Business 2.0, Sustainability

Definition of shared value

This is a cross-posting of a post originally published on the IDX Backstage blog. Note that Ben from SVA has commented on the original post.

Over at the SVA Blog Ben McAlpine asks the question Shared Value – Is it worth the hype?.

Specifically, he notes a colleague asking how Shared Value is different to “smart business”.

Shared Value, is of course, smart business. But Ben’s description of Shared Value I think has an issue that I see in an awful lot in discussions about the topic. It touches on only the first of 3 pillars that are outlined in Porter and Kramer’s HBR paper that launched the term into the business mindset.

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Business 2.0, Sustainability

Michael Porter on shared value

Certainly a man that’s speaking my language — economist and business school professor Michael Porter interviewed for the Harvard Business Review (via Umair Haque):

There are a few particular points of note I picked up watching this interview. At around 4:20 he says:

we once thought that if business just increases its profit, what’s good for business is then good for society. … we need to kind of think differently: what’s good for society is good for business. And that sounds like a play on words but it’s really quite a profound difference in perspective. The [concept] of “shared value” says that, actually creating societal benefit is really a powerful way to create economic value for the firm.

A short while later (at around 6:37) he says:

But that kind of profit creates shared value — it’s not just profit at the expense of society or the expense of the consumer, it’s really profit by benefiting society and the consumer.

On this latter point, in previous posts I’ve used the phrase “shifting from extracting value from the market, to creating value with and for the market”, which very much aligns with this theme.

At 8:31 he goes onto express the potential for competitive advantage inherent in such and approach:

I think the great strategies of the future are going to have this dimension. The companies that are going to have the more sustainable advantage are not just going to be making these minor cost and quality differences, they’re going to be engaging communities they’ve never served before; they’re going to be thinking much more deeply about the underlying human needs that are related to their products.

I would add, underlying needs that can be effectively determined using service design and design thinking approaches ;) He goes on to talk about building the shared value proposition into the core of the business strategy, another theme that I, among others, also propose.

His discussion on increasing farmer capabilities (around 11:00) reminded me also of what MTC Group is focusing on in their business.