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Social response capitalism: Product development strategies for 21st-century innovators and investors

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Courtesy of AHC Group

A new set of industrial products — from cars to computers — has shown that leading firms now compete on price, technical quality, and social response. This excerpt from Piasecki's latest book, World Inc., describes the revolutionary development of social response product development (SRPD) within Toyota and Hewlett-Packard.

AN ARGUMENT WAITING TO HAPPEN: SUPERIOR PRODUCTS IN THE NEAR FUTURE

Social response capitalism is not some pie-in-the-sky philanthropic notion. It has direct links to major economic events such as the recent spike in oil prices. Over the 12-month period, October 3, 2003 to October 1, 2004, crude oil prices increased by 62.3%, or from $25.39 a barrel to more than $41.20. Oil supply and the pricing of other critical materials are key variables in this new form of capitalism.

In fact, Alan Banks, a 30-year veteran of investment banking and former CEO of Fitch Core Ratings, now claims 'the majority of the global companies on earth, and the new generation of innovators vying for their tight places in the near future, all have developed serious and lasting corporate social responsibility programs to move beyond an overdependence on oil.' Banks notes this includes Toyota, BP, Suncor of Canada, and 'many, many intelligent mimics.'

'This social response-based competition has, in fact, been foreseen by many innovative multinationals,' notes Dennis Minano, the former head of energy and environment at General Motors, 'as they have been anticipating higher fossil-based energy prices and lower supply for quite some time.'

Innovative leaders like Banks and Minano ask these investment questions and realize that the growth of our global industrial society is at a crossroads. The earth's capacity to deliver economically extractable oil and gas is increasingly limited. Some estimates show oil reserves being depleted in the next 25 to 50 years.

Projections are uncertain; social directions, however, are discernable. What is certain is that we will eventually run out of oil and gas as a cheap, abundant fuel supply to heat our homes, drive our cars, power our computers, and sustain our industrial output as we know it. 'This rapidly changing landscape of global energy supply competition is fact,' notes Steve Percy, the former CEO and Chairman of BP America, 'and an increasing topic of debate and concern in boardrooms of some of the largest oil, automotive, consumer product, and agriculture companies of the world.'

Probably the most visible change is occurring with automobiles, where social response capitalism has made its greatest headway with bridge technologies like hybrid cars.

A TALE OF TWO ENGINES: TOYOTA'S HYBRID POWER-TRAINS

Products such as the Prius are the very heartbeat of the modern corporation. New product platforms like hybrid power-trains or HP's liquid crystal displays help investors and innovators in the supply chain identify new pathways to the very bloodstream of the global equity market. Following the introduction of the first-generation Prius in 1999, Toyota quickly assessed its placement in the market. Its first step was to evaluate its appeal to consumers based on its price point, performance, and social attributes. Toyota discovered that the 'greenness' of the Prius was not just a philosophy, but a functional product characteristic sought by some consumers. They also found that, to reach a larger market share, the vehicle needed upgrades on quality, performance, and aesthetics.

In short, Toyota led change in the global auto-making market by their studied process of management. This 'Toyota Way' is a system of manufacture and product change put in place to manage all changes within products, leadership, and corporate direction. This is the way we've detected social response capitalists work, from their innovative product outward.

In summary, Social Response Product Development (SRPD) suggests a new stream within advanced capitalism. This stream has culminated from more than thirty years of industry becoming cleaner, more efficient, and driven toward quality and service. In addition, the many related and major drivers of SRPD noted above — such as concern over global climate change, terrorism, energy diversity and security, environmental protection — have helped shape the context for a new form of industrial capitalism.

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