Reinventing Capitalism in the Digital Age

The current crisis of capitalism is due to business pursuing shareholder capitalism, which prioritizes maximizing shareholder value over all other stakeholders and society. Customer capitalism, which prioritizes co-creating value for customers and users, is a more practical guide to action for an entire firm and can help firms master the challenges of the digital age and meet the needs of all stakeholders.

Format: Paperback / softback
Length: 75 pages
Publication date: 15 December 2022
Publisher: Cambridge University Press

The current crisis of capitalism's legitimacy is explored in this Element, which argues that it primarily stems from businesses pursuing an aberrant form of capitalism known as shareholder capitalism. In this approach, firms prioritize maximizing shareholder value, as reflected in the current share price, at the expense of all other stakeholders and society. While shareholder capitalism gained prominence in the 1970s and was renounced by the Business Roundtable in 2019, it continues to operate under the guise of stakeholder capitalism. However, this Element contends that stakeholder capitalism is incoherent as a practical guide for an entire firm and that a more effective approach is needed.

A recent evolution of capitalism, customer capitalism, emerges as a solution. This approach prioritizes co-creating value for customers and users, enabling firms to navigate the challenges of the digital age effectively. By focusing on customer needs and preferences, customer capitalism not only benefits society but also meets the needs of all stakeholders, including employees, shareholders, and the broader community.

In conclusion, the crisis of capitalism's legitimacy is rooted in the pursuit of shareholder capitalism, which prioritizes short-term financial gains over the long-term well-being of society and all stakeholders. The emergence of customer capitalism offers a promising alternative, focusing on creating value for customers and users while also addressing the needs of all stakeholders and promoting a more sustainable and equitable economic system.

ISBN-13: 9781009332842