Nearly 30 percent of the babies born in India are preterm or underweight. Many of them die. Millions of others confront learning disabilities and are vulnerable to the early onset of noncommunicable diseases such as diabetes and heart disease. The problem is severe in India because most health clinics do not have the resources to purchase the traditional medical equipment used to nurture low birth weight children.
Fortunately, an unusual collaboration between Embrace Innovations, a small health technology company, and GE, the huge multinational conglomerate, is helping to address this serious challenge. The collaboration, which brings together Embrace’s innovative technologies and GE’s extensive reach and distribution, is giving thousands of babies access to an infant warmer that at $300, is roughly 1% of the cost of alternative technologies. By partnering, both companies are finding new ways to grow and increase their competitiveness while solving a social problem.
In FSG’s 2011, Harvard Business Reviewarticle, “Creating Shared Value,” we argued that companies face an extraordinary opportunity to identify new ways to grow and innovate by committing themselves to understanding the intersection of social problems such as poverty, environmental degradation, and weak educational and health systems and their businesses.
In the article, we cite the examples of what Johnson & Johnson, GE, Walmart and other companies are doing to increase their profitability by helping to solve a social problem. Increasingly, companies around the world are committing themselves to studying rigorously the shared value opportunities that surround them. Not surprisingly, this effort frequently commences with companies looking at their product portfolio, their supply chain, and their operations for opportunities they can pursue on their own.
Some companies are beginning to explore ways in which they can work with government or NGOs to create shared value. Yet to maximize the social impact and business value that results from shared value, companies need to be much more creative about exploring partnerships with other companies. Without a broad set of partnerships, companies will often lack the specialized knowhow, scale, or broad perspective required to make the shared value strategy a business success and to help solve social problems at scale.
Companies can grow their customer base by aligning their strengths. SMEs (small and medium enterprises) play a critical role in generating economic growth and creating economic opportunities for the poor. In the developing world, however, the lack of traditional credit scoring mechanisms makes it difficult for the SMEs to get credit. Entrepreneurial Finance Lab (EFL), a small company launched by a recent Harvard graduate and his professor, developed new technologies for assessing credit risk by considering the psychometric qualities associated with successful entrepreneurs. EFL is now partnering with Standard Bank in South Africa and BBVA Bancomer in Mexico to reach thousands of new SMEs. Linking EFL’s know-how with the banks’ distribution network is critical to making the shared value strategy a success.
Partnerships can help shared value strategies achieve a scale that individual companies will never gain on their own. In 2012, five of Latin America’s leading employers — Walmart, Caterpillar, Microsoft, CEMEX, and McDonalds — joined with the Inter-American Development Bank (IDB) and the International Youth Foundation (IYF) to launch the New Employment Opportunities (NEO) initiative. Collectively, the companies have committed $37 million to establish large-scale training programs, internships and job placement services. NEO plans to train 1 million youth in Latin America and the Caribbean by 2022. The partnership will give the companies a reliable pipeline of skilled labor and will create new economic opportunities for youth across the region.
Companies should develop partnerships at the early stages of exploring shared value opportunities, as well. Coca-Cola, Natura, Vale and Camargo Correa are exploring how to use new measurement tools to identify opportunities to strengthen their businesses by helping to solve social and environmental problems in the Amazon. Each of these companies is in a different industry and faces a distinct set of challenges in the Amazon. At the same time, there is considerable overlap in their opportunities to have social impact on issues such as poverty, health, and environmental protection. By sharing different points of view about the social challenges and the business opportunities in the region, the companies will consider a more robust and diverse set of possibilities, increasing the likelihood of success.
Companies cannot create shared value alone. Partnerships enable companies to maximize their shared value commitments, whether in accelerating innovation, reaching new scale, and aligning mutual goals.