Wednesday, December 7, 2011

Is social value creation a possibility in the health care industry?

After reading Porter and Kramer’s “Creating Shared Value” article,[i] I immediately thought of the US healthcare industry as one of the main culprits for sapping shared value. For the most part, the health care industry defines economic success by its bottom line—and not by its ability to provide necessary health services to individuals so that they can return to the labor market and continue to lead healthy, productive lives. Indeed, the health care industry does not seem to worry itself with “expanding the total pool of economic and social value” (5)—rather, its profits seem to be the motivating factor.

While there are many reasons for the current state of the US health care industry, it is more important to look ahead to the opportunities for change that are available to the health care industry. In particular, the health care industry would do well to take note of the first two methods of creating shared value from Porter and Kramer’s article. These methods represent huge opportunities to the health care industry—not only to create shared value but to benefit their bottom line, as well.

1. Shared value is created by reconceiving products and markets.

The main idea behind this method is that companies have forgotten key market segments—often, the communities that have greatest need for a product/service but the least ability to pay. The health care industry has a huge market that is waiting for them to implement innovative reform—nearly 50 million individuals are uninsured![ii] Health care companies should reconceive their product—insurance—by asking what Porter and Kramer identify as one of the most basic questions—“Is our product good for our customers?” (7) [An interesting article on whether health insurance is ‘good’ for us can be found in The Atlantic in March 2010. One good tidbit—when uninsured individuals in their 60s go on Medicare, there is no significant effect on mortality.[iii]]

2. Shared value is enhanced when companies redefine productivity in the value chain.

Unlike traditional business logic, there are often opportunities to enhance a company’s productivity while still pursuing societal progress. In terms of health care, an increased focus on developing preventative care initiatives (instead of stop-gap measures like emergency room visits) would reduce the health care industry’s use of resources, decrease overall costs, and improve quality of health care—at the same time as creating social value (healthy communities)!

It is clear that the increasing cost of medicine and the rising rates of uninsured Americans highlight the urgent need to rehaul the US health care system…but how can this be done? Is the health care industry so far removed from social value creation that a major disruption will need to happen for any real change to occur?



[i] Porter, Michael E. and Kramer, Mark R. “Creating Shared Value: How to Reinvent Capitalism—and Unleash a Wave of Innovation and Growth.” Harvard Business Review, Jan-Feb 2011.

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