Professor Michael E. Porter coins here a brilliant idea with the new concept of shared value. This new concept of shared value might or will have undoubtedly a huge impact on how we do business, how we create economic value, in the coming decades.
This is the right time to begin with redefining capitalism, as a system of not only creating economic value but also creating societal benefits.
"The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges."
Read below the transcript - I have summarized - of the interview of Professor Porter for the Harvard Business Review on February 2011.
At the bottom of this post you can also enjoy the video and a link to the HBR article.
Join the discussion!
"We’ve gotten into a vicious cycle in terms of relationship between business and society; the benefit of business in meeting society needs, like improving peoples life. This vision has been narrowed, and companies are being perceived as making profit at the expense of the society or making profit that are not in benefits of communities."
A lot of companies would argue that what we do is run businesses, we hire people when we’re successful, and to have an agenda beyond that is out of our scope.
“That has been the increasingly well-articulated view of business and society during the last 30 years”. The simple act of profit maximization was good in itself; what was good for business, was good for society as well... But I think as we’ve seen the effect of business practices on healthcare, nutrition, the mortgage crisis; example after example... Profit is not inconsistent with society needs, but if you think about creating value in a more “narrow way”, if you don’t see the broader and longer term influences on the ultimate sustainability of a firm success, you can get into the situation where that profitability does come at the expense of the society."
Creating shared value, how does it work?
"...What’s good for business is good for society and what’s good for society is good for business. It sounds like a play on words but it’s really a quiet a profound difference in perspective..."
"Concept of shared value is focused on tremendous opportunities for creating economic value through creating societal benefits. Creating societal benefits is a powerful way of creating economic value..."
"Let’s get busy mobilizing capitalism to meet those needs and make money out of it."
Shared value vs Corporate Social Responsibility: An example?
"Don’t come up with volunteer programs to have people building houses, your petrol engineer cleaning up the beach on the week end, don’t give money to charity"
"Fair trade is a classic CSR idea: there is a fixed pie, fixed amount of wealth.
We just need to share more of that wealth with the farmers. If you do that you’re a good guy, you’re fair."
"Shared value is different; it’s about expanding the pie. To figure at how we can create more value, and therefore the farmer will get rewarded for the reality of participating and creating more value and everybody can benefit. Smart Companies understand this better, that if you train the farmers better, help them to get access to fertilizers & seeds, you can make farmers more productive, raise the quality of products. You can go improving the farmer’s income from 20% to improving 200%, but not through a charity, not being a good guy, but by expanding the pie, by creating economic value but also creating social value at the same time."
This is the right time to begin with redefining capitalism, as a system of not only creating economic value but also creating societal benefits.
"The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges."
Read below the transcript - I have summarized - of the interview of Professor Porter for the Harvard Business Review on February 2011.
At the bottom of this post you can also enjoy the video and a link to the HBR article.
Join the discussion!
"We’ve gotten into a vicious cycle in terms of relationship between business and society; the benefit of business in meeting society needs, like improving peoples life. This vision has been narrowed, and companies are being perceived as making profit at the expense of the society or making profit that are not in benefits of communities."
A lot of companies would argue that what we do is run businesses, we hire people when we’re successful, and to have an agenda beyond that is out of our scope.
“That has been the increasingly well-articulated view of business and society during the last 30 years”. The simple act of profit maximization was good in itself; what was good for business, was good for society as well... But I think as we’ve seen the effect of business practices on healthcare, nutrition, the mortgage crisis; example after example... Profit is not inconsistent with society needs, but if you think about creating value in a more “narrow way”, if you don’t see the broader and longer term influences on the ultimate sustainability of a firm success, you can get into the situation where that profitability does come at the expense of the society."
Creating shared value, how does it work?
"...What’s good for business is good for society and what’s good for society is good for business. It sounds like a play on words but it’s really a quiet a profound difference in perspective..."
"Concept of shared value is focused on tremendous opportunities for creating economic value through creating societal benefits. Creating societal benefits is a powerful way of creating economic value..."
"Let’s get busy mobilizing capitalism to meet those needs and make money out of it."
Shared value vs Corporate Social Responsibility: An example?
"Don’t come up with volunteer programs to have people building houses, your petrol engineer cleaning up the beach on the week end, don’t give money to charity"
"Fair trade is a classic CSR idea: there is a fixed pie, fixed amount of wealth.
We just need to share more of that wealth with the farmers. If you do that you’re a good guy, you’re fair."
"Shared value is different; it’s about expanding the pie. To figure at how we can create more value, and therefore the farmer will get rewarded for the reality of participating and creating more value and everybody can benefit. Smart Companies understand this better, that if you train the farmers better, help them to get access to fertilizers & seeds, you can make farmers more productive, raise the quality of products. You can go improving the farmer’s income from 20% to improving 200%, but not through a charity, not being a good guy, but by expanding the pie, by creating economic value but also creating social value at the same time."
The Big Idea: Creating Shared Value - Harvard Business Review article
