Epilogue 249 Index 254

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Product Details

• Paperback: 304 pages
• Publisher: Wharton School Publishing; 2 edition (July 28, 2007)
• Language: English
• ISBN-10: 0136134394
• ISBN-13: 978-0136134398
• Product Dimensions: 9 x 6.1 x 0.9 inches
• Shipping Weight: 14.1 ounces (View shipping rates and policies)
• Average Customer Review: 4.7 out of 5 stars  See all reviews (21 customer reviews)
• Amazon.com Sales Rank: #59,850 in Books (See Bestsellers in Books)

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61 of 62 people found the following review helpful:

5.0 out of 5 stars The World Is Your Oyster , June 10, 2005

By	John G. Hilliard (Toronto Canada) - See all my reviews (TOP 500 REVIEWER)    (REAL NAME)

This review is from: Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems (Hardcover)

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.

31 of 32 people found the following review helpful:

5.0 out of 5 stars How to serve four billion at the base of the pyramid, April 28, 2005

By	Charles Ashbacher "([e-mail])" (Marion, Iowa United States([e-mail])) - See all my reviews (TOP 50 REVIEWER)

This review is from: Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems (Hardcover)

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 very large hammer.

25 of 25 people found the following review helpful:

5.0 out of 5 stars Sustaining Economic Growth in a World of Depleting Resources and Rampant Terrorism, September 17, 2005

By	Ed Uyeshima (San Francisco, CA USA) - See all my reviews (TOP 100 REVIEWER)    (REAL NAME)

This review is from: Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems (Hardcover)

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 symptom of the more primary underlying problem of unsustainable development culminating of course, with 9/11 when terrorists used violence to attack the symbolic epicenter of capitalism, the World Trade Center. Since violence begets violence, Hart emboldens himself to ask we look to the terrorists' target, not their tactics, to solve the problem. Reforming capitalism to create sustainable global enterprise may hold the key to eradicating the underlying problems of poverty and exploitation that breed terrorism while simultaneously reversing the looming environmental crises. It's a bold premise but one we cannot afford to ignore. This is smart, indispensable reading.