Friday, April 26, 2013

Creating Shared Value

Michael Porter and Mark Kramer have been trumpeting the idea that businesses should seek to “create shared value.” This is not some empty phrase or vapid concept like, say, blue ocean strategy. Rather, Porter and Kramer argue that businesses can connect company success with social progress. Companies can reinvent, redefine, and reconceive themselves and their products to create opportunities that benefit their own bottom line as well as society. What does this idea look like in practice?

In 2005, General Electric created its “ecomagination” program as both a business plan and marketing campaign. GE ‘s website for the program emphasizes maximum resource efficiency, “cutting edge technologies and services that deliver economic and environmental gains,” and “leadership in shaping sustainable practices.” Products in the program “must deliver a significant energy savings or environmental benefit over previous designs.” Sales revenue from these products nearly doubled between 2005 and 2010.

Low-Income Households
Intuit offers free tax services online to households with incomes under $31,000. “The program blurs the line between charity and marketing, because millions of people who are sampling the company’s product, may well become paying customers as their incomes rise.” Thirteen million people have used those services since 1999.

Creating shared value is a major idea behind economic development lately. Farmers in third-world countries often have limited information and technology. Some companies, like Intuit, are offering low-cost or free text messaging services to farmers that relay local crop prices. This enables farmers to sell their goods for better prices at local markets and, based on surveys, they are earning about 25% more money. Intuit is looking to capitalize on this service by making money from text-based advertising.

In reference to creating shared value, Jeffrey Immelt of GE said “we did it from a business standpoint from Day 1. It was never about corporate social responsibility.”  As businesses find new ways to generate money while increasing benefits to society, they are validating Porter and Kramer.

Do you think this is a sustainable model? Can businesses help themselves while increasingly helping society?

Steve Lohr, “First, Make Money. Also, Do Good.,” The New York Times (13 August 2011), (accessed 20 April 2013).

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