Difference between Good and Responsible Businessmen

You can be born to be a good businessman, but you can be only taught to be a responsible one.

Porter’s article “Creating shared value: How to reinvent capitalism – and unleash a wave of innovation and growth” argues that companies can create economic value by creating societal value, and the purpose of businesses must be redefined as creating shared value, not just profit per se. Thus, the basic difference between the CSR (Corporate Social Responsibility) concept and the concept of CSV (Creating Social Value) is that CSR is a form of redistributing incomes and CSV is a form of creating incomes through partnership with various types of stakeholders. Companies can create shared value by reconceiving products and markets, by redefining productivity in the value chain, and by enabling local cluster development.

The CSV concept is supposed to lead to significant an improvement in the global economy but, what is more important, it should be accepted by business with greater enthusiasm than CSR. According to Porter and Kramer, eventually it will reshape capitalism and new paradigm of doing business will appear. The last notion sounds really promising and it seems that finally the right solution for antagonism between business and society has been found. CSV will not require trade-offs between business and society and it will be just a perfect concept for everyone. A perfect concept in a not so perfect world…

For big international companies, which already have CSR practices, CSV will be the next logical step that involves reconceiving their business strategies. Since these corporations usually have access to expertise of the best specialists, who have the necessary knowledge and can share it with top management, CSV practices can be easily implemented by those businesses and a company may become the best in the industry, which will create spillover effects and will stimulate other companies to change their business purposes as well.

And what about small and medium enterprises (SMEs)? How this new paradigm can be accepted by SMEs in a natural way considering that they lack necessary expertise in this particular sphere? In my opinion, the process of initially creating value by businesses that can be shared with society contradicts the basic principle of traditional capitalism, which is selfish by its nature. Therefore, unless SMEs are taught to accept a new business model, there is a necessary education that will shift from traditional perception of business in a society, and the new generation of managers grow up we cannot talk about any shifts in capitalism model, because there will always be a bulk of companies operating in a traditional, “making profits and then may be redistribute them”, way.

Let’s look at an example. A person can be born with entrepreneurial talent. In this case he does not need to obtain any special education in any business specialization and still he can be one of the most successful businessmen in the district, in the city, in the country, or even in the world (Steve Jobs and Bill Gates are good examples of such people). This person can establish a small business and can be also good in finance and marketing without having any special knowledge, just because he is very perspicacious and he can feel how to better sell his goods. It is like this, because all these functions (marketing, finance etc.) serve one ultimate goal – getting income, and therefore cause-effect relationship, is obvious. Besides that, the initial intention to do business is usually selfish (we are not talking now about a concept of social entrepreneurship that has different basis) and this intention is to earn money through doing some kind of activity. However, thinking about creating value that can be shared with society is not quite natural for a person because of his selfish nature unless this person is taught and shown all the benefits that he can get from doing so, or unless there is such scarcity of resources in a community that this way of thinking becomes natural. That is why the only way to bring up a new generation of businesses operating based on new principals of new form of capitalism is to educate future management of these businesses and to do it as effectively and as quickly as it is possible. Otherwise, the second, natural scenario of developing new paradigm might be too late to implement.

Source:   Porter M., Kramer M. “Creating shared value: How to reinvent capitalism – and unleash a wave of innovation and growth” in Harvard Business Review, January-February, 2011