Tuesday, May 2, 2017

Who defines value?

In their piece "Creating Shared Value", Michael E. Porter and Mark R. Kramer make a convincing case that business can and should play a role in fostering social good. Porter and Kramer's arguments surrounding creating shared value (CSV) in many ways mirror the arguments made by sharing economy behemoths like Uber and Airbnb, companies that were in their infancy when the article was written in 2011: that private sharing economy companies can "open up many new needs to meet, new products to offer, new customers to serve, and new ways to configure the value chain." Travis Kalanick, Uber's CEO, would almost certainly agree that governments could do a better job of fashioning regulations that "enable shared value rather than working against it." The question, however, is whether these companies truly create shared value for the individuals they partner with for services - drivers and homeowners - and, more importantly, whether the value created for those individuals represents the societal value that CSV strategies, as envisioned by Porter and Kramer, are meant to maximize.

Uber would argue that it creates shared value by providing vehicle owners with a means to make money off of their vehicles that would otherwise sit idle. Moreover, the company would claim that it provides overall societal value by providing taxi services to underserved areas, often at prices better than what the competition can offer. These arguments are not untrue: Uber does provide vehicle owners a means to supplement their incomes by driving cars they already own and it has, in many cases, replaced horrendously inefficient taxi systems. But this comes at a cost - those local systems were generally built with regulations meant to ensure non-discrimination and Americans With Disabilities Act compliance, and Uber does not necessarily fill that gap. In this case, while the company has created value for many, does the value it has created really represent "shared" value in the sense that it has societal benefit? That remains up for debate, and likely varies market by market.

Likewise, Airbnb's stated premise is that it provides homeowners with a means to supplement their incomes by renting our spare rooms or apartments. In places like New York and San Francisco, however, the evolution of home-sharing has led to a sharp decrease in housing stock (as much as a 10% decrease in the case of New York). While homeowners have surely benefited from Airbnb's existence, as have tourist-oriented businesses that have seen an increase in traffic, have local residents seeking apartments experienced any benefit at all? Who has their shared value creation benefited?

Companies seeking to create shared value have been crucial innovators in the 21st century, but determining how to regulate them - and how to measure their value creation - is a critical policy challenge. We should be wary of for-profit entities claiming to offer societal value creation without determining what costs that value creation might have. Surely, these are capable innovators that develop new market frameworks, but at what cost? None of this is to say that the status quo should not change, but only that we need both quantitative and qualititive analysis of what CSV is really bringing to the table.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.