As shared value has continued to grow as a global movement in the past year, the second Harvard Business School course on ‘Creating Shared Value’ in December with Professor Michael Porter and Mark Kramer presented the latest thinking and developments in shared value thinking and application. Catia Davim, Partner at KPMG and founder of the Social Good Summit Australia shares her key takeaways from the course.
I’m often asked the question: “How are you going to change the world?” Well the reality is that I don’t really know, but I’m trying to figure out!
In my personal search to find an answer to this question, I decided to go to Harvard and learn from the ones that believe that the key to change the world is in the business community (most likely in partnership with Governments and the non-for-profit sector).
The three-day program held in the December, had an impressive audience of 72 professionals from all corners of the world and virtually all industries. The teaching staff including Michael Porter and Mark Kramer proved to be highly committed towards our education. They never left the room and taught us everything that they know about the topic. I left with the impression that they want to create an army of “peaceful warriors” to change the world. So what I have learnt from that experience?
Lesson 1: Profit is the key to change the world, that’s why most development programs fail
If we think about the way our societies are organised, the only institutions that create monetary wealth are businesses. All the other institutions use the resources generated by corporations to operate – Governments receive taxes, non-for-profits receive grants and/or donations. That is all good, however the latter tend to be less efficient in the use of resources and lack a commercial approach to implement development programs.
When we identify a way to make profit while solving a social problem, only then can we find a solution that is viable, scalable and sustainable. Development programs almost never involve the private sector and therefore do not follow a commercial approach. Businesses can be great contributors in solving complex social needs and they will play a role if we create the space for profit creation.
Lesson 2: Creating Shared Value is possible to most businesses
The concept of creating shared value was born by the hand of strategy giant Michael Porter (in collaboration with Mark Kramer), therefore is not surprising that the idea of CSV represents an evolved way of thinking about application of strategy to create competitive advantage. The starting point is to identify opportunities to grow the business rather than a philanthropic view over the world.
When we look from this perspective, CSV is possible to most businesses. The key is to identify markets that were never served (e.g. low income communities) and provide services and products (e.g. housing) to fulfill their needs under a profitable model. There are other ways to create shared value, but the essential point is that if there is a social problem, there is a business opportunity ready to be realised.
Lesson 3: When you look at your business as part of a cluster vs an industry you have a different perspective
One of the arguments of creating shared value is that you can grow your business by looking at the dynamic of your cluster instead of the industry. Let me explain in more detail.
If you are a hotel in Cairns, Queensland, the success of your business is influenced by the movements of your direct competitors, however all hotels in the region will be directed impacted by the quality of the airport, customer experience in taxis, local restaurants, police efficiency, existence of capable hospitals, touristic information before travelers arrive, and so on. So the argument is that if you want to grow your business, you should look at the cluster where you are doing business. If you help to improve the conditions of the cluster (eg: reduce crime in the region), you will help your business to grow.
Image credit: Harvard Business School