Mark Kramer

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Promoting Shared Value Creation Within and Across Companies

Sunday, October 16th, 2011

Many companies have donated to social causes for years. For the most part, however, these philanthropic activities were viewed as nice things to do or as ways of improving the company’s image as a member of a local community, rather than as an investment in the business. Recently, however, a growing number of companies have come to recognize that advancing social causes is not only good PR, it can also be good business. Well designed and executed social programs can provide “shared value”—delivering at least as much value to the donor corporation and its shareholders, as to the recipients.

This practice, which has been aptly dubbed “Creating Shared Value”, is already being adopted by a growing number of companies. Maximizing this value, however, is not easy. It is difficult to build commitment through all levels of the organization, develop a true Shared Value culture and, especially, maintain focus and commitment in good times—and even tougher in today’s challenging economy. Most companies, therefore, need help in making a convincing business case to their executives and their boards, getting buy-in, building commitment through all levels of their companies and in understanding the ways in which partnering with other organizations can multiply the value delivered to all parties.

The last week of September saw three separate forums in which leading Shared Value proponents have attempted to provide exactly this type of help by sharing their visions, their experiences and their best practices with other companies and institutions.

One example is a webinar sponsored by FSG, a non-profit social impact consulting firm whose Managing Director (Mark Kramer) joined with Harvard Business School professor Michael Porter to explain the concept of Creating Shared Value (CSV) in a January 2011 Harvard Business Review article. After FSG set the stage by briefly explaining the evolution of corporate philanthropy toward Shared Value Creation and by laying out its Ten Building Blocks, it introduced Corporate Social Responsibility executives from three companies, each of whom provided an overview of how they made the business case and built commitments for CSV within their own companies. For example:

  • Hewlett-Packard explained the need to align and continually reinforce vision, strategy, delivery and performance across all levels of the organization, from the board to branch executives and individual employees;
  • Intercontinental Hotels demonstrate how its four-pronged model for a Shared Value sustainability program gained commitment, not just from its own executives and employees, but also from its franchisees and its customers;
  • Houghton-Mifflin Harcourt showed how aligning its social commitment with its business objective (of “selling educational achievement”) and assisting its business leaders with the tactical requirements for managing such programs allowed it to maintain its program across the regimes of three CEOs in less than two years.

Although these and a number of other companies have certainly demonstrated commitments to Shared Value, as explained in previous blogs, I see two companies—IBM with its Smarter Planet initiative and General Electric with Ecomagination—as most embodying the ways in which companies can effectively integrate social value with their own business objectives.

IBM has been particularly active in both:

  • Explaining the metrics it uses to assess the benefits of its social and philanthropic activities and the need to continually demonstrate the strategic value these efforts deliver to IBM as a means of “ensuring sustained support for these programs within its own company”; and in
  • Evangelizing the importance of aligning business and social strategies and helping all types of for and not-for-profit organizations, academic institutions and governments work together to create mutual value.

In the last week of September, for example, IBM sponsored two forums to evangelize the value of and help other companies build their own programs—both individually and in concert with other organizations:

  • THINK: A Forum on the Future of Leadership brought panels of industry leaders together with up-and-coming leaders from government, business, academia and science to examine the structural changes that will affect all organizations in the coming decades and the ways in which these organizations can, jointly and independently, reinvent themselves to improve the world in which we will all live.
  • Regional Upward Spirals: The Co-Evolution of Future Technologies, Skills, Jobs and Quality of Life in which it convened leaders from leading institutions including think tanks (McKinsey Global Institute, Institute for the Future), universities (MIT, Berkeley and Michigan State), corporations (Boeing, IBM) non-profits (IEEE and CAEL) and regional technology clusters (Washington Economic Development Commission) to examine how technology will reshape the nature of learning and jobs, the skills that will be required in the new economy, the types of jobs that will be created (and those likely to face a shortage of qualified employees) and the opportunities for leaders in all segments to work together to create the jobs, the employees and the academic/industry clusters that will be capable of addressing the needs of tomorrow.

FSG and a couple of its clients, meanwhile, is already on the agenda for another webinar that will explain the ways in which numerous companies and organizations can work cooperatively to address societal needs—an approach they call Collective Impact (see FSG’s recent book, Do More than Give) and the Winter 2011 Stanford Social Innovation Review article). This approach, as it will discussed in a November 9 webinar, depends on each party applying a common set of measures to evaluate performance and track progress.

Forums, such as those recently sponsored by FSG and IBM, play critical roles in explaining the payoff—both corporate and social—and of providing guidelines for managing such initiatives. Hopefully, we will see many, many more by FSG, IBM and many other organizations, over the next couple years.

Posted in Corporate Social Responsibility, Hewlett-Packard, IBM | No Responses »
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Shared Value Creation: The Next Evolution of Corporate Social Responsibility and of Capitalism

Sunday, February 6th, 2011

Corporate social responsibility (CSR) and corporate philanthropy (CP) used to be managed separately from the business. They consisted largely of cash contributions that companies viewed, at best, as an effort to give back to the communities in which they operated and their employees lived. At worst, they were seen as a subtle form as extortion that companies had to pay to appease and demonstrate their “commitments” to their communities.

This is changing. A growing number of companies now recognize that:

  • CSR and CP initiatives can deliver big business benefits to their organizations; and that
  • They can often deliver much greater value to society by contributing technology and expertise than they can by contributing just money.

Many companies, for example, now recognize that reputations for social responsibility can burnish the company’s brand, attract new customers, aid in recruiting employees and improve employee commitment to the organization. Some even claim that their CSR and CP activities have increased their share prices by attracting incremental new investments from the growing number of Social Investment Funds.

This, however, is only the tip of a value proposition that can go much deeper—a value proposition that can directly help the corporation enter new markets, improve economies in existing markets and create totally new business opportunities. In fact, Michael Porter and Mark Kramer, in their January 2011 Harvard Business Review article, argue that companies must recast narrowly defined CSR and CP programs around a proposition for creating shared value—an approach designed to deliver as much value to the company as to society. They insist that a structured approach to Shared Value Creation (the latest non-intuitive buzzword for efforts intended to deliver both business and societal value) can, for example, yield:

  • Big cost savings, as in the $250 million savings (a $2.71 return on every dollar it spent on these programs from 2002 through 2008) that Johnson & Johnson attributed to its employee wellness programs (not to speak of demonstrated improvements in employee attendance and productivity);
  • Big revenue gains, as in the $18 billion that General Electric derived from the sale of Ecomagination products in 2009, a category of offerings that is expected to grow at twice the rate of total company revenues over the next five years (an issue that I will discussed in my February 20th blog on GE’s Smart Grid strategy); and
  • Big improvements to employee leadership development and retention, as with IBM’s Corporate Service Corps (as I examined in my January 23 blog and accompanying report), which deploys teams of high-potential employees on 30-day projects to help emerging countries address some of their most pressing societal needs.

Porter and Kramer, in fact, go further, much further. Not only do they view Shared Value Creation as the next evolution of CSR and CP, they also view it as the next evolution of capitalism—a more sophisticated form of capitalism that “arises not out of charity but of a deeper understanding of competition and economic value creation.” It is a form of “self-interested behavior” that creates economic value to the company, by the very process of creating societal value. A form of behavior that will also help mend badly frayed corporate and capitalist reputations and facilitate a more productive relationship between business and governments.

This “Harvard School” view of Shared Value Creation appears diametrically opposed to the “Chicago School” view in which Milton Friedman famously equated the spending of shareholders’ money for any purpose other than to advance the interests of the business as a form of “theft.”

Perhaps, however, these views are not as philosophically opposed as they may appear. After all, even Friedman was not opposed to all corporate giving. He admitted that corporate philanthropy could be justified if it served a business objective, such as increasing customer loyalty, improving employee teamwork and motivation or strengthening the marketing of a company’s brand.

But whichever side of the supposed philosophical divide on which one may fall, the issue is becoming increasingly moot. A rapidly growing number of very large, and very influential corporations (including virtually all of the largest technology companies) have instituted large CSR and CP programs and most have conceived and are managing these programs in way that is intended to create shared value. And this does not include the hundreds of small companies that have built their entire business models around addressing societal needs or the growing number of social entrepreneurs who are creating hybrid organizations that blur the line between for-profit and non-profit organizations.

In other words, regardless of whether you consider social value creation to be a new generation of capitalism, or just a new generation of corporate social responsibility, one thing is clear. More and more companies—and especially technology companies—are becoming convinced that they can, do quote another well-known economic philosopher, Benjamin Franklin, “do well by doing good.”

Posted in Corporate Social Responsibility, IT Industry Role in Education | No Responses »
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