Picture: THINKSTOCK
Picture: THINKSTOCK

Business strategy does like its catchphrases: terms such as sustainability, good governance and, of course, shared value. Each has merit, but a recent dusting off of shared value is particularly relevant in today’s constrained and challenging economic and business environment.

When Harvard Business School’s Profs Michael Porter and FSG consultancy co-founder Mark Kramer first coined the term — and the concept — of shared value back in 2006, the idea of business’s ability to drive positive change in society was certainly novel. There were a few examples dotted around, including Discovery’s Vitality programme, which first appeared in 1997, but it was largely a blank slate. Today we hear the likes of IBM, Google, GE and, at home, Absa touting the benefits of this approach.

The notion that business can, somehow, positively impact social change while still making a profit is attractive for a number of reasons, not least of which is the sustainability inherent in a healthier, stronger, wealthier society. But I believe that long-term thinking should also be mindful of the next generation of consumers coming through and what shared value means to them.

This next generation is, of course, the millennials, those 37 to 17-year-old up-and-comers born between 1980 and 2000. With 66% of SA’s population aged under 35 (StatsSA), this gives you just some idea of the future consumer clout these individuals will have in the very near future. Quite simply, if you aren’t relevant to these consumers then your business faces a huge up-hill battle.

Millennials aren’t the only driver of shared value in SA. Already we have social transformation imperatives such as the broad-based black economic empowerment (B-BBEE) codes and enterprise development requirements driving what — very clearly — is a shared-value agenda. Such government-led approaches will continue to encourage social focus at corporate level and have already put many South African companies clearly on the shared-value track. But these efforts are often the result of the state’s "big stick" approach, which is why we continue to face issues such as B-BBEE fronting. The millennials will not be as forgiving.

The carrot or the stick?

Research tells us that, by and large, the millennial generation has a mind-set centred around the notion of conscious capitalism. In fact, this tends to be a primary focus for both the millennials and many in Generation Z (born after 2000). Deloitte produced a report in 2015, Mind the Gaps, which noted that "Millennials overwhelmingly believe that business needs a re-set in terms of paying as much attention to people and purpose as it does products and profit". The study polled 7,800 millennials from 29 countries.

With Accenture’s The Great Wealth Transfer report projecting that $30-trillion in assets in the US alone will shift from the Baby Boomer generation (born 1946 to 1964) to younger hands in the next 30 to 40 years, business cannot afford to ignore the long-term competitive advantage of changing now so as to be in line with the next wave of consumer purchasing power. Taking time to get into the heads of the millennials is, without doubt, central to the future of any organisation and shared value might be the best approach to steer companies onto the right future path.

Understanding shared value

This came home to me last year when I spent two-and-a-half weeks at Harvard Business School in the US and attended a five-day programme with Porter and Kramer. In their effort to help companies re-position to the new normal, they argue that shared value has to be embedded in a company’s strategy. It is no longer sufficient for companies to chalk up their contribution to society to taxes, philanthropy and corporate social responsibility alone. Yes, these should continue, but real societal impact comes from embedding shared value in the company strategy; understanding that the organisation can still make a profit while addressing societal challenges.

All this requires a fundamental shift in mind-set around what shared value means and how shared value can be embedded in the ethos of a company — and used as a competitive advantage.

Part of what Porter and Kramer are arguing is that societies are facing significant social, environmental and economic challenges, and governments and non-governmental organisations lack the requisite resources and capabilities to deal with them. But if business puts its considerable weight and wealth behind addressing social issues through good business practice, it would go a long way to ensuring a more long-term solution to our skewed global society.

Discovery: the poster child

During the programme there was a lot of discussion around SA’s Discovery as a case study. Discovery is seen as a phenomenal example of shared value thanks to the group’s preventative life-care efforts. This has resulted in huge member numbers from a business perspective, with Discovery holding more than 50% of the South African medical aid industry. But their approach is really around positively impacting the lives of people and, in the process, they’ve impacted the entire industry.

Another example cited by the professors was Walmart. I admit to being surprised at Walmart’s inclusion. Until fairly recently it was a company that had a somewhat tainted reputation, but it has managed to shift perceptions through good practices and good supply-chain relationships. Walmart employs more than 2-million people globally and has millions of square metres of space around the world — a big environmental footprint to improve.

For me, the time with leading global thinkers enabled me to re-think the nature of profit, the nature of the firm, and the responsibly and role of business. Businesses have the power, the influence, and the ability to have a systemic impact on the sectors or society in which they operate, because they have multiple supplier touch-points across their value chain, the customers they connect with, their employees, and the governments they connect with and service.

Closer to home, Dr Nthabiseng Legoete of Qualihealth is a perfect example of what can be achieved when organisations harness this broader thinking. Legoete is an entrepreneur who has embedded a shared-value principle in her business, which provides quality primary healthcare services. The societal benefit is better healthcare access for individuals in the Diepsloot area, at affordable prices — while Legoete makes a profit. In the lingo of old, we’d call this a win-win.

Examples such as Qualihealth highlight that the creation of economic value is as vital as societal value — otherwise the balance would be unsustainable. Getting this right comes back to how we re-conceive products and markets, and how we re-define productivity in the value chain through actions such as improved patient care (Qualihealth), improved nutrition (Nestlé), improved behaviours (Discovery), and the improved use of natural resources (Walmart).

Fortune magazine’s Change the World list now focuses on 50 companies it believes are changing the world, all of which have utilised shared value to reposition their strategy, becoming more profitable as a result. They include the likes of GlaxoSmithKline, IDE Technologies from Israel, Nike, Starbucks, IBM and Tesla Motors.

Some of these companies adopted a shared-value philosophy simply because they had no option: customer patterns and behaviours necessitated that they change. Others found that it was necessary if they were to compete in the marketplace. Whatever the motivation, each of these companies and their executives will have had to grapple with a new way of thinking about social impact.

In this respect I believe that business has much to learn from the millennium generation. Find a millennial today and pick their brains — it may be mind-blowing, but it could revolutionise your business strategy.

Verachia is director for the Centre for Leadership and Dialogue at the University of Pretoria’s Gordon Institute of Business Science (GIBS)

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