Shared Value and ClustersDane Smith

Shared Value Creation

11 November

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Shared Value and Clusters

Dane Smith, Managing Director

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FSG.ORG

© 2014 FSG

FSG is a nonprofit consulting firm focused on finding

better solutions to social problems

• Consulting firm founded by Professor

Michael Porter and Mark Kramer

• Specializing in strategy, evaluation and

research in the social sector

• Over 160 employees in six offices

• Thought leader on corporate

engagement with society

Michael Porter Mark Kramer

Representative Corporate Clients

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FSG.ORG

© 2013 FSG

© 2013 FSG4

“Creating Shared Value”

– Porter/Kramer, HBR, 2011

Shared value holds the key

to unlocking the next wave of

business innovation and

growth…

An ongoing exploration of

social needs will lead

companies to discover new

opportunities … they previously

overlooked.

”

“

FSG.ORG

© 2013 FSG5

- Let’s donate

money to

minimize brand

damage

“Problems could harm

us”

- Let’s create

dedicated CSR

efforts

“We should do something”

“What problems?”

- Let’s ignore the

problems

- Let’s

strengthen our

company by

solving societal

problems

relevant to our

business

“We seeopportunity”

Evolving Perspectives on Corporate Social Engagement Approaches

FSG.ORG

© 2013 FSG6

Traditional CSR Shared Value

• Corporate reputation

• External stakeholders

• Reactive

• Spending, standard ESG

metrics

• CSR / Public Affairs

• Risk reduction and goodwill

• Successful projects

• Competitive advantage

• Corporate strategy

• Proactive

• Social and economic value

created

• Across the whole firm

• New business opportunities

• Large scale sustainable

change

Motivation

Main Driver

Approach

Measurement

Management

Business Benefit

Social Benefit

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Virtuous Cycle

Shared Value is NOT:

• Sharing the value already

created (philanthropy)

• Personal values

• Balancing stakeholder

interests

• Compliance with local

regulations

By creating a “virtuous cycle,” companies can maximize

social impact and business returns

8 FSG

Shared value occurs in developed markets…

“Bad” fats causing

20’000 deathsHIV co-infection from

needle stick injuries

600’000 tons of transfatstaken out of the U.S. diet,

# 1 product line for Dow

Protected millions of health workers,

25% of BD’s revenues

Safety devicesCooking oils

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…and in developing countries

Mobile banking service

Reinforced spices

70% of women, 57% of children anemic in India

No access to financial services

14M users in East Africa

18% of Safaricom’s revenues

138M servings sold, 87% growth

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1Reconceiving

Needs, Products,

and Customers

2Redefining

Productivity in the

Value Chain

3Enabling Local

Cluster

Development

There are three ways to create shared value

© 2010 FSG11

FSG.ORG

Nestlé Portugal 9/29/11

Arogya Parivar

Strengthening Interrelated

Companies and Institutions

Partnering with ~50 000

pharmacists and clinics

Training 300 health

educators

Continuity of supply to

rural villages

Health infrastructure

financing

40 million

new customers

Results

Improved access for 42 million patients in 28,000 villages

Expanding to Indonesia, Vietnam and Kenya

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Barriers to Cluster Competitiveness

Shared Value by Design and Shared Value by Default

Traditional Challenges

• Technical

• Market

• Government / Regulatory

Shared Value Challenges

• Poverty

• Weak educational systems

• Weak health systems

• Environmental degradation

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Increasing SME Competitiveness

World Class Provider Program

Increase innovation and efficiency by creating a cluster of 250

world class suppliers by 2020

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Closing the Skills Gap

Consejo de Competencias Mineras

• Shortage of qualified human

capital: critical challenge for

the industry competitiveness

• Cluster level response: clarity

regarding skills gaps, defining

profiles and career paths

• New career opportunities for

students, increased focus for

public expenditures

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Increasing shared value by design at the cluster level

• Cluster-level efforts are needed to solve many problems – Resources required

– Market power

– Institution building

• Significant challenges exist– Lack of trust

– Desire to take credit

– Interest in building individual brands

• Next steps– More deliberate effort

– Share success stories

– Build new tools