Today we will examine the traditional business models, I call them the models of Capitalism 1.0 and 2.0, and then we will construct a new model, Capitalism 3.0. This new model can be seen to emerge from the tech sector in the 1980s. Capitalism 3.0 companies are more dynamic, more powerful and better able to deal with the complex markets and problems of the 21st and even 22nd Centuries.
What is the higher purpose of an enterprise? Great tech businesses have a purpose or mission much higher than traditional business. Traditional companies, I call Capitalism 1.0 companies, have their reason for existence being to make as much profit for the company and its shareholders as possible via the selling of often mediocre products to the mass market. Social, environmental or other considerations were rarely, if ever considered. The function of business was to make money- only. Purpose was for other sectors, such as the Not For Profit (NFP) sector.
Capitalism 1.0 = Profit + Product.
As we drew towards the end of the 20th Century, we saw the early emergence of Capitalism 2.0 in some companies. Capitalism 2.0 companies saw the importance of profit and product being loosely aligned with a higher societal or environmental purpose. However, often non financial considerations were merely given lip service. They were more seen as good for brand or marketing.
These companies liked to think of themselves as ‘good corporate citizens’ whilst actually doing very little about serious problems, such as climate change or employee exploitation. Purpose was seen as warm and fuzzy, the almighty dollar still ruled. This might be called Pretend Purpose.
Capitalism 2.0 = Profit + Product + Pretend Purpose
Capitalism 2.0 companies seemed to be successful, however things began to change in the 1980s as the computer and digital revolution began. At the same time we had the inconvenient truth of climate change, and new issues arise from globalisation. This created fertile ground for a movement towards something more meaningful, and better able to deal with global markets and complex problems.
Counter-culture strands from the 1960s bred companies like Apple and the tech companies of today. There was a reaction to the failure of Capitalism 1.0 and 2.0 in how they dealt with people, the environment and other issues.
Capitalism 3.0 companies emerged with quite a different model. These companies put purpose and people first, ahead of profit and product. Capitalism 3.0 companies found having a purpose or mission that helped the everyday person, or solved a particular social or environmental issue, made business better. Simultaneously, it led to more product sales and profits. This was a new win-win-win model.
Capitalism 3.0 companies learned, particularly through the growth of the web and social media, that global connected markets demanded more from business. They demanded a broader role and responsibility of companies. A broader role coupled with the power of innovation and technology created a watershed.
Capitalism 3.0 = Purpose + People + Product + Profit
Innovation and Tech Companies
Innovation and tech companies spawned and expanded the Capitalism 3.0 paradigm. They could uniquely harness innovation and technological capacity to better deal with broader social or environmental issues, such as climate change.
Capitalism 3.0 companies can marry risk and opportunity. Insodoing, they can break out of conventional economic binds premised on scarcity. Older Capitalism 1.0 or 2.0 companies do not have this power. So, they are likely to be left behind given the speed and force of changing global markets.
Tesla and Elon Musk’s work on the electric car and battery technology provide a good example of Capitalism 3.0. The highest purpose of their important work can be seen as helping to address climate change. Consider this, if every household, say in the next decade or so, has an electric car, plus off-grid solar PV, plus battery storage capacity, then on a world scale, just imagine the impact on CO2 emissions and other pollution.
Renewables, especially newer generation solar panels, plus battery or other storage technology, can provide the long term solution we need to address climate change. If the world, or at least developed nations, moved in this direction in a concerted way in, then tech and innovation can provide the solution to climate change we need- and in time.
Elon Musk and Tesla provide clear evidence of the power and potential of Capitalism 3.0 companies. When purpose and people are put first, then complex problems can be better solved. When purpose and people drive us and our enterprises, then better products and meaningful profits flow.
Other tech companies give us more evidence of the power of the Capitalism 3.0 model. Bill Gates and Microsoft started with the vision of ‘putting a computer on every desk’. This bold vision enabled the Information Age. It has enabled and empowered the everyday person.
Steve Jobs of Apple gave to us the marriage of artisanship and computing. Simplicity and elegance of design can empower the everyday person to create great things through digital tools. Expanded with the iPhone and the iPad, we now have this power and beauty in the palm of our hands.
Larry Page and Sergey Brin of Google turned search into a gateway to the world’s knowledge. Knowledge, ideas and information were no longer to be locked in ivory towers, they were to be shared, harnessed and again used to empower the everyday person.
Mark Zuckerberg of Facebook used social media to better connect all people in the world, and to give a new, pervasive give voice to the ordinary person. This voice empowers and unites people to make companies, governments and other institutions more accountable. For the first time, the everyday person can create the media, rather than be subject to it. Today the everyday person can create a worldwide movement through the push of a button.
Your Higher Purpose?
What is your higher purpose? What is the higher purpose of your enterprise? What social or other problem do you solve- first? How will you empower the everyday person? Notice the impact of such questions- they instil drive and passion immediately. The higher your purpose, the more important it is likely to be. Your higher purpose will motivate you, your people, your tribe, and your investors for the long term. Purpose is like gravity. Do not look to just build a business, get out and get rich. True Wealth comes from building a long term business that makes a difference. Are you brave and crazy to build a Capitalism 3.0 company? When you align Purpose, People, Profit and Product- in this order, then you are well on the road do creating something very special.
“We don’t get a chance to do that many things, and every one should be really excellent. Because this is our life. Life is brief, and then you die, you know? And we’ve all chosen to do this with our lives. So it better be damn good. It better be worth it.” – Steve Jobs.
Regards, Lee M. Spano, Creatness International CEO www.creatness.com
© Copyright Lee M. Spano, 2017 All rights reserved.