Business 2.0, Sustainability

Shared value and SMEs

As part of my Masters studies, I had the pleasure of interviewing a few businesses that were doing really interesting things in the shared value space. While some of these businesses didn’t formally recognise their activities as being related to shared value (some hadn’t really heard the term), I put together a short paper with corresponding case studies that linked what they were doing with this broader concept.

I thought it might be of value to present these in a short series of posts that I’ll be putting up over the next few weeks. I hope that they contribute constructively to discussion around shared value, and particularly how this concept relates to smaller businesses.

As a starting point, I think it’s worthwhile to ground shared value in a broader context of what some have termed “strategic CSR” and to look at some of the challenges that small to medium businesses face in applying these principles in daily practice.

I wrote a (relatively) short paper on this topic (unimaginatively titled Strategic CSR and small to medium businesses in Australia (PDF 1.3MB), which:

…explores the concept of shared value as it relates to small to medium businesses (SMB) in an Australian context. It begins by lightly tracing the evolution of the concept of corporate social responsibility (CSR) from “defensive” to “strategic” positions. It then brie!y outline the core principles of shared value and related work around economic clusters. It then considers the role that SMBs can play in achieving sustainable outcomes and some of the potential impacts of shared value on SMBs. The paper concludes with three brief examples of Australian small to medium businesses who illustrate aspects of strategic CSR as outlined in this paper.

(Note that I’ve left the case studies out of that paper, as I’ll be posting them here individually in the next few weeks.)

One short note: my lecturer took (constructive) issue with my closing statement that “We are in the midst of a significant shift in thinking about the role of CSR within the business community.” He noted that perhaps this was more prevalent in the circles that I frequent, which is probably true. I very much based this on my experience and reading and there does seem to be a lot of discussion about these concepts, from Porter & Kramer’s HBR articles to commentary on the web to my own discussions amongst peers and with interview participants etc. I’d be interested in your thoughts: is this shift more broadly applicable, or is it a niche thing?

Business 2.0, Social media & networking, Sustainability

Platforms for shared value creation (redux)

I’ve just completed 3rd semester of my masters degree, and I wanted to share one of the papers I wrote on the concept of Platforms for shared value creation, that builds on the model that I outlined in my Web Directions South 2010 talk.

Diagram outlining the 'Platform for shared value creation' concept

The paper, which is provided under a Creative Commons license:

…proposes a model of service delivery that has the potential to create shared value (Porter & Kramer 2011), addressing pressing societal and environmental needs while delivering commercial returns. The aim of this paper is to introduce the model — the “platform for shared value creation” (PSVC) — as a first step towards further exploration in the future. The model is not yet fully-formed and as such this paper should be considered more as “thinking in draft” for further discussion and refinement.

While the nature of these things means it takes an academic tone, I hope that it provides some value as a contribution to discussions around shared value, Collaborative Consumption, and social innovation. I would love to know any feedback you might have, so please drop me a note in the comments if you find it useful, or want to challenge or probe any of its assertions.

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.

Business 2.0, Sustainability

Intrinsic and extrinsic value

I’ve been having some further thoughts relating to my previous post on value creation, platforms and trust, and the terms “intrinsic” and “extrinsic” value keep coming to mind.

Intrinsic value = “belonging to a thing by its very nature”

The way I’ve been thinking about the concept of “intrinsic value” is the underlying value a business/organisation provides, just by existing.  It’s the value, taken from the community/customer/environmental perspective, that is generated by the business simply existing.  It is the business’ core purpose — the reason that employees will be passionate about coming to work, and customers will be passionate about spreading the word.

In the case of Airbnb, the business exists to support people sharing their spare space.  This provides community value, whether you are a buyer or seller – it enables the community to do things it wouldn’t otherwise be able to do — i.e. afford to travel longer, generate financial return for disused space.  It also has environmental (and one could argue economic) value because it maximally utilises resources.

Similarly, GoGet creates a more convenient mode of transport at a lower cost to the customer.  It also reduces demand for resources (space for parking, one car shared among many people) and places the returns for efficiency back to the company, so they are incentivised to improve efficiency of vehicles etc.

Extrinsic value = “being outside a thing; outward or external”

What I conceive “extrinsic value” to mean is the economic value the business derives from its activity — i.e. financial return to the business.  This is the reward to the company/organisation for providing the intrinsic value that is its core purpose.

A strong intrinsic value proposition makes it much easier to generate these type of returns, as well as providing the broader social and environmental returns that might also be possible.

This is a shift in business thinking from extracting value from the market, to how to creating value for and with the market, and a refocusing on intrinsic value proposition —core purpose — to achieve deeper returns.

These terms might mean different things to different people (I know it means something very different in financial markets, for example), so I wonder if using this language makes sense?  But in any case, I hope it’s an useful take on focusing on core purpose to achieve business outcomes.

Business 2.0, Sustainability

Social innovation in business

I’ve been doing a lot of thinking (but clearly not a lot of blog writing!) about the idea of social innovation in a business context.  This ties into some previous thoughts I’ve posted about values and sustainability as a lens for innovation.

Two articles that I’ve come across recently expand on this concept.  The first is from Tim Draimin and focuses on shifting from Corporate Social Responsibility to Corporate Social Innovation.

In the article Tim references Michael Porter’s thoughts:

Michael Porter suggests that CSR has evolved.  He speaks about a concept he calls “shared value” or “corporate policies and practices that enhance the competitiveness of the company while simultaneously advancing economic and social conditions in the communities in which it operates.”

The thinking goes that while traditional CSR programs are often viewed as an adjunct to the core business, something that happens “to the side”, the idea of CSI is that the benefit comes from the core business itself.  (While I do have reservations about the Corporate Social Innovation moniker, I do think the concept has merit.)

This is akin to what Adam Werbach outlines in his book Strategy for Sustainability when he talks about North Star goals and aligning sustainability goals with core business activity.  To my mind this also very much aligns with the concept of “betterness models” as put forward by Umair Haque.

I was reminded of this article (which I read quite a few weeks ago now) when I came across Dan Gray’s post on delivering short-term “quick wins” for sustainability within the context of a longer-term sustainability agenda.

In his post he says:

The authenticity of your commitment stems from the materiality of your actions – i.e. beyond the thin veneer of charitable giving, cause-related marketing etc., that commitment should be self-evident in the very products and services you provide, and the manner in which you conduct your daily business.

And goes on to quote Jonathon Porritt:

In an ideal world, all actions taken by a company to enhance its own commercial success should simultaneously generate benefits for society, over and above those that come directly through the use of that company’s products and services.

There are, of course, a number of cultural drivers that make consideration along these lines important for businesses moving forward, and I think they tie into the shift we’re also seeing in relation to social technologies (social networks etc.).  A quick summary of my current thinking is that people are seeking:

  • Human connection: as organisations have grown in size and become more and more depersonalised, people are wanting more human interactions and personal response.
  • Authenticity and transparency: from greenwashing to the GFC, the market’s trust has been eroded.  People are looking for organisations to say what they mean and mean what they say.
  • Co-creation and collaboration: people are taking a more active role in developing the products and services that they use.  And if they don’t find what they’re looking for, they will often create it themselves.
  • Environmental and social responsibility: global warming, looming limits to natural resource consumption, pollution and waste; respect for human dignity with fair wages and conditions — people want to support organisations that take these issues seriously, not just as something “to the side”.

Building a business (or service/product/brand) that resonates in this new “economy of meaning” requires a rethinking of an organisation’s role in more than “market” or financial terms.  But also, I think, a re-evaluation of an organisation’s relationship with customers/constituents, stakeholders, and the environment.

And I believe that it is in this rethinking that significant opportunities for innovation can be found.