New Corporate Services

Our minds wander to what we know as “The Inner City” when we think about areas of the United States with the worst reputations for violence, crime, and dwindling achievements in education. We so often consider these areas to be full of people without drive, without real care for their neighbors, and, in between those people, some out of work residents down on their luck.

It seems to me that regardless of how you think “Inner Cities” came to be, there are some substantial ways to bolster the economies and general welfare of these areas. I discussed methods to create jobs in such areas in a previous article, but now I would like to explore how people in these areas can obtain and maintain many of the services that most everyone else takes for granted. The challenge is this: how can you convince corporations to continue services–or offer them in the first place–in an area that is known to have low income and low expectancy regarding the payment of bills once services have been established?

First, though, have you ever noticed that investment in items such as alcohol and cigarettes carry similar weight from neighborhood to neighborhood? It is reasonable to assume based on this knowledge that such investment does not help to develop a community’s economy regardless of the amount of wealth dedicated to it. Christopher P. Beshouri points out in a 2006 edition of The McKinsey Quarterly that the type of investments that are best for what he names “emerging economies” are those that both create profit for a corporation while having positive impact on the development in that same area.

This sounds great, right? But, the immediate question has to be: why would a corporation even care to do that when they can sustain high profit with low social investment? The answer is that there are not many businesses that can sustain profit in these areas except for alcohol and cigarette vendors. The potential for profitability is currently low for companies that provide services such as water, electricity, housing, restaurants, and retail. So, the next question arises: what can companies do to offer services, regardless if they want to better a community or not, so as to make a profit?

I think that “to make a profit” reads a little harsh to some, but I also know that the driving force of services that we take for granted is profit. It is great when there are examples of great corporate giving, but so many of them are relegated to isolated, albeit wonderful, tear-jerking on shows such as Extreme Makeover: Home Edition. There has to be a way for corporations to consistently make a profit if they are to offer institutionalized services in a way that is accessible to “Inner City” neighborhoods.

Take a moment to consider why companies cannot make a profit in the communities mentioned in this article. Most of us would probably conclude that it is because there is no money to be spent. This is simplistic, I would argue–and the corporations should stop believing this. The real reasons that corporations are not making money are more complicated. Here are some:

* FOCUSING TOP DOWN – If a company wants to successfully offer a service, they need to employ the residents of certain area to respect that service. And I mean pay by “employ.” This sounds like an added cost but it is actually much cheaper than erecting state of the art security systems.

* WRONG QUANTITIES – Companies try to sell items in quantities that do not make sense. For example, if light bulbs only come in packs of two but a person can only afford one light bulb at a time, she will decide not to purchase any light bulbs.

* INCORRECT ASSUMPTIONS – Corporations often assume that people do not buy their products because they do not value them. Instead of assuming that people do not want to buy a new stove, for example, it would do businesses well to realize that the gas hook-ups for that stove may be missing. Therefore, bundled services would be better received. Also, a person may be using predatory lending that offers flashy advertising instead of banks because he does not have the financial education to match his desire for credit.

* INOPERABLE BILLING METHODS – The way that corporations bill customers assumes that people can afford to pay in a traditional manner. Sounds like a problem with no solution, but it is solved all the time. People often pool their resources to pay for snow removal services in condo associations. Condo owners spend less money but receive the same snow services this way.

I think that the lesson here is that corporations have to be willing to alter their service models if they want to make an impact in a neighborhood. Energy companies could establish the option of common meters. This immediately creates a communal desire to pay on time: those who pay on time would enact some form of social pressure for the late payers.

The companion lesson is that while corporations are really driven by profit, that connecting this drive to economic potential for “Inner Cities” may be the only way to assist the United States’ burgeoning low income neighborhoods. We cannot keep telling business to help people; we have to show them how helping others helps the businesses, too.

– Todd Wellman (c) 2006

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