Wednesday, May 1, 2013

Is Google Creating "Shared Value" in Silicon Valley?
In Northern California many of the big technology companies like Google, Oracle and Apple are next door to poor neighborhoods and homelessness. In the Harvard Business Review article, Creating Shared Value, the concept to reinvent capitalism for the greater good presents a new approach. Companies like Google have many philanthropic initiatives like, google ideas, google cultural institute, google in education, and google green.

On it states they fund, “organizations doing vital work for society, such as improving education, health and clean water access in the developing world, leading scientific discoveries about deadly diseases or incubating new forms of renewable energy.” All of this work and creation of creating shared value sounds great, but are communities living in the shadows of these big companies being ignored?

In the Porter and Kramer article they state, “It is not philanthropy but self-interested behavior to create economic value by creating societal value.” The article ends by stating, “Shared value offers corporations the opportunity to utilize their skills, resources, and management capability to lead social progress in ways that even the best intentioned governmental and social sector organizations can rarely match. In the progress, business can earn the respect of society again.” It seems to me that they are creating shared value to new markets of the world to have their businesses continue thriving, while the middle class in the United States continues to disappear.

What are companies doing to create “shared value” opportunities? The following are three ways:
  • Change products and markets – Companies can meet social needs while better serving existing markets, accessing new ones, or lowering costs through innovation
  • Redefining productivity in the value chain – Companies can improve the quality, quantity, cost, and reliability of inputs and distribution while they simultaneously act as a steward for essential natural resources and drive economic and social development
  • Enabling local cluster development – Companies do not operate in isolation from their surroundings. To compete and thrive, for example, they need reliable local suppliers, a functioning infrastructure of roads and telecommunications, access to talent, and an effective and predictable legal system
The notion of and adjusting strategy with “shared value” concept has gained popularity among many high tech companies. Companies are emphasizing that profit-making from social good is not just a possibility but a priority. The priority then should be holistic to not only assist emerging markets for their profits but also support the communities surrounding their headquarter offices.  
As a result of this “shared value” popularity, hundreds of top companies have begun to realign their community giving. For instance, initiatives that once received very limited budget in their philanthropy or corporate responsibility are now finally pushing significant marketing dollars support.

All of this is good, but what about the people that are living in the headquarter shadows of Google in northern California; they are not seeing the shared value concept.
“Shared value” is not seen across America. In California’s Silicon Valley, Apple, Facebook and Google, among others, have reinvented the Gold Rush. But down the road in the city of San Jose it’s the Gold rush is not evident. For instance, one fourth of the population earn an average of about $19,000 dollars a year, rent alone can average more than $20,000 dollars a year, and this high cost of living and low wages adds up to homelessness.

Fifteen years ago, in the Silicon Valley 15 years ago, during the first boom, for every five jobs they were adding, they were building two units of housing.  The housing market changed to have the most expensive housing in the country. Furthermore, people who had blue-collar jobs were getting paid $10, $15, $20 an hour, and as their jobs went away they were largely unskilled and could only take jobs that paid $8 an hour. On this type of wages, rent is too expensive, groceries,  and transportation expenses are high.  In order to survive families have to live with three or four families to an apartment, or people move into homeless shelters or people leave the area completely to find a better job or lower cost of living.

This “shared value” concept will hopefully be implemented seriously in companies like Google. Silicon Valley has the brainpower and has the innovative ideas when it comes to poverty throughout the world. However, there has to be a growing awareness of what is happening to people in the backyard of Google’s headquarters. If the “shared value” is taken seriously perhaps the brilliant innovative ideas can take this to the next level to solve the cycle of poverty in the America. The responsibility will not only be on innovative technology companies like Google but also the public sector, government leaders and community leaders have to embrace and create coalitions for “shared value” strategies.

Read more: 

Creating Shared Value. Porter and Kramer. Harvard Business Review, January-February 2011

Charts explaining social inequalities in Silicon Valley:


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