strategic design & innovation

Creating Shared Value through Social Purpose

business models & platforms culture & capability shared value & ecosystems

At the dawn of a new decade, following one in which digital hyper-connectivity has fundamentally shifted the way we live and work, many of us will have been reflecting on ‘work-life balance’ and the meaning we derive from both. With post-digital technologies of the fourth industrial revolution promising to drive even more momentous change, it’s time to re-evaluate our human purpose, and what we value.

Much has been written about the need to review the capitalist models and the need to shift to ‘profit with purpose’ models that create ‘shared value’. Yet the rationale for creating shared value (CSV) is sometimes poorly understood, with many leaders fail to distinguish it from corporate social responsibility (CSR).

Creating shared value involves creating economic value in a way that also creates measurable value for a community or society at large, by addressing its needs and challenges, tying organisational success to social progress. It is a philosophy that is central to a company’s operation, not a set of peripheral tactics designed for remediation or redress.

An early and powerful example of creating shared value can be found in the story of Chobani, whose purpose is “better food to more people”. Founder Hamdi Ulukaya grew up heading sheep and goats in Turkey, emigrated to the US, got a business education, and was running a small cheese factory when he went to see a dilapidated yoghurt factory being closed down sold off for a song by Kraft. He was inspired by the pride and skills of the staff facing imminent redundancy and felt compelled to act to save the local community.

He bought the asset in 2005 with a loan and started making the now well-known Greek-style yoghurt which quickly resonated with an increasingly health conscious market. He hired back all the original workers, worked closely alongside them, gave them a stake in the company. And as the business grew and profits flowed, he built new community facilities which were valued by employees and their families. By 2012, Chobani's revenue exceeded $1 billion, it was the leading seller of Greek yogurt in America and had invested in operations in Australia.

creating shared value through social purpose

Ulukaya speaks to the difference between creating value for shareholders and shared value as the difference between profit and true wealth. He insists that the employees who help to build companies shouldn’t get left behind whilst the CEO gets ahead. He believes that a CEO should report to the consumer, not the shareholder. And that if you have a great product, and treat your people fairly, you will build an engaged community, nurture innovation and drive profitability.

So, how might you set about developing a new business model to create shared value?

  • Embrace open innovation and new ecosystems: To create breakthrough change, innovators within organisations of all stripes need to be able work together. That requires investment in open innovation platforms and mechanisms that support and incentivize people to collaborate in the development of the best ideas. And reforming cultures of efficiency and competition that impede this.
  • Develop new measures of shared value creation: New definitions of profitability will expect the costs of 'externalities' that have previously been ignored to be factored in, whilst 'growth' measures expressed solely in economic terms (EVA) will be inadequate in a new era focused on improving the health of societies and the environment.     

Organisations that cling to operating models forged in the last century and focus solely on creating shareholder value would do well to heed the winds of change. As Larry Fink, CEO of Blackrock, the largest investment manager on the planet stated, “society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society”.

When employees find connection between their own purpose and that of the organisation, the very notion of ‘work’ is fundamentally reshaped, engagement soars and achieving ‘balance’ is that much easier.

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