Ethical Business & VRM

Following Monday’s London event I’ve been refining my thoughts about the whole VRM concept. It interests me because it is very closely related to a subject I have a strong interest in: Ethical Entrepreneurship.

Entrepreneurship is one of those topics that polarizes people: some evangelize and others vilify it. Whichever side of the fence you’re on, it is incontrovertible that entrepreneurship is one of those phenomena that have a significant impact on our kind of society. Many entrepreneurs create new ideas, disseminate information, create jobs, tend to be politically influential and often donate substantial sums to educational and charitable institutions. At the same time, many entrepreneurs also tend to be greedy, ruthless and inconsiderate to environmental or social considerations in pursuit of their financial objectives.

VRM, is but another model for entrepreneurship (like Social Entrepreneurship, Permission Marketing and Ricardo Semler‘s approach) that is trying to change what I call the “Traditional” Entrepreneurship Model. I put together a small diagram to show what I mean by this:

enterprise-traditional

In the Traditional Entrepreneurship Model there is an exchange of value between customer and entrepreneur. The relationship hinges on the exchange for both parties but the outcome is often wildly different. The customer parts with money in exchange for a perceived set of values that far exceeds the price paid. For instance, in return for the price of an iPod, the customer gets aesthetic beauty, a feeling of importance, a relief from boredom when traveling, a portable hard drive, ownership of a physical object and a sense of belonging to a particular commuinity (friends, Apple fans, etc…). On the other hand, the entrepreneur typically gets only a financial return.

I believe it is this imbalance that drives entrepreneurs to unethical business practices. Practices that range from spamming and deceitful marketing right up to employee/third-world exploitation, misuse of natural resources and environmental disregard. (In short, all the stuff that Naomi Klein has been warning us about.)

VRM and similar entrepreneurship models are, in different ways, attempting to address this imbalance. An “Ethical” Entrepreneurship Model would look something like this:

enterprise-ethical

The core difference is that both entrepreneur and customer obtain more than just a financial return from the value exchange. This is not to say that business ventures should not be profitable. Rather, that profitability should not be measure in purely financial terms.

How to go about doing it, and how some people are already doing it successfully is a topic for another day however…

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