Could China lead in developing the Shared Value Economy?

Posted: October 17th, 2011 | Author: Kevin Lee | Filed under: Kev's Thoughts On... | Tags: Buy42.com, China Youthology, Collaborative Consumption, Comparative Advantage, Creating Shared Value, Fast Company (magazine), Harvard Business Review, Harvard Business School, Harvard University, Isaac Mao, Michael Porter, Nike China, Non-governmental organization, Open Youthology, Rachel Botsman, Shared Value Consumption, Shared Value Economy, Sharism, TED | 1 Comment »

Photo Credit: itsallaboutimagination.com

In the past year, I’ve met with scores of new people and talked about how the research & consulting company I help lead, China Youthology, has also launched a non-profit platform to directly engage youth called Open Youthology. The most common response I get is “Are you an NGO?”

It puzzled me why so many people couldn’t see the logic: investing directly in what’s good for the community, will secure what’s good for business. I felt a little anxious; why were we the only ones doing this? Are we totally wrong? How come there wasn’t anything to support what we knew in our gut was right?

Then in January 2011, validation came. Harvard Business Review started the year publishing a seminal article titled “Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth”. Here is a heavy paraphrase of the top-line ideas:

The concept of Shared Value recognizes that societal needs, not just conventional economic needs, define markets. True long-term, sustainable, and competitive economic value is reaped when business aligns with societal needs.  Therefore the purpose of Capitalism and the corporation must be redefined as creating shared value, not just profit per se. A narrow concept of capitalism has prevented business from harnessing its full potential to meet society’s broader challenges, but by broadening our perspective and adopting a Shared Value mindset, we recognize that the competitiveness of a company and the health of the communities around it are closely intertwined.  A business needs a successful community, not only to create demand for its products but also to provide critical public assets and a supportive environment.

The article laid out paragraph by paragraph, with numerous supporting case examples, everything my partners and I believed and are trying to build at China Youthology. I looked to see who had authored such amazing research: Mark R. Kramer, senior fellow at Harvard’s Kennedy School of Government, and Michael E. Porter, Harvard Business School professor, and one of the greatest business thinkers of our generation.

Read the HBR article if you haven’t already, or take a quick first glance by watching this talk by Michael E. Porter about “Creating Shared Value”.

This article reaffirmed to us that building Open Youthology was not wrong, we were just early.

 

In fact, the concept of Shared Value isn’t that new. Porter’ Shared Value Creation codified the business’ new role in a Shared Economy, but the other half of this equation is Shared Value Consumption, which is better known as Collaborative Consumption. Collaborative consumption is based on the concept that access to goods and skills is more important than ownership of them.[i]  People are building collaborative consumption economic models based on sharing, swapping, bartering, trading or renting access to products as opposed to ownership.[ii]

Fast Company thoroughly explains and showcases the world of Shared Value Consumption in an April 2011 article, “The Sharing Economy”. And you can watch Rachel Botsman give a paradigm-shifting TEDtalk titled “The Case for Collaborative Consumption” during the May 2010 TEDxSydney conference.

 

We must enlarge our purpose for creation to help us discover what really needs our attention. And we must enlarge our definition of consumption so that what we already have can best serve the most of society’s needs.

I believe that Shared Value is the next frontier of Globalization and the true motive behind Free Trade.

Free Trade is built on the law of Comparative Advantage: everyone benefits when everyone can offer what they do best and most efficiently.

Shared Value Creation and Consumption is taking this one step further: We now recognize that by ignoring externalities, especially negative externalities, we are in fact ignoring or even building barriers to other forms of value creation that in the end would help the entire societal ecosystem.

The Shared Value Economy is shifting us away from only thinking about assets, capital and traded goods to repositioning Capitalism for what the law of Comparative Advantage originally intended: the holistic betterment of society.

These concepts of Shared Value Creation and Shared Value Consumption are currently early adopter trends, enjoying niche acceptance and having their first initial success cases. But what will allow the Shared Value Economy to gain mass adoption, and benefit an entire society?

Looking at the examples from the rise of past major societal systems – Capitalism, Communism, Feudalism, Imperialism, etc. – we know it takes the right generation of people with fitting cultural traits to collectively buy-in and believe the new model works and must be realized. So will there be a generation that culturally fits to truly push mass adoption of a Shared Value Economy?

It is not a coincidence that it is this current generation that birthed the genesis of the Shared Value concept. The rise of Participatory culture in social media, Web 2.0, Open Source, mobile networks, is teaching us that the whole is greater than the sum of its parts. An entire global generation is now raised with this experience and truth, and we are starting to want it enacted in the other areas of society, from commerce to government to family.

But wanting it and having mass adoption are two separate things.  It still takes the right generation with the right cultural traits and the right environmental circumstances to really embrace the concept and adopt it systemically.

 

Michael E. Porter believes that this generational tipping point may come from places at a disadvantage in the current capitalist system. From the HBR ‘Creating Shared Value’ article:

“Equal or greater opportunities arise from serving disadvantaged communities and developing countries. Though societal needs are even more pressing there, these communities have not been recognized as viable markets. Today attention is riveted on India, China and increasingly Brazil, which offer firms the prospect of reaching billions of new customers at the bottom of the pyramid… As capitalism begins to work in poorer communities, new opportunities for economic development and social progress increase exponentially.”

This and next generation of China’s youth may be the pivotal group the Shared Value Economy is looking for. Here’s why:

1)   Chinese youth are already in-step with the newest global ideas.

Participatory culture from the Internet, social media, and mobile has been the experience of Chinese youth, similar to those in other countries. New concepts such as Shared Value not only have a receptive audience with Chinese youth, they are actively advocated and spread.  Isaac Mao, one of China’s earliest bloggers, leads Sharism.org in China, an organization dedicated to educating and advocating the philosophy and practice of Sharism. “The more you give, the more you get, the more you share, the more you’re shared”. Frequent meetings and conferences are held in Beijing and Shanghai, attended by some of the top thought-leaders and internet influencers in China.

Other than the Internet & Social Media, Youth growing up in China have few other social spaces to call their own. So Participatory culture and derived concepts have become important for them to cling to, as it makes up a larger piece of their generational identity.

2) Hyper growth means less entrenched traditional norms.

Chinese youth have only known fast and radical change. New is normal.  Therefore Chinese Youth are seeking new meaning in all aspects of their life; the meanings of self-identity, of being an individual, of being a society. This extends to re-examining old ideas that older generations hold so dear. Chinese youth are less resistant, and more willing to re-define the meanings of ‘business’, ‘industry’, and ‘capitalism’. Unlike other developed societies where the definitions of these concepts are treated as sacred and entrenched at an early age, in China these terms are newer, and much greyer. Other developed capitalist countries will take longer to extricate themselves from what they know and dare to reconsider the validity. China’s youth do not have that problem. They are re-defining traditional capitalism right now.

3) China’s next generation cannot keep up with traditional consumption.

This is one of the most important drivers for China’s potential leadership in Shared Value. Young people’s job and income prospects are far worse in China than in many other developed countries, while competition is several times greater. Even the hopes of achieving middle class consumption levels are a real struggle in China. A young person would need to take out a 70-80 year mortgage to buy a small apartment in one of China’s major cities.  The traditional expectations of a consumption economy are not possible in China’s reality. Chinese youth are driven towards different solutions to survive and flourish. Shared Value can fit this need.

4) First chances for creation, making new rules

If we had the first 3 reasons but a completely restrictive government and market, there would be no chance for this generation of China’s youth to champion Shared Value. Luckily this is not the case. China’s emerging marketized economy means there is room for new Firsts in everything. Few legacy systems or processes means entrepreneurs and organizations have the chance now to re-structure the market and industries to newer business concepts. In addition, few legacy ecosystems and competencies mean entrepreneurs and organizations must develop new clusters to create markets and pool resources to gather strength enough to build something of value. This is Shared Value in action.

 

We already see Shared Value Consumption taking root in China.

Swap shops are opening and swap markets are being organized by normal members of the community. Chinese youth love the feeling of surprise they get from thinking they can turn old, under-used items into something useful they need – all without spending more money.

Buy42.com is a new website and service that asks people to donate their second-hand clothes. The people at Buy42 then mix and match the donated clothes to create fashionable vintage or alternative, edgy ensembles to be resold. This provides a few important societal values: 1) educates & leads a larger mass population about vintage and alternative fashion styles 2) makes it easy for them to buy whole outfits at low prices 3) does it all using existing products without new manufacturing.

Buy42.com now has a fast-growing following on Sina Weibo, China’s Twitter.  It has set up dedicated channels for the clothes donated by leading indie designers and influential arty-youth.  Buy42 only takes a percentage of the money made from the resale of clothes to run the website and staff the company; the rest of the income is donated to charity for China’s poor.

 

Shared Value Creation in China is still in its infancy, but companies large and small are finding numerous fertile opportunities to align business value chains with society. One important role companies can play for this Chinese generation is creating Shared Value in culture.

Nike China invests in underground street-ball tournaments, sponsoring local rap artists to write street-ball anthems, and even designing and freely giving away customized street-ball Nike products. Nike understands that directly investing in a strong street-ball culture builds Nike’s future China market.

China Youthology also strives to lead by example in Shared Value Creation.

Open Youthology, a platform offering youth free inspirational conferences, equipping community research, and funding for innovative new cultural assets, is China Youthology’s current strategy for Shared Value Creation.  Developing China’s youth in cultural creativity, the courage to explore, and critical questioning, we are enlarging and strengthening our own market.

By helping Chinese youth grow as bright, inquisitive minds, we benefit from a larger and stronger pool of young researcher talent that we can hire. We also benefit from deeper acceptance into youth subculture communities because of the added credibility and legitimacy gained from our youth engagement. This benefits our research insights as we can dive deeper than normal researchers, into the lives of Chinese youth. We then in turn offer better research to our clients, who keep us profitable so we can continue investing in youth engagement and building China’s youth communities.

Through this Shared Value business model, we not only create a competitive advantage for our business and ensure greater market sustainability, but more importantly, Shared Value enables the leaders of tomorrow’s China a greater youth experience and more positive life inspiration.

Perhaps Shared Value Creation as a business model came quicker and more naturally for us because China Youthology is so immersed in Chinese youth’s mindset and culture – or because we are Chinese youth ourselves. But as we see other young entrepreneurs building Shared Value Creation business models, we think we’re only at the beginning, with the potential to bring the Shared Value Economy into greater mass adoption.

Someday when I introduce Open Youthology, instead of a confused responding question about maximizing profits, I hope I get a response of illumination: “ah! You’re creating Shared Value!”

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Implications for China’s Growing Group of Single Men

Posted: May 10th, 2011 | Author: Kevin Lee | Filed under: Kev's Thoughts On... | Tags: China, China Marriage, demographics, Foreign Affairs, gender imbalance, marriage, One Child Policy, pension, social welfare | 5 Comments »

(photo reference)

In the Nov/Dec 2010 Issue of Foreign Affairs Magazine, there is a fantastic article entitled “The Demographic Future” by Nicholas Eberstadt, where he introduces what the world of 2030 will look like from a demographic standpoint. As he explains:

“It is already possible to draw a reasonably reliable profile of the world’s population in 2030. This is, of course, because the overwhelming majority of those who will inhabit the world 20 years from now are already alive. As a result, one can make some fairly confident estimates of important demographic trends, including manpower availability, the growth in the number of senior citizens, and the resulting support burden on workers.”

Mr. Eberstadt spends a portion of his essay on China’s future situation, and he paints an outlook most people familiar with China’s demographic trends have known for some time: a doubling of the number of senior citizens, a shrinking of the younger working class, and rudimentary social welfare and pension systems that incapable of coping with the massive imbalance.

This coming reality is shared by the US and all developed nations, except China’s is pushed to the extremes because of its much larger population, much poorer per capita income, much lower education levels, and a more ill-equipped pension system.

Yet, for all these colossal national challenges, Eberstadt’s essay adds one more demographic trend unique to China that will have significant social and cultural implications:

“…China will face a growing number of young men who will never marry due to the country’s one-child policy, which has resulted in a reported birth ratio of almost 120 boys for every 100 girls…By 2030, projections suggest that more than 25% of Chinese men in their late 30s will never have married. The coming marriage squeeze will likely be even more acute in the Chinese countryside, since the poor, uneducated, and rural population will be more likely to lose out in the competition for brides.”

Can you even begin to comprehend living in a society where 1 in every 4 adult men you meet will have never married, and not by choice? How could this change the social and cultural dynamics of China?

Here are some ideas to get you pondering:

Men Marrying Younger Women

If a man cannot find a woman to marry in his peer group, perhaps he will find greater opportunity to marry a girl of a younger generation. By then, perhaps this man will have saved a little more money and may be desirable enough for a younger woman (and that young woman’s family) to consider. In fact, this is already a part of China’s reality today. It is quite common to meet Chinese couples where the man is 10, 20 or 30 years older than his wife. Chinese men are already putting off marriage until they can properly afford to provide for a wife and family. Chinese pragmatism and a continued income-imbalance based on gender play roles here. Perhaps the demographics of 2030 will show this trend to strengthen and become even more commonplace in the population instead of shrinking.

Sexuality in Question

There is great support on both sides of the argument as to whether Homosexuality is a genetic or social outcome. However, if you are persuaded that Homosexuality is in part influenced by social factors, then it is worthwhile to explore what impact such a large population of unmarried men might have on the issue of sexual orientation. There is already a thriving LGBT community and subculture in China, but as ‘coming out’ continues to find acceptance and support in the younger generations, will this significant gender imbalance have any effect on the perspective of the LGBT community in the China’s future mainstream consciousness?

Anger and Frustration

The prospect of never finding a life partner can be one of the greatest fears in a person’s life. In a culture like China’s, where the mainstream societal expectation continues to put heavy emphasis on progeny, family network strength, and family unit establishment as a benefit to status-building, for these one in four adult Chinese males, being single adds extra dimensions of undesirability. Deep personal anger and frustrations must inevitably be a byproduct of these societal pressures.

If these single men will be found predominantly in a single demographic – namely rural, poor and uneducated men – what we might see is the emergence of a distinct sub-group of people, or a new class segregation. An entire class of potentially angry, frustrated, relatively poor and uneducated single men can mean serious threats to societal stability, if this group builds a class identity that feels antagonized by society as a whole.  China’s history is full of examples when a group lashes out in defiance and/or violence. This potential new class of single, frustrated men will number in the tens of millions in 2030.

Resilience of Chinese Endurance

There are also a number of examples in history of the Chinese (and other Asian cultures) enduring harsh, distressed, unfair circumstances for generations. It speaks to the resilience and strength of Chinese culture in helping the particular afflicted group align its interests with the general collective society, enabling them to live out their lives enduring the pains of their life situation.

Perhaps this group of single men will not affect anything socially or culturally, but instead stay silent and endure their circumstance as other groups of Chinese have done in the past. For this to happen though will depend on the state and strength of China’s collective culture in the coming 20 years.

(Photo Reference)

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The Chinese government has been aware of these demographic trends for some time now. They have known, likely before the rest of the world did, that China’s fertility rate fell below the minimum population-replacement fertility rate (2.1 children per family) more than two decades ago.  So why hasn’t the government done anything if it can see the problems that may lie waiting ahead?

The more immediate challenges China faces must be addressed first. Enacting and maintaining the one-child policy alleviated growing pressures on agriculture and natural resources to give China a chance to shift industries and redirect capital into transforming China into an industrial nation and then a privatized economy. Without first accomplishing the short-term goals, China will never be in a position with the right resources to solve any longer-term issues.

Second, having a unified, single-minded governing body and a mass society that generally trusts and believes in the decisions of its government have its unique advantages. One of those advantages is the ability to enact sweeping and often extreme changes very quickly.  The Chinese government thirty years ago asked a nation to limit child bearing to one per family. It is not inconceivable that the same government can ask this same nation thirty years later to double its children – for the betterment of the society.

(Photo Reference)

While the official government rhetoric until now has been no changes in the One Child Policy, we are starting to see experimentation in a few selected demographics, and the creation of small policy loop-holes that are allowing more Chinese families to legally have more than one child. A good friend of mine who was a former UN officer working on the issue of China’s birth and fertility concurs with the expectation that China will sooner rather than later reverse its stance on the one-child policy and push some new form of incentive to drive birthrates up.

The question is whether the incentives will be enough. One of the biggest concerns facing Chinese families today is how to afford raising one child, let alone two. As one recent article from Reuters explains, some couples who have the opportunity to have a second child still choose only to have one as the costs of living and education are so substantial.  In our own research work at China Youthology, we observe an increasing number of young post 80’s and 90’s kids who say they have no desire to have any children at all. They simply are not interested in a life with parenting responsibilities.

This could all mean for the Chinese government, that something a bit stronger than incentives may be needed in order for fertility rates to rise again. If there is any country that has the political audacity and executional strength to do something so drastic, it is China.

However, for this coming generation of frustrated, single men, any policy changes now are too little too late. This emerging reality is almost here. The only thing we can do now is develop a richer and stronger Chinese culture so they can find some relief from any feelings of alienation or frustration. New initiatives that will help cohesion of family, community, and collective social units will be integral in enabling those unable to find a life-partner to cope and have other life-meanings to pursue.

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How should Brands behave in Social Media?

Posted: April 29th, 2011 | Author: Kevin Lee | Filed under: Kev's Thoughts On... | Tags: attributes, branding, brands, digital, individuals, interaction, Marketing, participation, platforms, social media | No Comments »

A friend recently asked me a question on Facebook regarding Brands in Social Media, and I thought I”d repost it here. The question is immensely complicated and my answer is overly simplified, but for your reading pleasure, here you go.

Q: On Sina Weibo (China”s Twitter), people re-share the same post from an influential micro-blogger more than a hundred times within several minutes. But a post from Brands, fans rarely share… How can Brands generate interaction while transferring the product”s benefits?

A: First, who cares about brand attributes? Only the brand manager of that brand does. Do you as a consumer of media and products yearn to hear and learn about brand attributes or a product”s benefits? I bet the answer is no.

Social Media has been built in part to equalize and democratize interaction and relationship. Brands need to approach social media as if they are any other individual in social media. What do individuals talk about? Do they talk to their friends about their personal attributes? No. Why? Because its weird, no one cares, you”ll piss off your friends and it makes you look like you”re an arrogant narcissist.

So what do real influential individuals talk about, and what is it that other people love them for? Influential individuals talk about the topics that they are passionate about. Specifically, the issues that are important to them and to their community. Other people learn about the individual”s personality by the things that individual talks and cares about. The individual does NOT exclusively tell other people he/she is about this or that.

So Brands need to do the same. Brand attributes and values are the personality of the brand. But then, as a personality, what should the Brand care about that is going on in the real world? How does the Brand, as a real individual, participate in the real world? The continual answering, exploring, exercising these questions is how a Brand should behave in social media.

Brands that build games or entertaining platforms is ok, it allows people to participate and interact. But instead of trying to get people to engage directly with the Brand in its brand attributes, the brand should build platforms and interactions that help individuals participate in the issues that the individual (and the brand) cares about in the world.

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