It's about time for a new economic framework

Not a day goes by without thriving stories concerning the sharing economy, new companies that are disrupting existing markets, artificial intelligence driven robots or CEO’s who suddenly declare there is more to (business) life than the upcoming quarterly results. Obviously, something is underway. However, we are lacking an accompanying economic framework that helps to explain the difference between what makes sense and what does not.

Because such a framework is still missing, we try to understand today’s transformation by using economic insights that have well passed their best-before date. This mismatch causes misunderstandings, cynicism and in many cases unnecessary fear. And not to forget, it doesn’t do justice to the good intentions of the Peerby’s, ASML’s and Paul Pulman’s of our world.

But what does a new economic framework look like? It all begins by rethinking the purpose of (contemporary) capitalism. Making a profit and free entrepreneurship are no more the purpose of capitalism as breathing is the purpose of living. Capitalism, as it was intended, is about enabling progress and prosperity. In our present day reality this means that being profitable without creating social value is useless as well as non-sustainable.

When we release ourselves from compulsory profitism, it turns out that today’s dominant logic, based on efficiency and productivity, is also outdated. In 2015, using the efficiency and productivity perspective to analyze Airbnb’s business model, the upcoming division of Philips or Rabo Bank’s purpose under its new CEO Mr. Wiebe Draaijer makes no sense. Let alone that it tells us anything about their chances on future success.

Nowadays, for really understanding these companies and CEO’s, it’s much better to look for the answer to the question why and how they want to make a difference in society at large. And whether they, to succeed in creating social value in the first place, are capable of setting-up high value partner networks which allow them to engage in meaningful coalitions. That they also need to make a profit goes without saying. But it’s a matter of first things first.

When we use this new perspective to look at the transformation underway, it appears that Airbnb is about personalization based on authenticity, that Unilever is re-designing food chains by making them sustainable (with benefits for Unilever as well as for the people and nature in them), that ASML is an important driver of global connectivity, that Snappcar reduces pointless consumerism and that Philips enables people to have more self control when it comes to personal health.

Yet, at the same time the new framework also shows that Uber (‘cheaper, faster, better’) on a net basis doesn’t add anything to society and in its current state holds no future, that Google Glass rightfully belongs to the category of technological bloopers and that the disappointing latest results of Coca-Cola and McDonalds will appear to be normative for the future ahead of them.

In brief, explaining today’s reality based on insights from the past is a slippery road. To change means to unlearn and dare to let go. It would help a great deal when we get a little better at it.

ps. If you want to know more about this new economic framework, please visit www.networkcapitalism.org