Could China lead in developing the Shared Value Economy?

Posted: October 17th, 2011 | Author: | Filed under: Kev's Thoughts On... | Tags: , , , , , , , , , , , , , , , , , , | 1 Comment »

M.-Porter-shared-value

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.

HBR Shared Value Creation

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.

HBR How to Fix Capitalism

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.

Sharism photo credit Mary Berstrom

photo credit: bergstromtrends.com

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.

Swap Shop in a popular Beijing Hutong

Swap Shop in a popular Beijing Hutong

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.

Buy42.com

 

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.

Open Youthology

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!”

China Youthology Butter Conference

Youth attending a Butter Youth Conference by Open Youthology


[i] http://www.fastcompany.com/magazine/155/the-sharing-economy.html

[ii] http://en.wikipedia.org/wiki/Collaborative_consumption

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Building a New Model for Agencies and Consultancies in China and Beyond

Posted: February 6th, 2011 | Author: | Filed under: Kev's Thoughts On... | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , | No Comments »

Reinvention is a constant that all businesses and industries go through. Ad Agencies, Media Agencies, Market Research Agencies and Management Consultancies are currently going through one such reinvention, and a dramatic one at that. These professional services help organizations interact and influence the end individual. They exist and thrive in what I call the Insight Economy.
The future for these kinds of companies are not very clear. Industry and organizational experimentation is happening in all areas. The successful new professional service will be one that accurately understands the nature and needs of the new industry environment.

Digital DisruptionSource:http://boldink.co.uk/
The Pains of an Industry:
The Digital Disruption has made interacting with the individual exponentially more complex and nuanced. The plethora of new channels not only makes reaching a segmentation more difficult, but traditional segmentations are obsolete as individualized digital experiences are creating people with multi-faceted, multi-layered and unique identity points.
Digital has lowered barriers of entry to many industries and professional competition is on the rise in all domains. Tech companies are becoming media agencies, management consultancies are becoming digital agencies, and digital agencies are becoming traditional/creative agencies.
Competition is not only rising in the professional practices, but where it actually counts too: the ability to influence. Digital has enabled each connected individual to potentially be the king of their own domain, or the multiple domains in their sphere of influence. The open stream of consciousness that now exists means the work and influence offered by professional services is even more at risk of being belittled and relegated to irrelevance.
The ever-evolving nature of Digital means everyone, including those traditionally seen as ‘experts’, has fallen perpetually behind.
And so clients have lost confidence in the ability of these professional services to provide a reliable and appropriate return on investment. If the professional service’s influence on the end individual is diminished, if they don’t even know what would influence the end individual, and if they may not even have the capacity to learn what could influence the individual, why should clients pay?
What makes matters worse is that most professional services are still organized in large, lumbering, un-adaptive institutions that derive their revenues from over-charging on services that are fast becoming obsolete themselves.

In other words,
Its chaos out there
We’ve got our backs to the wall
And we don’t know what to do

So what is the most promising and versatile business model for the agencies and consultancies in the Insight Economy?

Formation & Scale:
Military Tactical Unit
1) Be Lean & Tactical, Modular in Growth
Lets take a page out of the geopolitics strategy playbook. Traditional military units are ineffective in engaging trans-border terrorist groups, but we’ve now created tactical military cells specially equipped to handle specific needs and objectives in specific circumstances in specific locales. Professional services need to be reformed the same way. No longer can we operate with large, generalist divisions. We need to live in small cells of tactical units; each designed to be the expert on a specific purpose, in a specific environment, in a specific localization. Only then can we be flexible and focused enough to stay on top of the learning curve, and adapt to evolving situations. It’s also cost-effective. Operating a smaller group means the unit can survive at a time when the work required becomes more piecemeal while still requiring a high state of intensity.
Lean and Focused doesn”t mean alone. Like terrorist cells or elite military units, professional services need to live in fluid integrated networks that work in tandem, coordinated to achieve one objective. Different units of the same expertise should be built in different localizations to master the nuances of the diverse geographies. Professional services should drop in and out of different situations, working with different partners, and solve different problems.
It”s the only way to operate in this influentially-fractionalized environment.

2) Be Upward+Downward Scalable
Lego building blocks
Fast Company recently published a fantastic article about advertising, and in it they described a company called Co, a 5-person consultancy that can draw upon a network of 44 multi-disciplinary partner agencies in the event they take on a project more than their 5-person team can handle. In this way they can scale up and down to precisely fit the project size. In addition, they can invite the right combination of talents together that fit the project scope.
Upwards+Downwards Scalability may not be the most job secure, but its more sustainable than the status quo. Clients and the work require greater and greater customization. If you cannot offer the exact solution, a competing team will. The industry can no longer afford or tolerate redundancies. Those that expected an advertising or media job to mean a steady paycheck should wake up. The future of this industry will look a lot more like the film-production industry, where everyone lives project by project.
Such frequent scaling may pose problems for quality control, but this is the challenge of the new professional service. Creating replicable guidelines, procedures and methodologies to ensure highly integrated collaboration from Day 1 will be the mark of a successful company.

Scope:
3) Be Highly Specialized, Non-Integrated, and Positioned to Frame the Question
AdAge published an article by TB Song, Ogilvy’s Greater China Chairman that talks about the changing trends in China. Song states:

“Marketers often spend 10% of their budget to produce the average TV spot and 90% to blast it across mass media. In the coming years, budgets will look more like those of movie studios –80% for production and 20% on promotion. The stronger the content, the less one needs to spend on publicity.”

Indeed, today’s individual will only pay attention if there are nuanced, resonating, and timely personal meanings and relationships involved. But in this chaos its not only content production that will grow, the more important issue is What the content production should be, and Who it is for.
Song proposes that Ad Agency Planners will break away and form their own niche practices. I agree with Song’s forecast. Successfully answering “What content production should be and Who it is for” requires long-term, immersed specializations in categories/practices to develop the proper insights and trust. As traditional segmentations give way to tribal rituals, secrets, and micro-social interactions, the important question becomes which tribe, ritual, secret, and interaction should the organization/brand be involved with. Only a highly specialized professional service has the chance to answer this question. Specialists need to detach themselves from their present integrated service units in order to focus on particular areas and find the greatest relevant value – that”s what clients are really ready to pay for.
Tribal Immersion
Unfortunately not all specialists –and by extension agencies– are created equal. Planners are already positioned to capture high individual value because they are helping make sense of the chaos, and helping to frame the question. By the same logic specialized market researchers and management consultants may have a similar value-added.
This leaves Creatives in a particularly difficult position. In an age where one ‘Big Idea’ has a harder and harder time convincing its value and ability to resonate, Creatives are at risk of becoming a commodity. The earlier mentioned Fast Company article suggests that the way to capture higher value is for Creative Strategists to evolve from story-tellers to story-builders, meaning they curate, participate, and add to a never-ending storyline/lines in co-creation with the end individuals. This again would need to be highly specialized, as story-builders need to be adept at maintaining and innovating intricate interactions that are relevant to the cultural nuances of the particular community.
There are some services following de-integration that will be commoditized, and have already begun so. Media buying, media metrics, and to a lesser extent creative production are becoming more interchangeable and will become generally support-services, because they don’t answer the main value question “What content production should be and Who is it for”.
Those that will offer the highest value, and reap the greatest rewards, will be those professional services that can de-integrate, and be highly specialized with the ability to Frame the Question.

Value:
While the above Formation, Scale and Scope sections deal with organizing oneself for tomorrow’s industry, this Value section is about defining and defending a sustainable positioning.
4) Give Free Data-Points, Get Paid for Insights
A great blog article interviewing the founder of PSFK reveals the new nature of information value-creation, and anyone in the Business of Information –professional services, publishers, media– should pay attention. The small team at PSFK navigates through an immense amount of information and data points at a voracious speed. Acting as a media platform, they freely share and broadcast the information they come across with the public. PSFK instead gets work and makes its money consulting on concept development and trends. Their value-added is not from the selection of information they broadcast, but from linking disparate data points, synthesizing patterns into insights.
Why freely publish what you’re looking at? Shouldn’t keeping it secret give you more advantage?
Sharism PresentsSource: celinecelines
PSFK has embraced the new reality that information flows free, and the benefits gained from free broadcast outweigh the loss of potential revenue from taxing that information access. Consider why you use Twitter. What benefits come from freely tweeting and re-tweeting all those links? For one, you gain a following of people who begin to associate you as a credible source for a specific kind of information — sounds to me like the best kind of advertising you could hope for. Perhaps more importantly, you build conversations and relationships with a growing network of like-minded and equally amazing people. A network that will elevate the quality of information you consume by in turn sharing with you what they’re looking at. In this new insight economy, professional services are only as good as their information community. The traditional model of market research that ignores community immersion and commitment is dead. Give free data-points. Build your information community. Get paid for deeply nuanced insights.
5) Narrow-Casted Community Connectors
Your community is your long-term defendable competitive advantage because it is one of the most difficult assets to build and copy. Ask any Web 2.0 platform and they’ll attest to this. Communities are not just important for social media, but as we’ve just discussed, for professional services as well. Once you have immersed yourself with credibility and trust in a distinguishable community, clients won’t just want to draw on your insights from that community, they’ll want to connect to the community itself. And they’ll hire you to help them do it. This is the professional service’s next value added beyond insight. This is the real influence industry.
As a community connector, a professional service will ‘narrowcast’: strategically identifying and working with a small group of community leaders who influence the influencers. Each company will narrowcast in the community they’re immersed in. PSFK offers connection to high-level creative thinkers. Co, narrowcasts from their extensive network of media, branding, technology and other experts in North America. Victor & Spoils, another company mentioned in the Fast Company article, crowd-sources creative production from their base of operations in Boulder, Colorado. China Youthology, the company I help lead, will explore connection opportunities between passionate organizations and the China Youth community.
Being a connector can produce powerful win-win opportunities, but can only be achieved by first having credibility with the community. This credibility is rooted in deep immersion, commitment, passion and membership.
Mr.Rogers
“Won”t you be my neighbour?”

Where could we see this new model of professional service enter mainstream use?
It would have to be a place that a) Clients are willing to try new things and are thirsty for an edge b) There is less dominance by conglomerate holding companies c) There is a sufficient supply of talented specialists d) There is an entrepreneurial spirit by those in the industry e) There are growing communities of interest
I’d say that China has some challenges when it comes to growing the supply of quality talented specialists, but this problem is already on its way to solving itself as more and more talent migrates to Asia in search for new opportunities. The other hurdle for China are the clients. It is not that China’s domestic clients aren’t willing to try something new, but the unsophistication, immaturity and general lack of standards in the client-agency/consultancy relationship has in the past made progress difficult. A lot of education, hand-holding, and culture-building continues to be needed. But perhaps this is also China’s saving grace. With less legacy impeding the breaking of convention, maybe China will have an easier time embracing a new agency and consultancy model.
However, I can also see other regions being the first to champion this model. All have their weaknesses and strengths, but all are in desperate need for change, and a model — like this one — that can help solve their ills. I would also surmise that the adoption of this model may arise by industry instead of by geography. Ad agencies and Market Research agencies I would expect to be the first.

Some last thoughts:
With all this reinvention going on in agencies and consultancies, the onus is really on Clients. In the new Insight Economy marketers will not be able to rely on a one-stop-shop to answer all their questions and do all their work. It won’t be only a matter of assigning budgets and deliberating on pitches. While able to help clients frame the right questions and connect highly nuanced strategies, new agencies and consultancies will only be able to add value if the client is sophisticated enough to know what kind of professional service they need, and what kinds of value creation really matter to the organization.

If you’re finding yourself in the Insight Economy, and feel the pains of the industry, start your reinvention by first asking, What’s your specific community of connection? How do you immerse to capture the right, relevant insights and build to provide a unique, value-added professional service?

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Turning down Gates & Buffett: Philanthropy in China requires For-Profit Social Enterprises

Posted: October 3rd, 2010 | Author: | Filed under: Kev's Thoughts On... | Tags: , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

A few days ago we witnessed two momentous occasions: 1) Bill Gates and Warren Buffett took their much anticipated trip to China to encourage philanthropy among China’s super rich, and 2) Many of these Chinese super rich turned down their invitations to meet with Gates & Buffett, because of their unwillingness to give away part of their wealth and participate in philanthropy.

Media have been hotly debating what happened, and many are asking: Where is China’s philanthropist? Why are China’s super-rich so reluctant to help others? Why don’t they follow the examples led by Bill and Warren?

China is not completely devoid of rich, individual philanthropists. Jet Lee has for some years been very active in seeing his charity, the One Foundation, succeed. Guangdong province recently had one of its richest citizens, Yu Pengnian, commit all of his wealth, USD$1.2B, to charity. And there were the few who did pledge to come along side Bill and Warren during their visit. But these examples are the exceptions, not the norm. The broader implications why we do not yet see the rise of a philanthropy class/culture in China can be viewed in three driving factors: No religious precedent, no cultural precedent, and no historical precedent in China for Philanthropy.

No Religious Precedent: While religion is not the only factor to birth philanthropy, it is an effective driver of the philanthropic mindset. The most famous philanthropists in history, and indeed the forefathers of the modern (post Industrial Revolution) philanthropic model such as Andrew Carnegie, Henry Ford, and John D Rockefeller were rooted in their spiritual motivations. These pioneering philanthropists ascribed to the American philanthropic spirit, a cultural legacy from America””””s forefathers: Benjamin Franklin, Thomas Jefferson, and George Washington, Christians in the Age of Enlightenment.

China, a State that for many generations has had as its official religion Atheism, continues to be widely criticized for its lack of religious freedom. As a result of its policies, China has bred a general population that today is mainly faithless. The spiritual motivations and drivers that helped give rise to philanthropy in other nations are not present in China.

No Cultural Precedent: Even with all of China’s recent industrialization, urbanization, and modernization, China is still in an agrarian popular culture. More than half of China’s population continues to live in villages based on an agrarian economy. The other half of China’s population is mostly one generation removed from the same agrarian reality. Agricultural society is based on harvest and storage. Hoarding is a very strong cultural imprint that has lasted for many millennia. Even now with economic development, the hoarding culture — which is engrained in familial norms and passed-down by generational lessons — endures even beyond the first and second ‘moneyed’ generations. China will need at least one or two more generations of continued economic development and consistent education of its lower classes before the hoarding imprint can begin fading. Having a hoarding culture is a direct limitation to any rise of philanthropy in China.

No Historical Precedent: China’s history is based, in one perspective, on familial wealth & power via heirlooms, bequeathments and hereditary titles. China comes from an Imperial, agrarian society, where power and social status is based on familial wealth. Modern Chinese society continues to have many aspects that still emphasizes family wealth. We see this today in the continued inadequacy of China’s social welfare system, where Chinese parents still need to save all their wealth in order to pay for the education, and buy real estate later generations. Bill Gates and Warren Buffett have not been explicitly religious in their motivations for philanthropy. But they have had historical precedent from such past American philanthropists as Carnegie, Rockefeller, and Ford. China does not have philanthropic heroes in its own history.

The classic philanthropy model (the super rich who devote the rest of their lives to the effective distribution and use of their wealth to alleviate societal ills) is still a long way away for China as it needs to overcome the lack of religious, cultural and historical precedents to philanthropy that is so evident in western countries.

Luckily for us, philanthropy in China is starting to come in different shapes and sizes:

Micro-Philanthropy has potential, perhaps later:

Wokai.com, 51give.com and other micro-finance sites in China have gotten a lot of coverage lately as they are doing admirable, pioneering work. China is experiencing an increased social consciousness and activism, especially from the younger generations. However, China’s stagnant social structure and the turbulent overheated economic bubbles mean this young, socially aspirational generation does not have the economic power or wealth to ‘put their money where their mouth is’. So while Micro-Philanthropy mechanisms might be a useful model that fits with the motivations of this young socially driven class, unfortunately this group does not yet have the mass economic ability to participate even in micro-philanthropy to make it a market-changing force. What these young people can offer instead, is their time. We continue to see a rise in volunteerism in recent years. But even with volunteers, there still needs to be capital to fund and sustain any operation or project. Micro-philanthropy at this point cannot provide this.

Corporate-Philanthropy in China is currently inept:

High competition and continuing immature industry structure in China means businesses are almost completely focused on reinvestment of capital on development of their own direct competitive advantages. In addition, unlike in Western countries where advocate groups, and a socially-active older baby-boomer generation place increasing demand on corporations for social corporate responsibility, China’s public demand for such initiatives is still extremely immature and shallow. Therefore China’s corporations have little incentive to be involved with philanthropic endeavours.

NGOs & Non-Profit FDI valuable but inadequate:

Foreign direct investment into developing China’s social solutions is valuable, but a blunt tool for a complex and highly nuanced field. A local community knows best and is the first to recognize what are the most pressing social issues for that community. For money coming from outside sources, funding requirements and measurements of success may not be aligned with what is optimal and beneficial for the local community. Also, foreign funding is precarious because it is dependent on external factors such as the fluctuating enthusiasm of the foreign funding community. This risk is compounded if the projects are time-sensitive. Funding is always most aligned, most precise and has greatest potential coming from the domestic community.

With these philanthropic methods falling short, I believe the time and the environment is right for another kind of model, the For-Profit Social Enterprise.

The Case for China’s For-Profit Social Enterprise:

Social enterprises and social entrepreneurs are still buzzwords and novel concepts in most markets. But there is a clear fit and synergy for this model in China’s present context:

1) An up-and-coming generation of young, energetic, socially conscious workers/participants who have the heart for, and the time to, be involved in a socially conscious endeavour.

2) The lack of funding options from traditional philanthropic models: Individual wealth estates and corporate philanthropy

3) The need for locally-sensitive, locally-active, and locally-innovative solutions that only a private, local enterprise can offer.

4) The ability for Chinese pragmatism to shine yet again: The ability to accept a for-profit solution to social problems. Organizations can build a profit center that powers a non-for-profit objective.

Isaac Mao, a prominent China blogger and a critical voice on China’s inter-nets wrote a popular and widely re-posted article earlier this year entitled ‘Sharism(read the essay here), espousing that an open-source mindset established in a community will bring greater benefits than the protection of private information and property. Isaac posits that Sharism should be primed and applied to multiple industries to disruptively create greater value. People are buying into this ‘Sharism’ mindset, and courageous businesses can do it as well. Companies need to have faith: Investing in the community is profitable in the long-term for the business. A sharing business is an integral component and catalyst of a sharing ecosystem, an ecosystem that will eventually share back with that business.

Being socially-minded is not just profitable, but it is an emerging paradigm that may sooner or later not just be a luxury, but a necessity: each subsequent generation entering the workforce, even in China, yearns for visionary companies, companies with a larger purpose. Speaking specifically to the rising need of Chinese Youth, this new generation is seeking to go beyond monetary profit: they seek the pursuit of Truth. As Chinese youth continue to evolve in their individualities, they are looking for companies, organizations, and work environments that can support, add, and inspire their continued identity development. Visionary companies that care about more than the profit motive are built to deliver on this need.

Being a for-profit business on a social endeavour also enables two critical factors required for the China context:

1) For-profits have the benefit of trial & error. Responsible for their own money, businesses can define their own future. NGOs cannot, because they are answerable to their donors, and were sold on one original objective. They have no room to pivot. But ‘pivoting’ is exactly what is needed in a social condition like China’s, that continues to change, evolve and develop new or adapted social issues. For-profit social enterprises have the ability to adapt with the problem.

2) For-profits have the viability appropriate for a staunch pragmatic nation. While young people want to take part in social issues, they do not have the social or economic luxury to pursue such altruistic goals – often the social risks for them and their families are too great. If a for-profit company could offer them a tangible, sustainable option both financially and ideologically, you would see young people flock to that kind of organization. A for-profit social enterprise can do just that.

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In complete disclosure, the research and consulting company that I help lead, China Youthology, is pursuing exactly this course. As a For-Profit Social Enterprise, we’ve outlined our company spirit and values by placing our priorities and measures of success on social impact. We’ve aligned our for-profit business lines with Sharism for the community through a social platform that we’ve canonized as Open Youthology.

Our young, post-80’s and almost post 90’s staff have always loved our company’s DNA of self-discovery through cultural research. But they are even more empowered and captivated with our core purpose and group mission of social impact. As tweeted by one of our staff on China’s version of Twitter, Sina Weibo a few weeks ago:

“@SummerXia?Developing some anti-commercial emotion inside of me…only excited when in that part of OPEN YOUTHOLOGY and providing value to as many people as possible… Unhealthy? Shall I do something about this emerging feeling?”

Indeed, she’ll do something. She and her colleagues have gone above and beyond and will continue to do so, because they believe in what we are all about. The truth is, it is what they are all about.

Philanthropy in China today won’t come from the super-rich and follow the classic model that we’ve seen promoted by Bill Gates and Warren Buffett. The one model with real potential for substantial social impact and viable for today’s China context is the For-Profit Social Enterprise.

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