7 Forces Creating Shared Value in Every Business Strategy
The strategic conversation has shifted. The time has come to realize that obsessing about quarterly results won't build an enduring company. Businesses still just creating three to five year strategic plans miss opportunities and put their organizations at risk. Forward-thinking leaders shape the future by achieving results in the short-term while building the foundation for opportunities in the longer term. Organizations such as Unilever, Coca-Cola, Nike, and Marks and Spencer find ways to create greater value for their companies by creating value for society.
Michael Porter and Mark Kramer promoted the term “creating shared value” through a series of articles first introduced in Harvard Business Review beginning in 2011. In this game-changing concept, companies operating in ways that bring positive social impact go far beyond social responsibility, to spur innovation, competitive advantage and industry transformation. Every business, in every sector, in every country and of every size has the potential for greater growth at the intersection of economic and societal progress.
Seven powerful forces are converging to bring both challenges and opportunities. Companies looking at these forces through a lens of creating shared value will find new and compelling ways to foster innovation, engage employees, create new and better products and services, enter new markets, build greater brand equity, and increase profits by solving some of the most significant social issues of our time. These 7 forces should be considered as you look at your company’s strategic plan for the short term and to position your organization to lead and shape your industry’s future:
Disruptive Innovation: Companies must continuously scan the marketplace for new products, services or business models that may render the current way of operating as obsolete. A 2012 GE Global Innovation Barometer survey of more than 1,000 global executives showed overwhelming agreement that innovations addressing human needs will eclipse those merely generating profit. Shared-value innovations increase access to health care, improve education, spur job creation, and protect the environment, while also raising profitability.
Economic Instability: Financial uncertainty threatens all industries and ripples around this inter-connected world. Yet most senior executives continue to myopically chase quarterly profits, sometimes right off a “short-termism” cliff. Greed and pursuit of unsustainable growth led to the great recession still decimating people, countries and businesses around the world. One of the first things Paul Polman did when he became CEO of Unilever in 2009 was to end quarterly earnings reports for the huge consumer products company. Polman believes managing for the long-term drives enduring growth, while being held hostage to quarterly earnings promotes poor business decisions and, all too often, unethical behavior.
Societal Upheaval: Political unrest, corruption, poverty, unemployment, food shortages, inadequate health care, poor education, pollution and unfair labor practices find their ways into your supply chain, employee behaviors and your brand. Failure to anticipate and manage societal issues can take down a company. Proactive leaders find opportunities in the midst of upheaval. Coca-Cola enters new markets in emerging nations by setting up women-owned distribution centers. Unilever improves sanitation and health conditions while helping entrepreneurs sell its products.
Stakeholder Power: Companies focusing primarily on shareholders at the expense of others, open doors for unintended consequences and potentially unethical behavior. Yet shareholders benefit most when a company meets the needs of all stakeholders – employees, customers, suppliers, governments, communities, NGOs and more. Nike lost 69% of its earnings in 1998 after coming under fire for unsafe labor practices by its suppliers. Today, Nike has become a global leader in collaborating with suppliers, NGOs, governments and even competitors in bringing better working conditions and innovation throughout the entire value chain.
Environmental Degradation: According to a WWF 2012 report, we are currently using 50% more resources than this planet can ultimately satisfy. Unilever’s Sustainable Living Plan sets aggressive goals to double the company’s earnings while cutting its environmental footprint in half. U.K. based Marks & Spencer’s strategy redefines retail for the twenty-first century by putting sustainable development as fundamental to its strategy. M&S continues to grow profitably while reducing carbon emissions, recycling nearly all of its waste and generating most of its energy from renewable sources.
Globalization: Technology and rapid transportation serve to link people, companies and countries around the world. Just as products, services, ideas, and investments travel abroad, so too do problems arising from resource depletion, overpopulation, climate change, and economic disparity. Peace and stability benefit people around the world and the businesses who serve them. When China opened its doors to trade, it lifted 400 million people out of extreme poverty. Yet its unprecedented growth could become the country’s downfall if it doesn’t manage the environmental and social impacts and address rampant corruption.
Population Shifts: A rapidly expanding global population and shifting demographics prove to change the playing field for all organizations. Population growth has been declared by the U.N. to be the biggest problem of the century posing serious threats to the environment, human health, and economic development. Most of this growth comes in the poorest countries. Today, more than half of the world’s population lives on less than $2.50 per day. Urbanization presents other challenges and opportunities as more than 80 percent of Americans now live in cities. And, multiple generations in the workplace challenge the employment practices of past decades as companies try to attract, retain and deploy younger staff alongside veteran baby boomers.
All companies benefit by looking at the potential opportunities and challenges raised by each of these 7 forces and the convergence of multiple forces. Those gaining the greatest competitive advantage apply these with a goal to create shared value. Value for the bottom line, and value for society.
Contact me at firstname.lastname@example.org to learn how to create strategies to propel your organization forward by harnessing these forces within your industry.