Shared Value and Development

Michael Porter’s article about “shared value” poses some very compelling ideas to me. I have long been interested in the power of capitalism and business solutions harnessed for society good. As Porter points out, capitalism has been the largest force across the world and throughout history to bring people out of poverty.

I studied Finance as an undergraduate and have valued the hard skills and insights this business degree gave me. However, as characterized by many in my generation (pointed out by Bhalla as well) I wanted to use my skills to advance social good. This motivation has taken me to the front lines of some of the innovative public-private hybrids trying to create shared value for their communities.

I worked for a summer in Cape Town, South Africa at a jointly public and privately funded business incubator that exclusively supports black entrepreneurs. South Africa is still trying to recover from the deep economic divides left from apartheid and this incubator is one of the ways the government has sought to ease these divides. This incubator is a perfect example of creating shared value because it not only seeks social goods but also simultaneously pursues profits and economic efficiency. The private investors in the incubator act as venture capitalists who stand to gain from the success of the entrepreneurs. The community in general also benefits from more entrepreneurship and more people having access to the sorts of resources needed to multiply their efforts.

I also worked for a few months in Mirebalais, Haiti at a microfinance organization. This microfinance organization extended small loans to women and helped train them in at least one income-generating activity: planting pistachios, raising goats, or starting a small store. At first this microfinance’s funding came from donors, but now it has become self-sustaining.  This business recognizes the benefits to creating shared value in its community and therefor heavily invests in the training of its participants. It knows the more value the women are able to generate the less likely they will default on their loans.

These two and many of the organizations Porter sites, like Root Capital and TechnoServe, are great examples of a fused profit and social good generating model, but in some ways these examples are convenient partnerships.  It can be convenient for businesses to generate social value when it lowers their power bill or makes their employees more efficient. Unfortunately, it is not often convenient or profitable for companies to invest in social good.  The structure of many corporations that seeks to optimize stockholder value will limit many from achieving the optimal shared value Porter idealizes as the answer to many of the world’s ills. While a strong consumer preference for companies that generate shared value might be a strong enough incentive for companies, historically it seems like consumers are not nearly as aligned with their values when it comes to their buying preferences. It seems like governments and private donors are still some of the best advocates to encourage new organizations aiming for shared value (exemplified by the South African incubator and Haitian microfinance NGO) and existing organization to shift their optimization goals.

References:

Bhalla, V. (2017, March 27). Twelve Forces That Will Radically Change How Organizations Work: The New New Way of Working. Retrieved from https://www.bcg.com/en-us/publications/2017/people-organization-strategy-twelve-forces-radically-change-organizations-work.aspx?fbclid=IwAR3nNDX-MuStVfgN6tic8S22YW9tIZMi6GYNRdL4qmBixdCBSQv5cVb6AKk&redir=true

M. E., & Kramer, M. (2015, August 25). Creating Shared Value. Retrieved December 2, 2018, from https://hbr.org/2011/01/the-big-idea-creating-shared-value