Shared Value, a concept coined by Porter and Kramer, is a corporate strategy that focuses on identifying and expanding the connections between economic and social progress. Business economic value depends on the creation of value for society. By coexisting with society rather than merely maximizing short-term profit, business can improve profitability while also improving environmental performance, public health and nutrition, affordable housing and financial security, and other key measures of societal wellbeing.
There are three different ways to create shared value.
- Reimaging Products and Markets: creating or redesigning products, so they meet societal needs.
- Redefining productivity in the value chain: internalizing society’s problems and addressing them to benefit society and the company.It could include enabling more efficient or productive use of material resources, financial resources, employees’ skills and business partners’ capabilities.
- Building industry support clusters: improving the supporting institutions, supplier base and available skills in the communities in which the company operates makes capable local suppliers that foster efficiency and collaboration; as well, stronger local capabilities in areas such as training, transportation services and related sectors also raise productivity.
Corporate success through shared value
The benefits of shared value relate to its theory that to be successful a company must create a distinctive value proposition that meets the needs of society. This configuration of the value chain or its activities gives the company a competitive advantage.
In relation to innovation, the application of shared value in companies is a huge enabler of innovative practices in markets, products and configurations of the value chain of a company. Creating shared value will drive the next wave of innovation and productivity in the global economy.
It will also reconnect companies and communities in ways that have been lost in an age of narrow management approaches, short-term thinking, and deepening divides among society’s institutions.
