Corporate Shared Value - what is it and why does it matter?
We were delighted to welcome Oliver Olson, Director of Global Education Programs and Senior Lecturer of Marketing and Strategy at the Maastricht School of Management to talk about Corporate Shared Value (CSV). This was a topic that even Google had not been able to provide an agreed definition on and so mystery and interest ran abound. Oliver was disarming, starting with or rather playing down his own business experience of banking in the US and Management Education in Europe. ‘Nobody really knows what strategy is’ he told the intrigued attendees. It soon became clear and we realised why we were there and why this was good.
Filling in some background theory, Oliver talked about competitive advantage - know what you are and what you are not. From this emphasise your value, your perceived benefits over cost (a model that Apple have figured out pretty much perfectly). In the recent past then, companies have focussed on profits within the rules of the game. ‘Greed is good’ and if companies make money society will benefit. Oh yeah? Society was not so sure and so the rise of social responsibility in business grew and very soon green, sustainable products that donated money to charities were all around us. But Corporate Shared Responsibility (CSR) was a flawed model. In reality, companies measured social impact like they were judging a beauty pageant, and it was really all about reputation. The social mission was at the whims of managers. But worse than this, companies were failing to link sustainable activities to business growth – their revenue and profitability – so how could it ever succeed?
Oliver gave us an example of CSR – Tom’s Shoes. Around 2010 Tom’s Shoes promised that for every pair of shoes bought one pair of shoes would be given to a child in need. Tom’s shoes were $54 for the cheapest pair however annual sales reached $350,000,000 and people liked it. When this idea lost ground they went into coffee and offering clean drinking water. And from this then into selling sunglasses and offering sight saving surgery for every pair bought. This sounds good, and it may seem unfair at first to critique it, but in business terms this model can be massively improved– with Corporate Shared Value (CSV).
The key difference between CSR and CSV is that Corporate Shared Responsibility looks at everything after the value chain where as Corporate Shared Value looks at where it can input into the value chain. So Tom would have been using CSV if instead of donating one pair of shoes he had trained local people in the locations where they were donating to make their own. Or if he had trained local doctors in these locations to perform sight saving surgery rather than shipping in mobile medical units. Tom’s model was flawed because it was increasing perceived benefit whilst also increasing cost. To have used a CSV approach would not only lower costs and improve local knowledge but it would have created ways to be competitive that did not require massive diversification. This can be done on a degree of scale – so Tom could have simply employed local artists to pain the shoes for example to start with. In short, businesses can really benefit by incorporating the people they see as charity into their own business models.
This is what MBAs teach – how to apply great theory to your own business. If you redefine the products and the markets that you serve and think about reaching outside of your market, and if you redefine your value chain, then you will be improving the cluster that you operate in which in turn will be making your business more successful. Moreover, when you make large profits no one will be protesting outside your gates because you also genuinely and meaningfully benefitted others whilst you did this.