tci 2014 shared value and clusters
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Shared Value and ClustersDane Smith
Shared Value Creation
11 November
2
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
4
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
7 FSG
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
9 FSG
…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
10 FSG
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
12 FSG
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
13 FSG
Increasing SME Competitiveness
World Class Provider Program
Increase innovation and efficiency by creating a cluster of 250
world class suppliers by 2020
14 FSG
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
15 FSG
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
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