Business can co-create shared value with communities

Prof Robert Kaplan explains to Alan Hosking how the South African business community can use a shared value strategy to address key challenges in the country.

Where did the concept of shared value strategies originate?

In their 2011 McKinsey Award HBR paper, Michael Porter and Mark Kramer advocate that companies create shared value by enhancing their competitiveness while advancing economic and social conditions in the communities in which they operate.ยน

Their vision is for shared value strategies to become the new “corporate social responsibility”. Many companies today have active social responsibility projects, which they document extensively in their annual Global Responsibility and Sustainability Reports, which they display prominently on their corporate web site home pages for all to see and admire. Most companies, however, treat these efforts as something to be done to enhance their reputations as good citizens or a form of “noblesse oblige.” They treat it as an additional cost of doing business today. Few actually embed their social responsibility programmes into their corporate strategies.

Is a shared value strategy not, then, simply another form of corporate social responsibility programme which is just more sophisticated and possibly smarter?

Corporate social responsibility is laudable in its intent and, I am sure, beneficial to some extent to society. But, as Porter and Kramer point out, CSR programmes fall short of what potentially can be achieved.

A true shared value strategy would involve active collaboration in the communities in which a company operates to create a shared understanding and commitment from multiple community players: corporations, municipalities, provinces, NGOs, and local community leaders. The shared value strategy would have to offer economic benefits to the company, to attract sustainable support from the corporate boardroom, but it must also demonstrate environmental and social benefits to the community to engage the active collaboration of their stakeholders.

What kind of benefits have organisations experienced as a result of a shared value strategy?

I have had extensive experiences with private sector companies, governmental agencies and governments and a myriad of non-profits and NGOs, helping their executive teams develop strategy maps and Balanced Scorecards for their strategies. Many executive teams have told us that the process of creating the strategy map and scorecard created a shared understanding, consensus, and commitment to the strategy that never existed before; the process was even more valuable than the end product itself. We have seen the identical phenomenon when companies, such as Infosys, co-create strategy maps with their largest and most strategic customers. The process binds the two organisations closer together to a collaborative relationship strategy.

A similar process, conducted by a corporate leadership team and its community constituencies, to create a shared value strategy map and scorecard would accelerate the development and implementation of shared value strategies. This year we celebrate the 150th anniversary of Abraham Lincoln’s Gettysburg address. He closed that most famous speech with his hope that the American fragile experiment with democracy, launched “four score and seven years ago” would survive the terrible conflict of the US Civil War and that “this government of the people, for the people, and by the people, shall not perish from the earth.”

When companies do good things for communities and society through their corporate social responsibility programmes, they are doing programmes “for the people,” but the initiatives are not “of the people” or “by the people” as Lincoln eloquently hoped for.

How can such a shared value strategy be used as part of a national initiative to address key challenges in the South African economy?

Imagine that corporate leaders and community and NGO leaders sit together at the same table to discuss, develop and agree upon strategies that will produce good economic returns for the company while improving the social balance sheet of the community – with new and better jobs, new clusters of value-added suppliers, better educated and trained community residents, and an improved environment. And the leaders from the three sectors translate those strategies into a clear strategy map and Balanced Scorecard of objectives, metrics, targets and initiatives that describe what corporate and community benefits will be created, how they will be created, and who has specific assignment and accountability for each objective. This process will lead to a dramatic clarity, consensus and commitment among all the participants to the shared value strategy. And the shared value strategy will truly be “of, by, and for” the companies and their various community partners.

Prof Robert S Kaplan is the Marvin Bower Professor of Leadership Development, Emeritus at the Harvard Business School. Kaplan received a BS and MS in Electrical Engineering from MIT, and a PhD in Operations Research from Cornell University. He has received honorary doctorates from the Universities of Stuttgart (1994), Lodz (2006), and Waterloo (2008). Kaplan was co-developer of both activity-based costing and the Balanced Scorecard. He has authored or co-authored 14 books and more than 150 papers including 23 in Harvard Business Review. Elected to the Accounting Hall of Fame in 2006, Kaplan speaks globally on performance and cost management systems.

1 M. Porter and M. Kramer, “Creating Shared Value,” Harvard Business Review (Jan-Feb 2011).

This article appeared in the July 2015 issue of HR Future magazine.

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