- COVID-19 has exposed the ongoing racial inequalities that exist in today's America.
- In the 2018 census, the median net worth of black households was $17,600, compared with $171,000 for white households.
- Scott A. Snyder, a senior fellow from Wharton and John Hope Bryant, CEO of Operation HOPE, discuss how business leaders can equalize the playing field.
In 2004, the late scholar C.K. Prahalad published his seminal book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, outlining how companies around the world could create significant value by innovating offerings that meet the unique needs of the poorest billion people in the world. While there are inspiring examples of low-water usage detergents, nonrefrigerated ice cream and smartphone banking platforms being deployed in developing countries, somehow that same level of innovation has not taken root in the most underserved communities in the most developed countries in the world, including the United States. According to the 2018 census, the median net worth of black households was $17,600, compared with $171,000 for white households. Somehow, prosperity is not reaching the bottom of the pyramid in our own backyard.
The recent COVID-19 pandemic has made the disparities even wider. Those who are able to work digitally and thrive in a highly distributed, virtualized society are also those at the higher end of the income pyramid. Those who cannot are not only limited to fewer economic opportunities, they are also at greater risk for contracting the disease because their jobs and living conditions dictate close proximity with others. The digital divide begets an economic divide, which begets a health risk divide — and the downward cycle drives the gap wider and wider.
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The African American community stands at the door of a double crisis. First, African Americans make up approximately 21% of the overall fatality rates tied to COVID-19, according to the latest numbers from the Centers for Disease Control and Prevention, while representing only 13% of the nation’s overall population. Second, they are a capital-starved small business community that, as of July 6, received only 1.6% of the $2.2 trillion in CARES Act funding to date based on businesses reporting race on their loan applications. Where did we go wrong? More importantly, how can we turn tragedy into opportunity? How do we make sure we don’t miss the chance to turn this crisis into a springboard for innovation and change, to “flip the pyramid” in the U.S.?
Enterprises of all sizes are sitting on legacy assets such as customer bases, data and insights, brand recognition, technology and market expertise that they harvest to drive value for their shareholders. Meanwhile, most corporate Environmental, Societal, and Governance (ESG) efforts sit in obscure departments and tend to focus more on compliance and reputation management than true innovation. What if these same companies could channel their unique advantages to help tackle some of underlying causes of these stark disparities at the bottom of the pyramid while also creating economic value for their shareholders? What if they could ignite their assets to drive a flywheel of purpose-driven innovation that creates prosperity for black communities, customers and shareholders. What if “doing well by doing good” were more than just words?
Here are some steps companies can take towards this new model of “innovating for impact” and some examples of companies already on the path:
- Close the Health and Wellness Divide. One of the most significant areas of need is elevating health and well-being in Low or Moderate Income (LMI) and primarily black communities such as South Los Angeles, where there has not been a traditional grocery store chain for 30 years. Unsurprisingly, the area also boasts the highest rate of adult (30%) and childhood (29%) obesity in Los Angeles County. Yet the link between healthy eating and childhood development and eventual economic opportunities is indisputable. What if the top restaurant, grocery, health care and transportation providers could collaborate to eradicate these perpetual food deserts? Innovation examples include Kaiser Permanente’s Food for Life Program, which helps make it easy for those in need to access food benefits at the state level; Lyft’s Grocery Access Program that provides flat-rate, low-cost rides to healthy eating/grocery options to reduce the hurdle of eating well; and Penn Medicine’s IMPaCT Program, which provides health system navigation, social support and advocacy to more than 1,500 high-risk patients annually and returns $2 of benefit for every $1 spent.
- Close the Digital Divide. Every job will have a digital component to it in the future, yet there is an enormous disparity in both access to technology and digital skills. Despite similar penetrations in smartphone use among black and white households, penetration for other critical solutions such as laptops (58% for black households versus 82% for white households) and broadband (66% for black households versus 79% for white households) is lagging significantly. Coupled with lack of access to training, this translates into a digital skills gap where 50% of black workers have no, or limited, digital skills, versus 31% for the average U.S. worker. Corporations innovating to close this gap include Microsoft, which has committed to helping 25 million workers around the globe digitally upskill and find new job opportunities using its LinkedIn and GitHub platforms; and Comcast, which has added 8 million low-income broadband users through its internet essential program and is offering micro-degree programs in digital skills like cyber security in underserved communities in the southeastern U.S.
- Ease the Path to Financial Freedom for low- and moderate-income (LMI) populations. After World War II, the G.I. Bill became the “magic carpet ride to the middle class” by removing barriers to homeownership for white and black Americans. Homeownership remains the primary driver of wealth for most citizens, but it is becoming an increasingly unattainable aspiration. McKinsey estimates that closing the wealth gap between black and white families could add $1 trillion to the U.S. economy in 2028. Elevating financial literacy and building 700 Credit Score Communities are foundational to making this happen. Yet only around 6% of financial advisers are black. One company innovating to break through this barrier is Fulton Bank and its partnership with Operation HOPE to put financial literacy coaches in branches serving low-income communities. Also, the Center for Financial Planning (CFP) Board has invested in mentoring and scholarship programs to accelerate the development of black and Latinx financial planners to help close the gap.
- Create fluid access to capital and customers for fledgling businesses and entrepreneurs coming from the most underserved communities. This is difficult when black investors represent only 3% of venture capitalists. There are now a growing number of social impact funds — including Reinventure Capital, Plexo Capital and Equal Ventures — that see an opportunity to generate significant returns by investing in black founders and entrepreneurs. Some companies are using their workforce and customer base to provide new opportunities to those who are struggling. For example, coffee chain Saxbys offers entry-level jobs for homeless citizens looking to build a new career, and Kiva.org connects customers of brands that want to help businesses and citizens most impacted by COVID-19.
- Create new technologies and governance structures for rooting out racial bias in all business and government decisions, and increasing diversity in not only the workforce but also the C-suite and boardroom. Companies with diverse workforces have been shown to out-innovate and outperform their peers historically, yet black professionals hold only 3.2% of all executive roles in major American companies. Google has published AI principles to combat algorithm bias and has created AI4ALL, a summer camp focused on training the next generation of diverse AI leaders. Executive search firm Heidrick & Struggles has launched the Director Institute to help develop the next generation of diverse board candidates to close the diversity gap.
The tragic death of George Floyd on May 25 at the hands of a Minneapolis police officer and the worldwide protests that followed have not only spotlighted the need for long-overdue police reform, they have also opened a deeply emotional and important examination of racial inequality in this country. The COVID-19 pandemic has highlighted how deep these disparities run, but it also creates a unique opportunity for innovation and change. Corporations have an opportunity to leverage their unique assets and scale to join the innovation efforts around some of these daunting challenges and help close the gap through the steps outlined in this article.
There is nowhere to hide. Society will be watching, as will the future employees who will choose to work for you and the future customers who will choose to buy your products based on how your organization reacts to these crises. Now is the time for purpose-driven innovation efforts to take on the significant challenges we face around inequality. It is not only needed but necessary if we are going to propel our society and economy forward and truly “flip the pyramid” for everyone.