Ethical value creation and the economy: an Italian case study

A contribution by Adam Arvidsson:

“The following is an attempt to use an empirical study of an actual instane of value co-creation. In essence: value depends on the ability attract affective investments from a co-producing audience. Such affective investments can be attracted through the promotion of a particular kind of ethos. The people who supply affective investments are generally not interested in monetary compensation but they are anxious that the ethos of their productive community be respected: they ask for responsibility. On a second level, this ‘ethical economy’ of affect is valorized through the criculation of reputational exchange value which, mainly through the brand, is linked directly to monetary values. It’s a bit tentative, but anyway.

Let is start with how value actually framed by participants in customer co-production? We have looked at one case, il Mulino che Vorrei (‘The mill of my desires’) launched by Italian food company Barilla as a user-driven innovation platform for its sub-brand of biscuits and cakes, Mulino Bianco (The White Mill). Mulino Bianco was originally launched in 1976 and has since built up a strong presence in the popular imaginary of Italian consumers (cf. Arvidsson, 2003). In its advertising, Mulino Bianco has positioned itself as a proponent of an idealized, yet modern nuclear family that leads a healthy life in an idealized Italian countryside. (One of the brands most famous advertisements, in the 1980s, pictured a professional family who fled the big city to go life in a white mill -mulino bianco- that the company had purchased in the idyllic landscape around Chiusdino, outside Siena in Tuscany.) Indeed many of the blogposts that we have analyzed testify to consumers harboring strong affective ties to the brand, and often viewing it as a central aspect of their childhood memories.

The initiative, il mulino che vorrei, consists in an online platform where consumers are invited to suggest ideas for the future development of the brands and its products. (Or as many consumers in fact did suggest, the re-introduction of older products.) Participants can then vote for the suggestions, and Barilla pledges to actually realize, produce and distribute the product- ideas that have received the greatest number of votes. This way, the project is understood as a way of inviting consumers to realize their collective fantasies and desires about the brand.

At a first glance this might appear as a classic example of a company appropriating and commodifying knowledge and ideas that are freely supplied by consumers, realizing their value as a number of new products that are subsequently sold back to the contributors. While this might end up being true, realizing value from new lines of biscuits was not the strategic intention of the project. The mother-company, Barilla, rather saw the manufacture and distribution of such new product lines as an additional cost . Indeed the company does not envision much in terms of direct monetary profits from this initiative. Neither is there any clear view of its profitability as an advertising vehicle. Also, there is a general lack of precise methods for measuring the advertising value of the number of hits or conversations, the Word of Mouth buzz, that projects like this generate (cf. Hunt,2009). Consequently, the proponents of the projects within the organization were constantly faced with the problem of arguing for its benefits, particularly when faced with an ‘older generation’ of executive who were used to the measurability and relatively low cost-per-eyeball of television advertising. They did this by framing the advantage of il mulino che vorrei, not in terms of immediate profits, but in terms of long term brand value. It was primarily about creating and strengthening existing deep affective ties with consumers, by involving them in the online community. This way, it was understood that the success and long term value-creating potential of the project hinged on its ability to make consumers’ needs, desires and demands come out in the open ‘; to ‘interpret an underlying reality beneath the objective reality of everyday life’.iii In other words, the main source of value was not primarily considered to be consumer attention but consumer affect, and the value creating potential of the project hinged on its ability to make such (formerly private) affect, public, that is to transform consumers’ private experiences and relations to the brand into components of its brand equity.

That the project prioritized deep affective ties over maximum number of participants was also one of the main reasons why its designers had decided to avoid offering consumers monetary rewards for their participation. Such monetary rewards were understood to the be detrimental to the success of the project for two reasons. First, they risked undermining the ethos of ‘trust and transparency’ necessary for attracting affective investments from participants. Second, monetary rewards risked skewing the mechanisms of participation in such ways that the outcome would not represent a correct expression of the collective desires of the community.

We do not want hordes of participants who would do anything to obtain a a price, even creating fake profiles. If you vote for your friends’ ideas just because they are your friends’ ideas and not because they satisfy your desires, then you have lost an opportunity.

This logic is linked to the particular conception of value and reward that the mangers behind the project entertained. They saw the project as a collective pursuit, as an ‘enterprise brand’ to use Majken Shultz (Hatch & Shcultz, 2009) term, in which consumers worked with the brand to realize a common goal: the creation of the kinds of biscuits and other products that they genuinely desired.

In this project no single person wins, there are no prices, neither money nor other things. Here the community wins. It does not matter who has posted an idea, the important thing is that the community gives it value, by voting for it.

Was this idealistic picture of common enterprise shared by consumers? Consumers did realize that in a sense they ‘worked for’ the brand by freely offering their ideas and sentiments, and by participating in the communal value-creating process that was seen to lie at the heart of the project. Never, however, did they frame their participation as a form of labor that required precise and measurable forms of compensation. It is remarkable that no blogposts posted by consumers ever talked about monetary compensation (while this was a theme that sometimes occurred in posts on the part of communication professionals). Instead consumers framed their participation as a gift, that invited counter gifts on the part of the brand.

Like in the case of gift-giving more generally, consumers gave a positive value to their experience of participation. The online platform gave them a space to express their creativity, and even more importantly, strengthen the affective ties that they entertained with a brand. These ties, it seemed had a deep significance for their own identity and narration of self.

I grew up with Mulino Bianco, it has been part of my life since I was a child.vi great, so many memories, afternoons watching cartoons wile eating tegolino or soldino [names of Mulino Bianco biscuits].. that was my childhood.

From the consumer postings, it appears that Mulino Bianco’s biscuits were endowed with strong affective investments, that they functioned as something akin to Bernard Cova’s linking objects, albeit within consumers’ own self-narratives (Cova et al. 2007). The Mulino Bianco biscuits were able to link consumers to affectively charged experiences of their own childhood and thus function as vehicles for nostalgic investments within a present that was perceived as increasingly insecure and precarious. In fact, a number of consumer postings had quite a tragic note. They contrasted the idealized version of the family that featured within Mulino Bianco’s advertising, and which they took as a roughly realistic rendering of their own idealized memories of childhood, with the fact that they themselves were unable to form a family in the foreseeable future, given the economic precarity of their present existence. The counter-gift requested by consumers in relation to the brand mainly consisted in a responsible management of their ideas and affective investments. In part such concerns regarded fears that their ideas would be put to work in unethical or unsustainable practices; that they would contribute to supporting a food industry, the environmental consequences was becoming ever more evident. In part these concerns had to to with the unreal nature of the idealized family that figured in the brands advertising. Here the brand was called on to update its image and make it more in tune with the actual reality of contemporary Italian families. In part consumers raised concerns that the brand would simply waste their ideas, and that they would never see them realized in products available on supermarket shelves. Overall, consumers did not so much fear exploitation as much as they feared waste: that the energy and affective investments that they had freely given to the brand would be put to the ‘wrong’ kinds of uses, or simply not be put to use at all.

It would seem that in the case of il mulino che vorrei, participants frame their talk about value as something quite different from the established approaches discussed above. Value is mainly a matter of affect and ethics. That is, managers do not understand the source of the (long term) value added of the project to primarily lie with the number of consumers that participate, nor with the time they dedicate to participating. Il mulino che vorrei, is not framed as an expression of the attention economy √† la Smythe, nor is it a matter of consumers being exploited as they ‘work for the brand’. Instead the main source of value is perceived to be consumer affect. It is the ability to attract and make public consumers individual affective relations to the brand, and transform them into visible dimensions of brand equity (in the form or viral public opinion, or in the form of the tangible new products that might result from the project) that are the most important source of the long term brand value that it might eventually generate. Consumers on their part do not frame their participation as ‘working for the brand’. Instead they generally experience the platform as an opportunity, a gift given to them form the brand that enables it to realize their fantasies and desires about the brand, and strengthen its integration into their own narratives of self. They freely and voluntarily give of their affect to the brand, and as a counter-gift they expect their gift to be handled responsibly. That is, they frame their expectations on the brand as a matter of ethics, not monetary compensation.

The question to ask at this point is to what extent these framings can be taken as a reflection of an actually existing albeit quite different process of value-exchange, and to what extent they should be treated as the result of managerial ideology and consumer naivité, that combine to hide a very different reality. The way to begin to address that question is to explore the possibility of a process of exchange that works, more or less, as described by the participants to the project. In other words can such a thing as an ethical economy exist?

Ethical Economy

The first thing to do in addressing this question is to ask what is scarce in the practices of social production on which corporate initiatives like il mulino che vorrei rely. Clearly it is not labor time, rather monetary rewards are deliberately refused in order to avoid attracting too much of the wrong kind of labor time. (And in other instances of social production, like Free/Libre Open Source Software production-FLOSS- similar dynamics are at work. Projects like Debian device clever schemes to filter out unworthy participants. Unlike Microsoft they do not need to pay people to program for them, quite the contrary.) What is scarce, what creates value? In our analysis of il mulino che vorrei, as well as in Gabriela Coleman’s analysis of Debian- and in countless articles on knowledge management, post-bureaucracy, social capital and so on- the scarce asset is the ability to create the kind of climate, or ethos, that gives a desirable direction to productive cooperation: consumer cooperation in elaborating the best ideas in the case of il mulino che vorrei, dynamic and flexible problem solving in the case of Debian, many instances of salaried knowledge work. The creation of such an ethos hinges essentially on the ability to manage investments of affect in order to create the kinds of values and norms of action (a nomos) that is particular to the specific situation at hand. Gabriela Coleman, drawing on Bahktin calls this ‘ethical labor’ (a term that would have made Hannah Arendt cringe!), and she argues that ‘the hard labor of ethics, its demanding phenomenology, is an outgrowth of taking risks, putting in the effort to engage with others and choosing to confront the situation at hand in its specificity’ (Coleman, 2005:60). In her description it is such ethical labor, rather than programming labor, that is the most important source of value in the Debian community. Programming is abundant on the contrary the community needs to device complicated entry rituals to keep potential programmers out. What is scarce is the ability to build and maintain the complicated web of relations that keeps Debian functioning as a productive community and that maintains the ability of the Debian brand to keep attracting vast supplies of free programming labor. Conversely, along with technical brilliance, it is the hard ‘ethical labor’ of building community through affective investments that ultimately confers on participants the charisma and reputation in which their relative value is manifested. This picture is not too different from the ways in which management scholars have described work in networked, knowledge intensive ‘post-bureaucratic’ organizations (Maravelias,2003). Indeed, a wide and quite disparate literature on Free/Open Software (Coleman, 2005, O’Neil, 2009), Social , Open or User-led Innovation (von Hippel, 2006), web 2.0 (Benkler, 2007), brand management and viral marketing (Arvidsson, 2006); knowledge work and creativity (du Gay, 2007, Arvidsson, 2007). So a first suggestion would be that in practices of social production, as well as in a number of advanced corporate practices that show similar dynamics, what creates value is the ability to balance affective investments so that a particular nomos arises, or, which is the same thing, ethics.

Why is this the case? All of the productive instances listed above rely mainly on abundant or ‘common’ (Dyer-Withford, 2005) resources. The creation of trust and social capital deploy common affective and communicative skills, customer co-production schemes are about appropriating the common knowledge of consumers; web 2.0 participation requires access to a networked computer (which is fairly ‘common’- in the sense that 1.5 billion people have such access) and skills that are common to one’s group of peers; FLOSS or Open design participation requires more sophisticated skills which are nevertheless common to particular communities of practice (indeed one of the most prevalent reasons for participating in FLOSS initiative is the ability to absorb this common knowledge through a collective learning process, O’Neil, 2009). In other words, social production deploys as its most important productive resource, skills and competences that are commonly available and highly socialized, what Marx, in a famous and much quoted passage in the Grundrisse, called General Intellect (Marx, 1973[1939]:705-709). Marx said two important things about General Intellect. First that this is a common resource, freely available to workers by means of their membership in a productive context; their status as social (on our case, ‘networked’) individuals. Second, that to the extent that the capitalist production process becomes more complex- as it has with the processes of globalization and hyper-networking that mark the information economy, the importance of such General Intellect would dwarf that of labor time as a source of value.viii But since General Intellect is common, and hence abundant, it cannot, by definition, constitute the basis of value. Hence Marx concludes that the massive importance of General Intellect as a source of wealth will ultimately explode the ‘labor theory of value’ on which the capitalist economy builds, and propel us directly into communism , where the most important productive resource would remain ‘beyond value’ (Negri, 1999). What Marx did not foresee was that the very expansion and complexity of the productive process that has promoted this new importance of General Intellect also creates the conditions for a new standard of value. When production is hyper-complex and networked, and builds on commonly available resources, the scarce element becomes the ability to coordinate such complex and mobile processes in real time in ways that ensure the successful appropriation and utilization of General Intellect. Economic value becomes contingent on the ability to build, however transient social values and norms that are able to coordinate particular and situated productive processes, to construct the temporary, particular and situated nomos that allows a flexible and complex productive process to go on. In other words, value becomes contingent on ethical practice.

The value of ethics resides in its ability to construct however temporary forms of order in complex productive networks, in particular in situations where abundant recourse to common resources and ‘free labor’ like the affect and creativity of consumers (or forms of labor that are difficult to command, like the ‘creativity’ of employees), renders the two classic forms of capitalist coordination, identified already by Coase (1937), market and contract, insufficient. This takes two important forms: One, ‘the right kind of ethics’ confers order and direction on productive cooperation, it creates the kind of trust and social capital, which facilitates cooperation in complex networks. Two, ‘the right kind of ethics’ is able to attract externalizes that are difficult both to command or remunerate (like customer input to Open Innovation systems, or programer labor in Free Software)

Reputation and brand

In sum, we suggest that il mulino che vorrei, as well as similar instances of customer co-production, and even social production as such, can be understood as elements of an ethical economy. These processes unfold as ethical exchanges. Customer create affective investments in the mulino bianco co-production community, in turn the company handles these investments responsibly. What creates value is the ethos of the community, which is able to give direction to the productive cooperation that unfolds on the platform; to constitute the community as a community. This ethos is co-created by participating customers and the company alike, and the task of management in these instances is to ensure that the right kind of ethos can be maintained. We have suggested that a similar principle applies to many other instances of social production, like FLOSS and other forms of Open collaborative production and many contemporary knowledge intensive, networked corporations. If this is true, and if consequently an ethical economy is emerging around social production (a big if, admittedly), then one important question remains. How is ethics valorized? Or better, since the use value of a particular ethos is per definition limited to the particular context of a single productive community (endowed with a particular value horizon), how does such ethical use values acquire a general, exchangeable form? Our suggestion would be: through the mechanism of reputation.

Reputation and attached notions of a ‘reputation economy’ are affirming themselves as important principles of value circulation in a wide range of instances, like the valuation of firms intangibles, the rising importance of Corporate Social Responsibility, ‘careers in open production and peer to peer systems’ and the determination of the value of knowledge workers’ skills and assets (Martin, 2005). The most important mechanism for the transformation of specific ethical use value into general reputational exchange value, is the brand.

In their present form brands are much more than mere symbols. They are better understood as a sort of platform that enables the repetition of a particular consumer experience, or affective pattern (Lury, 2004). And brand management is essentially about managing the media context in which consumers act around or with the brand, in order to ensure that such a persistent pattern is maintained and enforced. Indeed it can be argued that contemporary forms of brand management have evolved as a response a growing agency on the part of consumers. Brand management , in its contemporary form, is an attempt to appropriate and valorize that agency (Arvidsson, 2006). This way, brand management is a mechanism for the reification of affect, its transformation into brand equity. This transformation also entails a conversion of incompatible and specific forms of affect into compatible qualities that can circulate more generally (Lury, 2004): while there might be hostility between Macintosh and PC users at the level of lived experience, at the level of ethical use value, there is no hostility,or incompatibility between Apple and Microsoft as brands (cf. Muniz & O’Guinn, 2001). This rendering compatible of affect, its transformation into abstract affect, or what we could call General Sentiment, is precisely what accomplishes the transformation of ethical use value into reputational exchange value. As brand, such reputational exchange value can subsequently be relaized in four important ways: It can motivate a higher price on the part of consumers. It can motivate investors to pay share prices that far exceed a companies book values, that is brand is an important way of establishing the value of intangible assets (that often represent value appropriated form processes of social production.).A ‘personal brand’ represents a stock of reputational or ‘social’ capital that play an important role in determining the market value of knowledge work (Ilouz, 2007). Finally, for FLOSS and other kinds of Open production, for many forms of customer co-production, it is the brand and its reputation that serves as the main vehicle for attracting productive contribution from users and members of the public. Increasingly companies are experiencing a similar mechanism in relation to the problem of recruiting and retaining ‘talent’ (Fishman, 1998).

Conclusion

This article has argued two things. First, that established theories of value are unable to account for new practices of social production, chiefly because they define value as deriving exclusively from proprietary assets. Second, that such practices of social production can be fruitfully conceived of as elements of an ethical economy. In such an ethical economy, investments of affect are offered by participants, free of charge. In return they expect responsible conduct from the organization or brand to which they make their offerings. Such affective offering have a use-value in constituting a particular ethos that enables smooth and continuous productive cooperation. Such ethical use-values subsequently circulate as reputational exchange value. The most important link between ethical use value reputational exchange value is the brand. However, this is by no means a perfect mechanism. The absence of precise metrics for the reliable measurement of the exchange value of the ethical use values that make up the basis for brands and other forms of reputational capital indicates that the ethical economy, to the extent that it exists, is not yet a rational economy. On the other hand, the fact that a number of alternative metrics for measuring ‘ethical impact’, ‘social value’, ‘online buzz’ and similar things are emerging suggests that such a process of rationalization is under way. After all, it took about two hundred years for the industrial economy to find its fully rational expression in modern systems of accounting. “

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