The Giving Model: A True Competitive Advantage

Shared value is an incredible construct for humanity, especially as we become more progressive.  Equally affected by the concept of shared value is business.  An effective business must have a perfectly symbiotic relationship with the living environment surrounding it.  When this relationship is achieved, economic profits and social value will skyrocket.  When the people are happy, they in return will spend more money on the business that they attribute some happiness too.  It is important to break the old cycle of businesses focusing on profits first, social factors second, and replace it with the new paradigm of focus on contributing to positive social factors first, with trust that profits will come as a result.  With this shift in mind, it is also imperative to discern the difference between corporate social responsibility (CSR) and shared value.  The real difference is to what degree social issues play a role in the strategy of a business.  CSR is when the emphasis on the social factors are a byproduct of business; whereas, shared value is when social factors take on the core of the business.

Unfortunately, as of today, most businesses are too caught up in the aforementioned cycle of focusing on economic profits.  Most seem to take on CSR as a solution to bad press or just as an afterthought.  A lot of companies are under the misunderstanding that partaking in social initiatives will require many additional costs that will obstruct profit.  One incredible and profitable company that has always built community into the core of their strategy is TOMS.  They originally started as a shoe company that would donate one pair of shoes for each pair purchased.  As time passed, and positive economic growth occurred, they expanded their giving model to eye glasses, safe water, safe birthing training, and bullying prevention programs.  As of a couple weeks ago, they expanded once again to provide funding to organizations that are combating American gun violence.  As of today, TOMS has given away 86 million pairs of shoes, helped restore the sight of 600,000 people, 600,000 weeks of safe water, 175,000 safe birth services, and 5 million dollars to anti-gun violence programs.  TOMS is also valued at 625 million dollars.  They could’ve taken the approach of not giving back and just selling shoes and glasses, but they chose to base their company on a giving model.  This choice attracted more consumers to buy their shoes based off this charity value that is solidified in their company, which in turn drove up economic profits.  This giving model isn’t just a thing they do, it is their brand.  Recently, TOMS sold 50% of its shares to Bain, which agreed as part of the sale to continue this model of giving back, both in good economic times and bad.

I believe that every company going forward needs to adopt this mindset.  Michael Porter, a strategy expert, often preaches the importance of competitive rivalry when shaping strategy.  Not only do I believe shared value is a competitive advantage, I believe it is the most important and currently differentiating competitive advantage there is.  The symbiosis of business and social initiatives is quintessential for business success, overall capitalism, and humanity.