Mantra for Project Management to drive Social ImpactPranal DongareAssistant ConsultantTata Consultancy Services

Shared Value CreationA New Age Business Strategy

Nachiket Kawathekar, Pranal Dongare

Title: “Shared Value Creation: The New Age Business Strategy”

Theme: Mantra for Project Management to drive Social Impact

Keywords: Shared Value Creation, Sustainability, Corporate Social Responsibility

Abstract:

Today, business practices are heavily skewed towards the benefit of the business even as the social

impact, which these practices may have, is largely ignored. Even if few organizations do pay attention

towards the social responsibility, it generally is considered as a non-core activity and thus rendered

irrelevant to the business. Hence, the overall outlook of the society towards the business is that of

distrust and business unit perceives social responsibility as a burden.

However, in reality, the two sides are interdependent for their very existence and growth. Healthy

society needs a competitive business for job and wealth creation and in turn, competitive business

depends on the healthy community to create demand for its product and to provide support for its

overall business environment.

The time has come when the business organization starts thinking about social responsibility as

inherent part of its overall strategy. This means treating the society as “The” stakeholder rather than

“a” stakeholder. The focus should be on the creation of the shared value which will benefit both the

society as well as the business unit.

However to achieve this, we will require a new approach from the business leaders and need to

identify new management practices. This paper deals with some ways in which organizations can

achieve this goal and provides some real world examples of the few organizations which already are

on this path of creating competitive advantage for themselves by focusing on the creation of the

shared value.

Contents:

1 Introduction 4

2 What is “Shared Value creation”? 4

3 Four approaches for “Shared Value Creation” 5

3.1 Solve the problem:................................................................................................................. 5

3.2 Align the Product:................................................................................................................... 6

3.3 Look Inside:............................................................................................................................ 6

3.4 Choose The Cause:...............................................................................................................7

4 How “Shared Value Creation” benefits the business? 7

5 How “Shared Value Creation” benefits the society? 10

6 How can “Shared Value Creation” be incorporated in project management? 11

7 Conclusion 12

8 References 13

9 Author Details 13

1 Introduction

Industrial age wisdom of running business was founded on the principle of “profit maximization”. This

resulted in business organizations going all out, all guns blazing against each other with unwavering

focus on getting larger chunk of the pie. Strategy and tactics resembled that of warfare. Each

organization made it a point to kill or cut out the opposition in order to gain the supremacy.

However in all this warfare, bloodbath and throat-cutting an important stakeholder- the “Society”, was

mostly, if not always, ignored by all. Business is not an island and does operate amidst the society

and as we see, the major loser of the battle between the business organizations was not any

organization but it was the “Society”. Cities became cramped, water became polluted, air became

toxic, rich became richer and poor went poorer.

Remember Enron?  Union Carbide in Bhopal? These are just a two examples of how unwavering

focus on “profit maximization” by the business organizations led to major catastrophes. History is full

of many such catastrophes which could easily have been avoided if the business organizations had

focused on need of the society in addition to the need of self.

2 What is “Shared Value creation”?

This brings us to the point of “Shared value creation”. This idea stems from the belief that society is

major stakeholder for the business and is, as said by Jamshetji Tata, the very purpose of its

existence.

“In a free enterprise, community is not only just another stakeholder but the very purpose of

its existence.”

- Jamshetji Tata

The idea is to align the business strategy to create a benefit for both the business organization and

the society. For business these benefits can be more direct like creation of new business opportunity

or sometimes indirect as improvement in brand value. For society this may mean a sustainable option

for existence, greater employment opportunities or improvement in lifestyle.

Figure 1: Shared Value

3 Four approaches for “Shared Value Creation”

The entire idea of shared value creation rests on the axiom of benefit of both. It is not a suggestion of

doing charity or benefitting the society at the cost of business itself. This can never be sustainable and

will end up costing both the parties heavily.

There can be various ways of creating the shared value. We will try to present a few of them along

with the real world example for each one:

3.1Solve the problem:Nobel laureate Muhammad Younus, during his research, acknowledged the need of the skilled poor

for the source of a loan to make their living. Mainstream financial institutions were not designed to

provide the loans to the poor who can’t provide any collateral. The negative outlook of these

institutions kept the poor out of the financial inclusion and he had no way to come out of the rut of

poverty and become independent financially. This very problem faced by the society- the need of the

poor for the credit, became the business opportunity for the Grammen Bank. Grameen Bank was

found on the principle that loans are better than the charity to interrupt poverty. They offer people the

opportunity to take initiatives in business and agriculture and pay off the loan.

The similar kind of innovation and awareness can help businesses to understand the problems faced

by the society and apply the strength of the organization to create a business model which will solve

the problem and will also become profitable for the organization. We call this approach “Solve the

problem”.

3.2Align the Product:Organizations which have multiple years of history and are in business for long time can follow the

approach of “Align the Product” to create the shared value. In this approach the organization can

identify the ways in which it can change its current practices or products to align to the cause.

Nike is perfect example of this. Nike Grind is a concept in which Nike recycles the used shoes and

creates a material out of it which is then used to create high quality sport surfaces like courts, turfs

and tracks. This has enabled Nike to take care of the waste material which would otherwise have

polluted the environment and also has cut its cost of creating such sport surfaces as the raw material

became available almost at no cost. Since 1990 Nike has recycled around 28 Million pairs of shoes

and 36000 tonnes of scrap material to produce sports surfaces of 63,20,00000 square feet all around

the globe.

3.3Look Inside:Next very important approach by which business organization can create the shared value is by

getting its own house in order – by “Look Inside” we suggest that an organization can make a great

deal of difference and also benefit itself by making conscious efforts to change its own policies and

practices. Improved facilities at the buildings, reduction in usage on natural material, employee

friendly policies and many such small but important initiatives go a long way in creation of shared

value.

This method of creating shared value will benefit the organizations in terms of reduction in operation

cost, lower attrition rates and motivated employee bases to mention few.

As we can see by the following graph, this is actually the approach which many organizations have

currently focused on. This approach helps organizations to contribute to the society by making bare

minimum changes in its overall strategy.

Figure 2: Drivers of Shared Value Creation [Source : IBR 2008]

3.4Choose The Cause:Another approach for the organizations to create the shared value is to choose a cause which aligns

to its business needs or ideology and then try to spend some part of its resources to address the

same.

For example, Piramel Group has started with the “Piramal Foundation For Education Leadership”.

The foundation was started with the aim of addressing one of the gravest problem faced by the India

(especially in rural areas and in government schools), the sub-standard education system. The

foundation has started the 3 year part-time program to provide masters degree in the areas like

Education Leadership, District Education Management, Instructional Design, Coaching for School

Improvement etc. to headmasters of the schools. The effects have started showing with increase in

enrollment of the students from across the locality. Attendance has increased by 20% and

improvement is seen in the learning competency as well. In return organization has got the loyalty of

the locality and immensely matured brand image.

4 How “Shared Value Creation” benefits the business?

It is given that no organization can create sustainable business by focusing only on the welfare of the

society. Charity can never be a good reason to run a sustainable business. When we talk of creating a

shared value we have to ensure that business organizations get benefitted from the endeavor so as to

make it sustainable and profitable venture. Below we try to list out some of the benefits for the

business organizations:

Competitive edge

Shared value creation can open new business opportunities for organizations and early entrant can

gain competitive edge over the competition. As we have mentioned in the “Solve the problem” or

“Align the Product” approach above the endeavor to address the acute problem faced by the society

can actually result in creation of a new business opportunity altogether for the business organizations.

The rapid decline of traditional energy resources is the most disturbing challenge faced by today’s

world and automobile industry makes for substantial part of today’s fuel consumption. Toyota’s

response to concerns over automobile emission is a best example of how it helped Toyota to gain

competitive edge. Toyota Prius, the hybrid electric / fuel model innovation have produced competitive

advantage for Toyota as well as environmental benefits to society by reducing emission of harmful

pollutants. This new innovation by Toyota has created a unique position with customers and forcing

other car companies to use this innovation.

Early entry into the business segment

Innovation can lead to creation of altogether new business segment for the business organization.

This provides business organization with immense competitive edge and even before the rivals can

understand the phenomenon completely a niche market segment is already created for the company.

For example Nintendo’s strategic decision to create a video game to improve the social wellness

changed the demographics of the video gaming industry completely. Social wellness is about

connectedness, quality, intensity, durability and quantity of relationships. Nintendo developed a game

Wii which helped to bridge the gap between generations and contributed immensely towards the

theme of social wellness. Sunrise Living – a senior care center company in USA used Wii at it’s one of

the center where “Wii Fit exercise program” helped to turn 1 hour social program into fun creation

activity. This video game became a useful medium for social interaction in families and at senior care

centers. This initiative not only made Nintendo major player in video games market but also ensured

social wellness is improved.

Easy access to capital

Including social welfare performance in financial report of business units is getting mandatory day by

day. A strong social welfare performance helps organizations to create a unique selling point.

Creation of shared value can build organization’s image as ethical organization in the eyes of the

stakeholders and hence can help it gain trustworthiness.

Investors are increasingly viewing social welfare performance (indexes like the Dow Jones

Sustainability Indexes, FTSE4Good) as a strategic business issue. Many socially responsible

investors are using the shareholder resolution process to pressure companies to change policies and

increase disclosure on a wide range of CSR issues, including environmental responsibility, workplace

policies, community involvement, human rights practices, ethical decision-making and corporate

governance.

Hence creation of shared value can actually attract good investors towards the organization and will

make it easy for the organization to get access to capital.

Brand Differentiation

Business Units are trying to create unique selling point and unrivalled brand image to survive in cut

throat competition in today’s globalized business scenario. Shared value creation helps them to gain

advantage over competitors by creating trust environment between company and stakeholders on

which business sustains and grows.

Recently Coca-Cola launched its new anti-obesity campaign in USA. The campaign drew attention to

Coca-Cola’s low calories drinks which were made with natural sweeteners. The message was clear

“Coca-cola cares about your obesity and wants to make you healthy”. This campaign helped Coca-

Cola to retain its reputation and created a strong brand image for the organization.

Cost Saving

Environmental sustainability initiatives such as recycling, waste management, water management,

using renewable energy sources, utilizing reusable resources, creating 'greener' supply chains, using

digital technology instead of hard copies, developing buildings as per environmental standards and

minimizing overall pollution helps organizations to save cost in their operations which they can utilize

for business growth.

Following graph depicts the correlation between efficient waste management and related energy

efficiency for the countries world over:

Figure 3: Waste Management-Energy Efficiency Correlation [Source : IBR 2008]

Innovation in practice

Focus on creation of shared value leads to various innovations in various business application areas

for an organization. Innovation helps to increase organization’s competitiveness. Focus on innovation

makes it an integral part of the organization’s thought process and hence help build vibrant culture

with lots of ideas getting generated and discussed upon regularly. Recent organizations like Google,

Facebook and WhatsApp are good examples of this “Innovation in practice”. For all these

organizations innovation makes an integral part of the overall business strategy.

Loyalty

With growing awareness creation of shared value can be a major differentiator for the business units.

According to ‘Grant Thornton IBR’ report of corporate responsibility drivers Employee welfare / Human

resource development tops the chart with 65% (Refer Figure 2).

In Many countries, employees are preferring organizations with high moral values and ethics.

Potential recruits often ask about a firm's social welfare policy during recruitment, and having a

comprehensive policy can give an advantage. It can also help improve the perception of a company

among its staff, particularly when staff can become involved through community volunteering.

5 How “Shared Value Creation” benefits the society?

“Shared value creation” considers society as “The” stakeholder and hence results in maximum benefit

for the society. Below we list down few of the benefits which society accrues:

Employment Opportunity

With ever increasing population and unemployment rate, dependency on government and

conventional business units for new job generations really has limitations. With organizations focusing

on “Shared Value creation” new employment opportunities are created and opened for the society.

For example, Marriott has created 180 hrs. of classroom and on the job training program for

unemployed local youths. It proved beneficial to Marriott to reduce cost of recruiting entry level

employees as well as to local community to reduce unemployment. A study suggests that 90% of

trainees join Marriott and 65% retains job after 1 year which really is a collaborative (WIN-WIN)

scenario for both business and society.

Chance of participation

General rule of participation suggests “Whoever is affected by the firm’s actions should have the

rights to participate, with preference given to those affected the most.” With shared value creation

society can get this kind of opportunity to participate in some of the business decisions. The society

can have direct voice in what kind of product or benefit does it desire from the business enterprise.

For example, Starbucks, in 2008, launched the website “Mystarbucksidea.com”. This website

encourages people to place their ideas regarding any of the business product or process. This idea is

then put to review and moderated discussion and best of the ideas which also create a business case

are selected for implementation. Some of the results of this activity are – A splash stick which fits into

the lid of cups, a Starbuck VIA Ready Brew, to name few.

This endeavor by Starbucks not only provided Starbucks with million dollar ideas almost for free but

also provided society with a chance to participate in decision making and to draw benefits from this

participation.

Improvement in standard of living

Social welfare initiatives are immensely contributing to improve overall standard of living of the

society, by contributing in Health sector, Education sector, Environmental initiatives, and

infrastructure. It highlights the importance of getting basic facilities to everyone and improves socio-

economic status.

For example, Nestle’s value chain creation in the district of Moga in Northern India proved life

transforming for the nearby villages. When Nestle had started its dairy operation in the district of

Moga, the locality was reeling under abject poverty. Basic amenities such as medical care,

transportation, electricity were near absent and milk production from the area was sub-standard in

both quality and quantity.

Nestle’ took giant steps forward to change this reality. To increase the milk production both

quantitatively and qualitatively it created refrigeration facilities, provided each town with transportation

facilities for milk collection and also built testing labs in the area. In addition to this Nestle’ also helped

create medical facilities for the farmers. It also provided financial and technical assistance to farmers

in the areas of agriculture as well.

These initiatives resulted in increase of milk production in the area by around 50% along with

improvement in the quality. Calf death rate is decreased by around 75%. 90% of residents of the town

now have electricity, telephones, have primary / secondary educational facilities and have better

medical facilities improving overall standard of living of the town.

Less impact on environment

‘Go Green’ is the mantra of today’s globalized world for environment protection. Shared value creation

with focus on environmental sustainability can result in improvement in environment standards in the

locality of the business organizations operational units.

These initiatives can mean cleaner and safer potable water, greener surroundings, cleaner air,

reduction in noise pollution and various such benefits for the society. This will also ensure that future

generations get safe and sustainable earth as the heritage from present generation.

6 How can “Shared Value Creation” be incorporated in project management?

As project is the last unit which implements the organizations strategy it becomes imperative that

“Shared value creation” becomes imperative part of project management practices. This will ensure

that actual project work is in line with the overall organization strategy and hence contributing towards

organizations goal of creation of shared value.

Here we would like to suggest some of the ways in which project managers can incorporate the

strategy of shared value creation in some of the project management knowledge areas. Major areas

which project managers can focus on are:

Cost Management: Allocate a cost budget at project level for social welfare activities. Man hour

efforts should be also considered during planning stage. Mandating social cost benefit analysis

can be done in order to perform shared value analysis of social welfare initiative.

Stakeholder Management: Incorporate ‘society’ as a key stakeholder in stakeholder

management and impact analysis should be done from social point of view also during

stakeholder management process. “Social value creation plan” can be put in place within this

knowledge area which can chalk down the methodology and processes to follow in order to attain

maximum positive impact on the society.

Procurement Management: Procurement should be done from globally ethical suppliers which

need to be mandated in procurement management process. Corporate social responsibility

practices can be made one of the major screening criteria while conducting procurement.

Human Resource Management: In order to create shared value and make social welfare

initiative successful, team members should understand what their responsibility is and what

organization is expecting from them for social welfare initiatives. In order to achieve this, making

social welfare training as a core training of the organization will definitely prove beneficial.

Comprehensive understanding, know focus areas, understand key points and value proposition

makes sure that everyone in the organization understands the organization’s social welfare

strategy very well.

7 Conclusion

Creation of shared value is need of the time and has to be first priority of the business organizations if

we have to create sustainable and safe future. As a primary consumer of world resources including

human resource, the onus of creating safe and sustainable community lies on the shoulders of

business organization. Shared value creation provides with both tangible and intangible benefits to the

organization. It helps create the sustainable society and improves participation in the business

endeavors.

When embarking on the path of “Shared value creation” business unit don’t have to do something

completely out-of-sync but can choose any one approach out of “Solve the Problem”, “Align the

problem”, “Look inside” and “Choose the cause” to do so.

Project being a last unit of implementation of organizational strategy has to take onus of incorporating

the “Shared value creation” in the practice. It can improve on and utilize many existing knowledge

areas to ensure the correct decisions are made and maximum possible positive impact is made on the

most important stakeholder that is “Society”.

8 References

[1] Haque, Umair; The New Age Capitalist Manifesto[2] Hart, Stuart L.; Prahalad, C.K.; New Age of Sustainable Capitalism: Business Models to Drive

Growth and Social Change (Collection), The[3] http://csr.cisco.com/pages/environment [4] http://en.wikipedia.org/wiki/Corporate_social_responsibility#Potential_business_benefits [5] http://www.mallenbaker.net/csr/page.php?Story_ID=2786 [6] http://www.nike.com/us/en_us/c/better-world/stories/2013/05/reuse-a-shoe [7] http://www.piramal.com/piramal-foundation [8] International Business Report 2008, Corporate Social Responsibility :a necessity not a choice.[9] Lovehagen Nina, Bondesson Anna; Evaluating sustainability of using ICT solutions in smartcities

– methodology requirements[10]Sammi Massood V., Cost Benefit Analysis[11]Zheng Qinqin, Luo Yadong, Wang, Stephanie Lu; Moral Degradation, Business Ethics, and

Corporate Social Responsibility in a Transitional Economy

9 Author Details

Nachiket Kawathekar (Assistant Consultant, Tata Consultancy Services) Pranal Dongare (Assistant Consultant, Tata Consultancy Services)