1. Introduction
In this globalized and fast-paced world, where most companies, collaborators, leaders and people have the only goal of “making money”, no matter what it costs them and who they pass on their way to achieve their goals; They forget the true meaning of life and the commitment we have as human beings, collaborators, managers, organization and even with the environment.
Today what the world and societies need, are leaders with values in organizations, with revolutionized ideas, with ideas that not only think about making money, but stop to think What is the true objective of your organization ?, the answer to this question that everyone would expect would be - satisfy the needs of the clients, then why not consider what those clients really need to have a full life instead of creating needs that they do not really need at the moment.
If we, as future leaders, discard the idea that companies or organizations have to take advantage of society to achieve an increase in the financial status of their organization and we replace that erroneous idea with the idea where the organization and society have to work in harmony., we would be surprised by the fruitful results that we could obtain in the financial statements.
To achieve what is mentioned above, we need to return to the practice of values and implement shared value. Before getting into the topic of shared value, it is essential to take a few minutes to reflect on the following questions: What is shared value? And do we practice it? The following article will define the concept of shared value, its objectives, its importance today and even how to implement it in an intelligent organization.
2. Conceptual framework
2.1 What is value?
The word value has different meanings, however the one we are interested in is social. The value in society refers to the set of principles or beliefs that a person possesses, which define the behavior of the person, which help to prefer, appreciate and choose another's behavior.
Therefore a person formulates dreams, aspirations, purposes and goals based on the values he possesses, this means that our values define our attitudes and these in turn our behavior (see figure 1).
Definition of values
Attitude refers to the state of mind with which we carry out our actions, which is affected by our values, while behavior is the externalization of our thoughts, which are based on the values we possess. Values are very important within a society, because they function as regulators of the actions or behaviors of the individual, at the moment in which he is going to make a decision.
So if a person lacks values, it is most likely that their behavior is out of place and that many people express their disagreement with this behavior, which will hinder interpersonal relationships and life in society, damaging the collective well-being. It is vitally important to mention that an organization has its own values.
Organizational values are related to the reason for being of the organization, its objectives and its vision; They serve as a framework of behavior for its members or collaborators, in order that collaborators and organization have the same values and objectives. Organizational values must be shared with the internal public (collaborators) and external (consumers).
It is essential that the manager's personal values are in perfect harmony with the organization's values, because the person in charge of disseminating organizational values is the leader or general manager of the intelligent organization; The above is also very important because the manager is responsible for organizing and directing the structure of the organization and making important decisions that can mean the success or failure of a company.
Some of the essential values that an organization manager must possess are shown in image 2.
Indispensable values of a manager
For the collaborators to adopt the values of the organization, it is necessary for the manager to make sure to find practicality in it, therefore the manager must ensure that the activities shown in Figure 3 are practiced.
Activities to be performed by a manager
When all the collaborators of an organization act according to the organizational culture, it can be said that they work with the organizational values, which is why the gap to achieve their objectives efficiently and satisfactorily is extremely short.
On the contrary, in an organization where there is an absence of organizational values, the path to achieve its objectives and goals becomes more tense, heavy and difficult. If all these problems occur within the organization, the most likely thing is that the client perceives it and does not trust our organization.
2.2 Share
The word share for many people is such a simple and unambiguous meaning; However, nowadays not everyone is capable of understanding and putting it into practice in their daily life.
The word share comes from the Latin compartíri, it refers to the action of distributing, distributing or dividing a resource into several parts. That person capable of sharing is considered a kind or generous person.
3. Origin of shared value
The origin of shared value stems from a process of evolution of awareness among human beings. The first trace of this awareness is philanthropy, when people or organizations with the best economic position began to share a part of their assets with the people who needed it, without expecting anything in return; provide a little help to people, without solving their problems thoroughly.
This was followed by social marketing, which aimed to increase social well-being by influencing behaviors in society. The most recent is the emergence of Corporate Social Responsibility (CSR), where companies created foundations in order to support society and finally in 2006 the term shared value was mentioned for the first time, in the article “Strategy and society ”. Figure 4 shows the evolution of shared value.
Evolution of shared value
It is until 2011, when the term of value is taken up and explained in the article published by Harvard Business Review called "Creating Shared Value: Redefining Capitalism and the Role of Organization in Society" written by Michael E. Porter and Mark R. Kramer.
3.1 Shared value
According to Michael Porter, companies are currently perceived as one of the main causes of social, environmental and economic problems; since society perceives that companies take advantage of societies to obtain higher profits. This belief is based on the fact that today's companies, instead of satisfying the real needs of societies, create new needs that society did not even know it needed.
This took place when companies began to depend more on outsourcing abroad, breaking the company-society connection, thus losing contact with customers. The globalization of companies had a satisfactory effect on the progress of economic efficiency, however the creation of value was lost.
The companies focused on matching or lowering the prices of their skills, regardless of whether they had to move their factories to places where the costs were cheaper, however the companies forgot that if there are no sources of employment, people will not be able to acquire their products or services.
For societies to change this perspective of companies, it is necessary for companies to start working on the relationships between company-society and abandon the theory of Corporate Social Responsibility that keeps society on the periphery, for a business strategy such as it is shared value where society is at the center of a company.
For shared value to be the basis in the decision-making of a company, it is necessary for leaders and executives to develop systems thinking, leaving aside the thinking where the company is an independent entity of society and think about the needs of society, in the productivity of the company, ability to collaborate company-society with or without profit.
Then shared value can be defined as the creation of economic value for companies and societies, satisfying their real needs. Shared value is not doing philanthropy, or CSR and much less social marketing.
Poter and Kramer (2011) define shared value as the operational policies and practices that improve the competitiveness of a company, which in turn improve the economic and social conditions in the communities where it operates. The creation of shared value focuses on identifying and expanding connections between economic and social progress.
Porter and Kramer (2011), considered the fathers of shared value, ask how companies can overlook the well-being of their customers, the depletion of natural resources vital to their business, the business viability of their key suppliers or the economic hardship of the communities where they produce and live?
How can companies think that the relocation of their activities to places with increasingly low wages is the sustainable solution to the challenge of competition?
3.2 How to create shared value?
The company creates shared value when its performance generates a significant benefit for society (social value) that is also of value for the business. In the article "Creating Shared Value" by Michael E. Porter and Mark R. Kramer they consider that there are three essential ways for a company to create shared value (see figure 5.
Ways for a company to create shared value
These three routes form a vicious circle, where by increasing the value of one, it affects the other areas, increasing its opportunities. This cycle requires innovation and balance that is not easy to achieve between social needs and business benefits, but not impossible.
Creating value
3.2.1 Re-conceiving new products and markets
Many companies ignore the current needs of society and instead prefer to invent new needs. It is easier for companies to stop to carry out an analysis of the products or services that people really need, changing the idea of manufacturing unnecessary products or services for those that are really of interest to society.
Before designing a product or service, we have to make sure if the product or service will really be good for our clients or our clients' clients. It must be considered that a product that really satisfies the needs of society produces more profit than a product that is imposed on society.
Such is the case with Intel like IBM, who are currently designing energy efficient products that help utilities and take advantage of digital intelligence.
It is very important to mention that shared value blurs the boundary between for-profit and non-profit companies, this means that it is possible for companies to be successful and increase the income of their gross product and perhaps contribute something to society, this it is the true meaning of shared value. One example is WaterHealth international, a for-profit firm, which uses innovative techniques to purify water and distribute potable water at minimal cost in rural areas of India, Ghan and the Philippines.
Figure 7 shows some areas where the connections between competitive advantages and social problems are stronger.
Creation of Michael Porter and kamer
The fact that a society has needs does not mean that these needs will have them forever.
As entrepreneurs we must be innovating and continually investigating the needs of society, as these evolve along with technology, economy and its priorities, if we keep this in mind, our company will always remain competitive in the market.
3.2.2 Redefining productivity in the value chain
Michael Porter published in his book Competitive Advantage (1985) the theoretical model of the value chain, which aims to maximize value creation while minimizing costs. Previously, it was thought that efforts to produce shared value considerably increased costs for the company.
However, nowadays it is believed that the application of technology for the conservation of the environment produces a reduction in costs by making the process more efficient and of higher quality. The objective is to increase the productivity of the supplier, in such a way that the customer benefits. The areas with the greatest influence of shared value are: environmental, use of energy and logistics, use of resources, supplies, Use of energy: companies with the intention of saving electricity costs are using light better, recycling, cogeneration among others, which in turn generate shared value.
Logistics systems: to reduce the costs of this area, you are redesigning shipping distances, processing, improving vehicle routes, among other things.
Use of resources: the implementation of technology takes place, to make better use of natural resources, extending to suppliers and channels.
Supply: previously, companies were looking for very cheap inputs, to the extent that farmers, ranchers or suppliers made their products cheap, which impeded the growth of the suppliers' production; causing that the supplies that the companies needed, were more difficult to acquire.
This idea is staying in the past, now the companies understood that if the suppliers are well they will also be productive, so now they share knowledge, forms of financing, among other things.
Distribution: unique ability of a company to reach distant places, increase its economic income but at the same time it facilitates that those inhabitants obtain the benefits of their products.
Location: consider acquiring supplies near the plant, leaves great benefits as it boosts the economy of the place, as well as the company saves transportation costs and resupply times.
3.2.3 Allow the development of clusters
The term cluster was introduced in 1989 by Michael Porter in the Diamond of National of Advantage.
A cluster is the concentration of companies, suppliers, institutions or organizations within the same geographic area that are interconnected, that compete with each other but at the same time collaborate.
The development of clusters is to improve the success of all companies, given how susceptible they are to changes in the environment that surrounds them, such as: affected companies and infrastructure. The objective of the clusters is to innovate, increase the productivity and competitiveness of a geographical area.
When creating a cluster, the shared value is built or created: due to the time that the companies with the greatest development in the place, they focus not only on the failures of their company; rather, they see the failures of the external environment, which affect the productivity and growth of the company itself and put collusion on these problems.
If companies focused on solving the weaknesses of the cluster, they would solve their internal weaknesses, being more effective than CSR actions, since CSR addresses many areas without focusing on true value
An example is Nespresso, where Nestlé builds a cluster in order to make its supply process more efficient, which proposed developing firms, agricultural, technical, financial and logistical capacities in each coffee region, increasing in turn the value of coffee.
A key aspect for the development of clusters is open and transparent markets; which consist of companies ensuring supplies, providing greater incentives to suppliers, improving the income and purchasing power of local buyers.
Characteristics of a cluster
- Geographic concentration of economic activity Specialization in a specific economic sector Spillover effect, since its activity benefits the entire region Triple Helix: administration-university-company system Balance between competition and collaboration by its members
All these elements make the clusters "living" entities, becoming dynamic elements of the economy, generators of opportunities, employment and wealth.
3.3 Difference between CVC and RSC
Companies should leave CSR or CSR behind and implement shared value; because the difference between the two is very great.
CSR arose from the need to heal the ties between companies and society; because companies lost the legitimacy and trust of society, since companies thought that companies only made money at their expense and companies did not give back to society.
This is due to the fact that society thought that companies only polluted the environment more, cut down forests, consumed excess water and electricity.
Faced with this situation, the companies designed the CSR which was an action in compensation for the damage they caused to society, however this compensation was economically limited and for a certain period; after that period, companies forgot about society.
However, the companies forgot that this investment did not economically reward society so that it had the possibility of acquiring their products or services.
Unlike the shared value is not to solve the problems of society for a period, it is more than that, it is when companies "create economic value" by investing their capital in sustainability projects for society creating in turn "social value", where society acquires greater purchasing power and, on the other hand, favors increased sales of products or services.
With this investment, companies earn more money, as who says we have to change the “only the company wins” for a “the company wins, when the society wins”.
The only thing that is equal is that both, comply with the laws, ethical standards reducing the damages for the activities caused by the companies.
To more easily identify and visualize the differences between shared value and CSR, table 1 is shown below.
Table 1 Comparative chart between shared value and CSR
| CSR | CVC | |
|
Value |
Doing good, generosity Give back to society what you get from it with works of charity | Economic and social benefits |
|
Creation of shared value |
Philanthropy, companies provide a momentary solution to society's problems, a response to pressure from society. | Company and society create shared value It is part of the competences |
|
Utilities |
Does not influence | Maximize profits |
|
Impact |
It is limited, since there is a certain percentage to carry out charitable works. | Realign the company's budget |
3.4 Success stories
A case of shared value in Mexico was the mortgage financing plan "Rent with purchase option", which, unlike the United States, which applied financial plans that were not economically sustainable and were ultimately devastating for society.
If companies adopt shared value as a prism, other approaches would be generated, giving rise to their innovation and growth. Some companies that have already embraced shared value are:
- GoogleUnileverJhonson & JhonsonIntelGE
4. Conclusion:
In the current market there is a great diversity of companies among which the real demand is distributed. Faced with this situation, the companies used cost reduction or differentiation as a strategy; leaving society on the periphery. The companies exploited the earth's resources, polluted the environment and caused social problems. Faced with this situation, society turned its back on companies.
The companies with the desire to recover a little demand, credibility and trust from society, had no alternative but to become aware of what was happening in the world. This was when they realized that they were overexploiting society and the environment, so they decided that it was fair and necessary to give back a little of their profits to society through “philanthropy”.
However, society related the word philanthropy with charity and they thought that if companies gave away their money with charities, it was because companies were aware of all the damages that during the process of obtaining their final products or services they caused to society and environment.
Especially since society thought that they only did charity work to improve company-society relations, so the effect did not last long.
The companies after raising awareness reached the conclusion of implementing the creation of shared value, which is a business strategy that is currently being implemented by various companies, since they allow company-society relationships to regenerate and at the same time create economic value for both and meet the real needs of society.
Shared value is not philanthropy, it is giving society a sustainable means of all the profits that society's companies receive.
A company can create value in 3 ways: 1) Conceiving new products and markets: which means manufacturing products that truly meet the needs of society. 2) Redefining productivity in the value chain: maximizing value creation while minimizing product manufacturing costs and increase supplier productivity, benefiting the customer and 3) Build a cluster where the factory operates; in order for the more developed industries to support other companies and in turn deal with external factors that harm their company.
5. Bibliographic references:
- King Núñez, KI (2012). Shared value. Michael Porter's theory. http://www.gestiopolis.com/administracion-estrategia-2/valor-compartido-teoria-michael-porter.htm.Pereira, JE Creating shared values. https://www.deltaasesores.com/Porter, ME, & Kramer, MR (2011). The creation of shared value. Harvard Business Review.RSE, A. (2011). Creation of shared value Vidal, I. (2012). Porter and Kramer: the principle of shared value. Barcelona.
