Creating shared value

Our second daughter was born yesterday April 1, 2011. Sitting in the hospital room while mom and baby slept, I read an email from a great mentor and friend that ended:

Now, let’s work to make the world… worthy for all of our children, their children, and their children

In that spirit, I wanted to revive this blog with excerpts from a recent Big Idea piece by Michael Porter and Mark Kramer in Harvard Business Review on Creating Shared Value:

In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community… The legitimacy of business has fallen to levels not seen in recent history. This diminished trust in business leads political leaders to set policies that undermine competitiveness and sap economic growth.

A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success… Government and civil society have often exacerbated the problem by attempting to address social weaknesses at the expense of business. The presumed trade-offs between economic efficiency and social progress have been institutionalized in decades of policy choices…

The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges…

A growing number of companies known for their hard-nosed approach to business—such as GE, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Wal-Mart—have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance. Yet our recognition of the transformative power of shared value is still in its genesis. Realizing it will require leaders and managers to develop new skills and knowledge—such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries. And government must learn how to regulate in ways that enable shared value rather than work against it.

In reading Porter’s piece, I actually saw a theme common to many faiths, that of breaking down our own perceived boundaries between people and institutions, of not taking as immutable categories and narratives that we collectively have constructed. In this instance, it is the separate compartments and blinders for our interests as shareholders through our savings and managers through our jobs and for our interests as citizens and as members of communities. Amongst our challenges over the coming years will be to change this circumstance, to build a coalition of businesses, communities, and people that can see the world in a different way so that we can make the world worthy for all of our children, their children, and their children.

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