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Billion People Problems
We live in a world of big problems. 3 billion people live on less than $2.50/day. 2.5 billion do not have access to adequate sanitation. 1.6 billion have no access to electricity. 1.1 billion have inadequate access to water. Around 790 million are chronically malnourished. 121 million children have no access to education. Of course it can be difficult to wrap one’s mind around such massive problems, especially when we spend the equivalent of a two-day’s wage for close to half the world’s population on a coffee, flush our waste with the flick of a finger and shower in enough clean water to quench the thirst of 22 people.
A bit closer to home, most of us have known someone with cancer. We pass a growing number of single mothers on the street and patronize stores whose workers are unable to provide the basic necessities for their families. Does business have a role in the social problems that surround us? The type of business you run may either be improving or exacerbating the problems at hand.
The worst type of business is a destructive business. These companies create a product or service that actively causes harm to the end user or are designed to enable the end user to create harm to others. Tobacco, pornography and payday lending all fall into this category.
Value Consuming Business
The second type of business is a value consuming business. Value consuming businesses are parasitic, sucking value from some stakeholders and transferring it to others (usually shareholders or customers). Unlike destructive businesses, value consuming businesses may actually create valuable products or services. I would classify Wal-Mart as a value consuming business. While no one can deny that Wal-Mart has incredibly low prices that benefit its millions of shoppers around the world, how does it achieve those prices? Wal-Mart uses its size as the largest retailer in the world to beat its suppliers into offering “rock bottom prices.” The relationship is definitely one of David vs Goliath. While Wal-Mart is the largest private employer on earth, it has had a long history of labor disputes. Sam Walton, founder of Wal-Mart, built a model based on low wages. Walton said, “I pay low wages. I can take advantage of that. We’re going to be successful, but the basis is a very low-wage, low-benefit model of employment.” Many workers make less than the federal poverty line.
Value Creating Business
The third type of business is a value creating business. These businesses are constructive, creating value for several stakeholders. The total amount of value created depends both on the nature of the product or service and the relationships the company creates with its individual stakeholders. I would argue that a transportation business creates more inherent value than a similarly sized entertainment business, although both are valuable. Whole Foods Market is an excellent example of a value creating business. As I’ve written previously, Whole Foods is very intentional about creating win-win relationships with its customers, employees, suppliers and other stakeholders.
The final type of business is a restorative business. These businesses heal, directly addressing social issues and decay that plague our world. Medicine, insurance and recycling would all be examples of restorative business models. It’s important to note that even though a business has a product or service that is restorative in nature, greed can corrupt the business and significantly reduce the effectiveness of its healing properties. At the turn of the twentieth century, Bayer AG was a restorative business introducing acetylsalicylic acid under the trademark Aspirin. A toy company that treats its stakeholders well would be classified as a value creating company, but if that same company focused on creating toys that bring parents and children together, it would be a restorative business.
Business for Restoration
Through my experience working across the globe, I’ve had the privilege to see how business can be a powerful force for change in a world full of problems. I’ve seen first hand how an entrepreneur in Turkey can turn trash into treasure. I’ve witnessed former hackers in Brazil to use their skills to protect companies vulnerable to a new age of corporate warfare. I’ve watched an entrepreneur in India help smallholder farmers in India transition to organic cotton, more than doubling their income. I believe business can be a platform for restoration in a broken world. The best part about it, is if the company is successful at creating a scalable model, then the larger it gets, the more restoration it can bring.
What type of business do you work for? I’d love to hear about your favorite examples of restorative businesses, especially any that have achieved significant scale.
Photo Credit: Garry Knight