shared value

A new point of view on why (brand) nations fail

A new book comes out tomorrow entitled Why Nations Fail: The Origins of Power, Prosperity, and Poverty, by MIT professor of economics Daron Acemoglu and Harvard professor of government James A. Robinson.

In the New York Times Magazine yesterday, Adam Davidson wrote a great piece about it. I pre-ordered the book and look forward to reading, but in the meantime, the New York Times article hints at some key conclusions the authors reach. From the article:

“…the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy… when a nation’s institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help… If national institutions give even their poorest and least educated citizens some shot at improving their own lives — through property rights, a reliable judicial system or access to markets — those citizens will do what it takes to make themselves and their country richer.”

A relatively simple concept: Nations that give citizens opportunities to improve their lives—to create value for themselves—give them the incentive to create value—both for themselves and for the nation collectively.

According to the summary on the authors’ website, the book highlights examples of the theory in action around the world and throughout history, “from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa.”

So how might this theory apply to the study of how organizations can build passionate and sustainable brand communities? If we think of brands as nations, what might make them fail or see great success?

Michael Porter wrote a now-famous piece in HBR last year entitled Creating Shared Value that to me articulates the business equivalent of the principle. Here is how Wikipedia describes Porter’s concept of creating shared value:

“The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Recognizing and capitalizing on these connections between societal and economic progress has the power to unleash the next wave of global growth and to redefine capitalism.”

I think there is a strong connection here, and I would frame it as simply as this:

Brands (and nations) that exist only to extract value from their communities are, in the long run, less competitive and less sustainable than brands (and nations) that exist to create and share value with their communities.

Think about the brands you interact with on a daily basis:

– Which of them are clear value extractors (i.e. they unabashedly exist in order to extract as much money as they can)?

– Which of them are extractors in “shared-value clothing” (i.e. they hide their true selves behind a veneer of shared value)?

– Which of them truly create and share value with the communities that care about them?

If you are like me, some specific organizations immediately come to mind when you see the three categories above. Humor me for a second as I remix the quotes I shared from the New York Times article earlier, but putting them in a brand context:

“…the strength of an organization’s brand community is most closely correlated with the degree to which the average community member shares in the overall success of the organization and community… when an organization prevents the average community member from profiting from its work, no amount of PR, advertising, or charitable giving seems to help… If organizations give even their average community members some shot at becoming more successful — through providing innovative products, experiences, and connections to new people or opportunities — those community members will do what it takes to make themselves, the organization, and the overall brand community richer.”

I suspect that organizations interested in building passionate brand communities have a lot to learn from Why Nations Fail.

And I’ll let you know what I personally learn once I’ve had a chance to read it.

How to *really* help the communities your brand interacts with

Organizations have a lot more to offer the communities they interact with than the products they sell. When these organizations unselfishly offer assistance to the communities around them, they can build powerful relationships based on trust and shared value rather than just on transactions.

Sure, building this foundation will often mean that people in these communities would be more likely to consider buying products or services from you down the road (in case the marketing types ask). But if that is central to your thinking, community members will smell a rat. It is not enough to simply seem selfless while remaining selfishly motivated by your own bottom line.

You must actually care what happens to these communities. You must want to help them be more successful at achieving their own goals. Although this approach seems so obvious, my experience of working in the business world for the last 20 years indicates that it’s not.

Usually when I begin to talk about helping the communities that surround a brand, people immediately assume I’m just referring to typical organizational philanthropy or corporate citizenship work. While in some cases, a community-based brand strategy will dovetail nicely with these efforts, they have very different end purposes.

By carefully considering how you can help the communities of customers, partners, prospects, friends, neighbors, and others that interact with your brand every day, you can not only create value for these communities, you can develop deeper non-transactional relationships that will also benefit your organization in the long run.

If you need help shifting your thinking to a community-based approach, consider the following types of things your organization might do to help the communities around your brand:

Funding

Consider investing money in projects that help the community achieve its goals. Bonus points if the investment will also help your organization achieve its goals or further your brand positioning. Red Hat and other open source software companies have done this extremely well, investing in projects that later become the heart of products they sell while also creating value for community members at the same time.

Gifts

Many communities are in need of assets that individuals can’t buy on their own. Are there assets you already own or could buy and then give to the community as a gift? Red Hat bought many companies over the years with useful proprietary source code and then gave away the code for free. The community was able to innovate more quickly, and everyone—including Red Hat—reaped the benefits.

Your organization might have other assets that would be of value, such as a conference facility that could be used or land you haven’t developed. You could donate your products, services, web server space, or other supplies and materials that might otherwise go to waste.

Time

Your organization probably has knowledgeable people who might have a lot to offer. Consider allowing employees to spend on-the clock time helping on projects that further community goals and support the brand positioning.

Connections

Who do you and others in your organization know, and how might these relationships be of value to others in the brand community? Perhaps you can make connections that not only help the brand community, but also help your organization at the same time.

Brand power

Could you use the power of your brand to shine the light on important community efforts, drawing more attention and help to the cause?

The bottom line…

When organizations begin thinking like members of communities—when they are of the community, not above the community—and bring value in the same ways individuals do, they can fundamentally alter the relationships they have with members of the community.

This means that organizations have to stop thinking selfishly about what they want to get the communities to buy from or do for them (what I call Tom Sawyer thinking) and start thinking about what assets they bring to the table that could create real value for community members.

Faking it will get you nowhere, but when you really bring some tangible value to a community and the community becomes better for it, your brand will reap the benefits down the road.

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This is the ninth in a series of posts drawn from The Ad-Free Brand.