Csv 102012 Final
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Transcript of Csv 102012 Final
Creating Shared ValueSharing Michael Porter and others
October 20, 2012
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This document intends to share author’s learning, ideas and personal reflection on the topic. If you intend to quote or replicate any part of this presentation, acknowledgement of this document and other authors cited in this document as your sources would be greatly appreciated
Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011
Healthy business needs a healthy community
• Only business can create Prosperity• Healthy business needs a healthy community• There is a growing awareness of major societal challenges• Government and NGOs lack sufficient resources and capabilities to fully
meet these challenges• Legitimacy of businesses are falling and have fallen
2Source: World Business Forum New York 2012 – Session given by Michael Porter
Creating shared value is NOT CSR / CR
PhilanthropyCorporate
Responsibility (CSR)
Creating Shared Value
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Small impact Good citizenship, ethical, sustainability
Integrate social and environmental improvement into economic value creation
Source: World Business Forum New York 2012 – Session given by Michael Porter
The principles of shared value
• “Shared value creation cuts across the traditional divide between the responsibilities of business and those of government or civil society. From society’s perspective, it does not matter what types of organizations created the value. What matters is that benefits are delivered by those organizations—or combinations of organizations—that are best positioned to achieve the most impact for the least cost.” – PORTER, M E and KRAMER, M R (2011) 'CREATING SHARED VALUE'.
Harvard Business Review, 89 (1/2): 62-77.
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“Not all profit is equal. Profits involving a social purpose represent a higher form of capitalism, one that creates a positive cycle of company and community prosperity”
PORTER and KRAMER, M R (2011) 'CREATING SHARED VALUE'. Harvard Business Review, 89 (1/2): 62-77.
According to Michael Porter…There are three levels of shared value
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1. Reconceiving customer needs, products and markets
2. Redefining productivity in the value chain
3. Enabling local cluster development
Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011
1. Reconceiving products and markets
• Around unresolved customer problems / concerns, not traditional products
• Not just meeting consumer needs but improving lives• Customer groups that are poorly served or overlooked – often seen as
unattractive groups• Start with no pre-conceived constraints about product attribution, channel
configuration or economic model of the business
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Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011
2. Redefining productivity in the value chain
8Slide copied from Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011
3. Shared value through local cluster development
• Strong local clusters with capable local suppliers and institutions improves company productivity
• Companies / institutions working together collaborative can stimulate more significant improvements or progression
• Local cluster development can strengthen the link between a company’s success and the community success
9Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011
Unilever’s Water Purification
• Safe drinking water is a problem in India• Everyone tried – no scalable solution• Produces safe water at a cost of ½ cent per litre• Does not need electric power• Portable • Switches off automatically when replaceable processor is
depleted• Innovation comes – collaborating with external / internal
resources • Leverage 100 Unilever scientists worldwide• Unilever brought in supply chain and retail distribution
expertise• NGOs for access to schools and consumers
http://www.youtube.com/watch?v=zmVJhf6rqlc
10New products and markets
Nestlé’s CSV – diary sector in Pakistan
Nestlé - sources milk locally, tests the quality of the milk, and by using cooling stations and collection points, Nestlé has helped to prevent adulteration and unhygienic milk handling. By offering higher quality milk, Nestlé has responded to growing consumers’ expectations. It has also fortified its products with iron to help to prevent anemia.
• Consumers – value exceeded price, pay much cheaper than competitors’ milk• Suppliers – local sourcing from 150,000 local farmers (each farmer sells
approximately the milk from 1 buffalo)• Industry – success of Nestlé in the milk district, draws in local competition,
increases efficiency, lower price premium etc• Employees – created over 2000 jobs with better wages, training, and
Sheikupura milk processing factory is ISO certified – safer work environment • Communities - Over 80K jobs created total (direct and indirect), pay local taxes• Shareholders – higher return from better shareprice improvement (28 %
return) 2003 – 2008
11http://www.nestle.com/csv/CreatingSharedValueCaseStudies/AllCaseStudies/Pages/CSV-dairy-Pakistan.aspx
Productivity in Value chain
Shared value created when all parties win
12Source: yahoo finance
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http://www.nestle.ca/NR/rdonlyres/9F537C54-FF8D-466B-803F-5C580AD76479/0/E_CreatingSharedValue.pdf
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Nestlé 10 yr CAGR 28% in share price appreciation
Unilever plc10 yr CAGR 9.7% in share price appreciation
General Mills10 yr CAGR 9.1% in share price appreciation
Source: google finance
CSV is a paradigm shift for businesses in how they perceive market opportunities, determine investments, and build capabilities…
15Chart copied from Source: Porter and Kramer, Harvard Business Review, 2011
Shared value creates strategic positioning
16Source: www.wholefoodsmarket.com
Whole Foods vs The Kroger
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WFM 311 Stores10 yr CAGR 15.8% in share price appreciation
KR - 2435 supermarkets10 yr CAGR 6.2% in share price appreciation Source: yahoo finance
Maximize purpose, maximize profits?
18Source: yahoo finance
John Mackey Co Founder & Co- CEO Whole Foods ‐ ‐Market on the topic of Conscious Capitalism
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https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/UBS_Conference_NYC_October2012.pdf
What is Conscious Capitalism
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Slide copied from: https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/UBS_Conference_NYC_October2012.pdf
Conscious business is beyond CSR
21Slide copied from: https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/UBS_Conference_NYC_October2012.pdf
Final words from Porter – my takeaways
• Shared value enables a more holistic and creative approaches to economic value creation
• Shared value thinking will spur innovation, productivity improvement and economic growth
• Businesses are not charities, and can be a very powerful force for tackling many issues facing our society
• Businesses need to transform their thinking beyond how their current business model is formed
• Shared value allows businesses to rethink and redefine their purpose beyond profit maximization
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Source: Michael Porter, Creating Shared Value – Redefining Capitalism and the Role of Corporation in Society FSG CSV Leadership Summit June 9, 2011