Porter’s “Shared Value” idea: Where’s the Beef?

idea
Image by orkboi via Flickr

As I have been exploring various pathways of my “business detox” investigations, a number of colleagues have suggested that I really needed to read Michael Porter and Mark Kramer’s (apparently provocative) HBR article entitled “The Big Idea: Creating Shared Value”.

Now, if the authors really believed in “shared value”, one would presume that they would openly provide their article — with no strings attached — with the idea of driving up “shared value”. Well, not quite. You can read the first bit of the HBR article here, but after the teaser you’ll have to register with HBR and pay for access. Mark Kramer has put a PDF of the article on the internet, however interestingly there is a statement embedded in the footer of the PDF document that states “This article is made available to you with compliments of Mark Kramer. Further posting, copying, or distributing is copyright infringement.” So do this Google search and download the PDF yourself…

So after all that anticipation about this next “big idea”, I must admit to a major case of lunch-bag letdown after the read. In fact, I was reminded of that wonderful Wendy’s commercial from 1984 — “where’s the beef?”

OK. Nice big bun (it’s a very big bun!), but really, where’s the beef? I don’t think there is anything new in their concept of “shared value” that any reasonably enlightened business manager doesn’t already at least attempt to think about when they are making business decisions. Their specific definition of “shared value” is “…policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.”

This is the new “big idea”? As far as I can tell, this is classic stuff out of Business 101, that suggests long term business sustainability is enhanced if you have positive (presumably some combination of economic and social) relationships with your employees (who live in the communities your operate in), your suppliers, your consumers, and other significant stakeholders.

What they really seem to be focusing on in their article is that progressive companies are getting better at producing (and selling internally) intelligent business cases that better estimate the actual cost/benefit analysis (CBA) at play in their business opportunities, and so now they have better arguments to sell to their Board for why they should take a longer term view of investing in a certain community. As a practitioner to a “shared value” approach, what does this look like to my business? Examples cited in the article include working with local farmers to improve their yields so I can increase my access to inputs; contributing money and expertise to improving roadways so my trucks can get to market faster and with less repairs; investing in helping my employees gain better health so that they don’t trigger as many health insurance claims, skip as much work, and can thus provide me with more productive hours.

Smart companies have been driving initiatives like this for decades. McDonald’s initial entries into the Russian market in 1990 required them to develop a whole farming supply chain so they could secure appropriate quality inputs for their Russian stores. Presumably that helped the farmers by teaching them new farming methods, improving the quality of their output, and providing them a purchaser for their outputs. Shared value is created.

It’s very clear that the rationale given for companies to embark on the shared value approach is to secure profits for the business, and Porter/Kramer elaborate on the requirement for developing new economic and quantitative metrics for measuring the effectiveness of “shared value” initiatives. From my read, “shared value” boils down to three key things: progressive companies are (1) getting better at thinking through business problems more holistically and better understanding the actual inter-dependencies at play in their markets; (2)  getting better at estimating the true costs and benefits of addressing issues more holistically, and (3) getting better at selling these longer-term business cases to their senior management to secure longer term investment.

(Frankly, we could help them a lot by providing more accurate pricing signals to them in terms of the actual costs of their current externalities. Check out my proposal for what such a global/local framework might look like.)

“Shared value” principles are really just “business as usual”, with an emphasis on businesses to develop better, more accurate  understandings of their interdependence with society at large, to appreciate how the social sector and governments fit into the picture and to learn how to leverage them accordingly, and to develop valid metrics and longer term business cases for generating better win/win outcomes. Whether widely practiced or not, I’m pretty sure this is basic stuff out of a Business 101 textbook that I might use in my first year “Business and Society” course.

“Shared value” = let’s please think things through a bit more completely and develop better, more accurate business cases for our investment. This is the “big idea”? Really, you’ve given me a nice big bun, but where’s the beef?

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2 thoughts on “Porter’s “Shared Value” idea: Where’s the Beef?

  1. I really enjoyed the article! There is always going to be a push-pull there with what you offer and what value it brings to all parties involved. I think we just need to remember: customers first.

    1. Thanks for your comment, Nicole. The great news with Porter weighing in on “compassionate capitalism” is that his credibility helps to drive the conversation forward.

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