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Shared Value: A Game Changer for Corporate Strategies

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On September 7, 2017 IPADE hosted 400 attendees for the Harvard Business Review Summit Mexico, the most important meeting of leaders, organizations, and ideas regarding the future of management. With the theme ‘The Art of Management for a New Era,’ the event served as an opportunity to engage in timely, in-depth discussion of the ideas, practices, solutions, and public policies that will change the way business is conducted in Mexico, in Latin America, and in the world.

Robert Kaplan, Senior Fellow and Marvin Bower Professor of Leadership Development, Emeritus at the Harvard Business School, was invited as a keynote speaker, opening the event with a session titled “Shared Value: A Game Changer for Corporate Strategies.” During the hour and fifteen minute long keynote session, Professor Kaplan, known for the development of the Balanced Scorecard, focused on the risks currently facing global capitalism and the principal disruptive challenges to global market-based economic systems.

According to Professor Kaplan, the greatest threats are:

  1. Inequality: Inequality undermines the faith that market-based global growth benefits everyone. Increasing inequality can be seen in pervasive poverty at the bottom of the pyramid (BOP) and the decline of the middle class in the U.S. and Europe, as well as high unemployment rates, especially among youth.
  2. Populism: Democracy and persistent inequality leads to the election of populist leaders. These leaders often increase the role of the State in the economy, overregulate market transactions, violate property rights, and confiscate private property.
  3. The decline of public health and education: Poor health and education are high drivers of youth unemployment. Low-quality public health and education programs limit the quality of employees available for local businesses to hire and require company programs to enhance education and health of its workforce.

According to Dr. Kaplan, businesses tend to respond to these complicated issues by adopting one of three perspectives: business as usual (denial), business as bystander (these are not problems that business can productively address, but are rather the government’s responsibility), or business as innovator. Companies that adopt a business as innovator perspective recognize the need for businesses to develop new strategies, products, and services that enable them to serve the BOP, operate in a sustainable manner, and survive and prosper in changing environment.

“Business and community are innately intertwined,” said Dr. Kaplan. “A business needs to operate in successful communities; they need the public goods that governments and societies provide. A business needs a successful community, not only to create demand for its products, but also to provide critical public assets and a supportive environment, while a community needs successful businesses to provide jobs and wealth creation opportunities.”

Over the past few years, the role of business in society has changed, with a shift from a philanthropic focus to a focus on corporate social responsibility (CSR) and, more recently, a focus on shared-value strategies. During the philanthropy stage, businesses donate to worthy social causes, encourage their employees to volunteer, and perhaps publish a corporate foundation report. During the CSR stage, businesses comply with community and environmental standards, attempt to be good corporate citizens, launch sustainability initiatives, publish annual CSR reports, implement integrated (triple-bottom line) reporting, and work to improve trust and reputation (“greenwashing”). Now, companies must make the transition to shared-value strategies, focusing on how to make an economic profit while addressing societal needs within the context of a sustainable business model. In other words, doing well by doing good.

According to Dr. Kaplan, it is crucial to continue this transition from philanthropy and CSR initiatives to shared-value and inclusive growth strategies.

“Historically, CSR projects have been point solutions (we’re going to build a new school, we’re going to power a new supply, etc.),” said Dr. Kaplan. “This is all good, but it’s not transformative. Transformative projects are chemistry – they involve building bonds and connections… What I’ve articulated to you today is our hope for creating these ecosystems built on growth, by involving the corporations, the NGOs, and the community, we can create value that… is of the people, by the people and also, for the people.”

Questions were accepted through Twitter, with attendees using the hashtag #hbrsummitmx. The January/February issue of HBR will publish additional information on this topic. For more coverage of the 2017 Harvard Business Review Summit, click here .

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