Creating Shared Value Is The Solution
Copyright (c) 2011 Scott F Paradis
The January - February issue of the Harvard Business Review featured Michael Porter and Mark Kramer offering a means to reinvent capitalism and unleash a much needed wave of innovation and growth. By creating "shared value" corporations and communities can break the vicious cycle of economic expansion promoting progress but leading inevitably to political corruption and the ultimate destruction of social prosperity. Mark and Michael's promising, but hardly novel idea for public and private collaboration refocuses capitalism on creating value for the corporation and society. The prospect of cooperation here is not a call for a socialist utopia but rather a modern necessity to foster insight and energize productivity.
While Michael and Mark state, more than once, "playing by the rules" is assumed, the reality on the street and in the board room is far different. Unfortunately the basest elements of human nature (greed, arrogance, and fear) eventually overwhelm all but the most disciplined and principled of organizations. Companies and corporate culture focus on efficiency and immediate profits at the expense of effectiveness and long term viability - that is: value. This lack of integrity and the absence of a moral compass plagues contemporary society. This call for creating shared value is like a 'voice in the wilderness' besieged by a devastating headwind - the listeners really have to be motivated to get the message.
Shared value, as Mark and Michael state, is about expanding the total pool of economic and social value. Well, that idea of "value" is and always has been the basic tenet of economic exchange. Business, economics, and capitalism are about creating and sharing value. No exchange takes place unless both parties to the trade realize some benefit. Industry is in the business of delivering products or providing services to improve or enhance the lives of people. Profit is, or rather was, the byproduct of meeting needs and satisfying desires in a mutually beneficial way.
Mark and Michael outline, in their article, the three ways companies can create shared value: by reconceiving products and markets; by redefining productivity in the value chain; and by building supportive industry clusters at the company's locations. In a free-market system ingenuity begets success, and success begets success - at a much greater tempo than can be produced by government. To create shared value and to overcome the ills of modern society we need a sophisticated form of capitalism imbued with social purpose.
Creating shared value is not a new concept, it is a return to the roots of economic exchange. But Mark and Michael's call for a return to a simpler way is most timely. Hopefully the message will not be lost on all but the most enlightened corporate leaders. The truth is, "...The competitiveness of a company and the health of the communities around it are closely intertwined." It has always been this way. It is up to us to start creating shared value - as the world is waiting for America to right herself again.
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,building supportive industry clusters
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