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Your for-profit business has a limited quantity of an incredibly high-value product. Should you give that product away?
Maybe.
That’s not how my five-year-old son, Reuben, reacted on his birthday. The dot of icing on the corner of Reuben’s mouth told a secret: he’d already eaten some cake. Yet Reuben still screeched when told to give the last piece to his brothers.
Traditional economics wouldn’t tell Reuben to donate his cake. Scarcity drives value. If you’re lucky enough to have something in high demand, Econ 101 suggests the price should be sky-high.
But Reuben eventually does give the cake away, and his family relationships become more valuable to him as a result. Similarly, sky-high pricing does not always maximize shareholder value.
Biopharma company Gilead, for example, just reversed scarcity economics. Gilead donated its entire 1.5 million dose inventory of the only FDA-approved treatment for Covid-19 emergency use, remdesivir. Virtually every story on every news outlet is about Covid-19. Globally, hundreds of thousands have died. And the owner of the only confirmed treatment just gave the only existing inventory to the US Government, free, to distribute.
Gilead could have followed textbook economics. But in the real world, such rapid, crazy-price sales to the ultra-wealthy would have been chaotic; those actions probably would not have preserved the most life. So, Gilead’s donation, which could be over $600 million worth of treatments, potentially saving thousands of lives and more. This massive philanthropy (more than ten percent of Gilead yearly earnings) deserves recognition.
Yet there’s more. From a business perspective, Gilead now has a one-and-a-half billion dollar plus investment in serving society: it’s spending up to $1 billion in 2020 remdesivir development, plus the $half-billion-plus donation.
By weaving leadership, sincerity, value, and caring into the very fabric of every remdesivir action Gilead takes, the company can build trust and strengthen its reputation with key stakeholders. And, those relationships can translate into new opportunities to make sales, engage employees, and earn fair treatment from politicians, regulators, and others. Gilead announced the bare bones of such a strategy as it gears up to “accessibl[y] and affordabl[y]” deliver remdesivir to patients around the world. But such a strategy is not, and cannot rationally be, just about price: it must incorporate many tools and strategies that build meaningful collaborations. And through those relationships, learning more about key stakeholders’ needs, issues, and the challenges they face on a day-to-day basis. So that Gilead can deliver the greatest value to these stakeholders as a business leader, sharing in the benefits created.
As with any strategy, there are myriad ways Gilead’s plan could go wrong. In particular, GIlead could revert to a strictly self-serving approach, or it’s gifts could be insincere. If that happens, Gilead would be found out and the massive present will ring hollow— delivering little solace to both society and investors.
As organizations look to reboot in today’s turbulent times, much past value has turned to dust. Yet new nuggets of gold are appearing. You can view these opportunities through the lens of a five-year old who misunderstands meaningful relationship. Or, the adult who recognizes how sincere commitment can deliver greater value to all involved.
As a leader, can you translate today’s crisis into an opportunity to preserve value through human connection, rather than just via cold technology?
Send me your thoughts or write a comment below.
Safeguard your future today. And position yourself to thrive for your children tomorrow.
Rod
Dr. Rod Wallace is an economist, consultant, and speaker who helps businesses make more money by solving society’s problems. A Fulbright Fellow, he has led multi-organization billion-dollar initiatives worldwide and partnered with a Silicon Valley pioneer to explore the impact of Artificial Intelligence on society.
Rod speaks about how to integrate social responsibility into business to maximize profit and purpose. He highlights digital technology’s impact on society and the strategies and tools with which business can solve our big, systemic problems.
Contact Rod at info@RodWallacePhD.com.