Companies Impact on Social Problems (aka “Shared Value”)

| By Editorial Staff

Warby Parker, Beckton Dickenson and Deux Mains are figuring out that having a greater purpose and making money don’t cancel each other out. Not when they put innovation in perspective.

Harvard Business school professor, Michael Porter, describes the synergy of social benefits and profitability as “shared value.” While he might be renowned for his groundbreaking “Five Forces” business model developed in 1979, Porter has recently focused on the social side of making money.

Porter proposes that companies can out-perform their rivals and make a profit by taking on a bigger purpose like improving the planet or quality of life or access to education. It’s a view that many businesses are fearful of considering, let alone executing. Porter suggests that they should take a hard look at their narrow approach to value creation.

Companies like Tesla (affordable battery power), Gilead Sciences (lifesaving drugs at the speed of need) and Kickstarter (globally available start-up funding) apply innovation to the global good and are financially successful at it. Their shared value approach has helped to make these companies both popular and prosperous.

Gasp! They’re making money by solving social problems! Porter and his co-author, Mark Kramer, published an article in the Harvard Business review back in 2011. Creating Shared Value inspired a movement, including the Shared Value Initiative, a non-profit dedicated to bringing inventive organizations together to promote the new competitive frontier.

Companies like these are defining markets in terms of underserved needs and social problems. Instead of throwing money or goods at these ills (philanthropy) or creating social responsibility policies (“do no harm”), they’re developing profitable products and services that address the social problems within a potential marketplace of billions of low-income consumers.

Shared value is still early in its adoption cycle, but it’s already embraced by many of the world’s most respected companies like these three:

Becton Dickinson

This healthcare giant has expanded its reach and protected millions of health workers with needleless injection systems that can be used around the world – an innovation that is especially important in settings where sharps disposal is a significant health issue. This is now a $2 billion business for Becton Dickenson and Company, and accounts for 25% of the company’s revenue.

Warby Parker

International business development experts have been talking about the importance of economic development in emerging countries. They also express concern about the damage that has already been done as a result of misplaced generosity. Warby Parker has this figured out. Their commitment to give away a pair of glasses for every pair purchased requires training people to do eye exams and giving them glasses they can sell at a price that’s affordable to those in their local communities.

Deux Mains

Julie at shopThe sandals-making company Deux Mains (“Two Hands”) was founded in Haiti after the devastating earthquake of 2010. Started as the charity Rebuild Globally, its founders had the idea of taking old tires that litter the streets and waterways of Port-au-Prince and turning them into sandals. The small company hires local people who lost everything – their homes, their livelihood and their dignity – and teaches them a skilled trade. With a couple of years of hard work, many of these artisans have been able to buy property, build homes and send their children to school. Rebuild and Deux Mains are onto something. Not long ago their hand-crafted footwear caught the attention of Kenneth Cole. Now their little shop makes sandals marketed under the Kenneth Cole brand.

Michael Porter offers a simple challenge to companies wrestling with the idea of shared value: see your role differently. Being a good corporate citizen has to mean more than food drives, fundraisers and recycling. If company efforts aren’t innovative, long-term and profitable, they won’t offer opportunity and sustainability. Shared value is a way for companies to both do the right thing and be around for a long time.