The January-February issue of the Harvard Business Review carries a paper by Michael Porter and Mark Kramer called Creating Shared Value.
At its core is the argument that capitalism is under siege. New ways of creating shared value, value that goes beyond a remorseless focus on cost reduction and short-term market-oriented financial results, are now needed.
Porter and Kramer are not going soft on capitalism. Get this wrong, they opine, and governments will impose policies that sap corporate and economic growth.
Societies, individuals and lobby groups will make it difficult or impossible for companies to operate on their own terms. By implication, worse scenarios such as revolution or attacks on specific companies are possible.
The paper outlines case studies (in tried-and-trusted HBR style) of companies getting this right, and making changes. The case for financial success seems reasonable, with sustained profit coming from companies creating models that in turn create meaningful, sustainable and fair partnerships based on shared input value, and on creating shared output value.
What’s not discussed by Porter and Kramer is the communications element to shared value. Without effective communications, there will always be a missing link in the notion of shared value.
And this is not a cynical pitch for a public relations slice of the shared value pie. Nor is it a contrived add-on on the periphery of an organization’s operations. Corporate social responsibility programmes can sometimes be this, as Porter and Kramer comment.
If the concept of shared value is assumed to be true, communicating what you’re doing as a company about creating shared value must be part of that much broader business objective.
At the most basic level, if a society doesn’t know what you’re doing, it can never understand your role in creating shared value, and the alternative scenarios introduced above become possibilities once again.
This is not boasting, but an integral part of creating shared value. A company’s extended audience includes its customers, suppliers, shareholders and those who have influence on its operations. These can include government and other legislators.
Engaging with these audiences means equipping them with the knowledge, facts and context about your organization’s operations. Sharing the success you’ve had at creating shared value is important. Being open, honest and truthful about the work in progress is also important and beneficial.
This moves the communications tasks away from self-aggrandizement, simple publicity, and hubris, towards an approach that seeks to inform and influence, but from a position more clearly defined by the sense of mutual benefit – Porter and Kramer’s shared value concept.
Clearly, there’s also a defensive play in all this, one in which a positive balance of goodwill is being created against that day when something goes wrong.
But this is not a sustainable communications strategy. Organizations tire of being defensive. If nothing goes wrong, the need for communications budgets, resources and effort can be challenged, and can be cut because nothing has gone wrong.
This misses the point: organizations should communicate because it makes good business sense in this shared value context.
One way to rationalize this decision is to build the financial objective into the communications plan. For commercial organizations this makes obvious sense and is arguably easier to do (although it often isn’t). The financial equation should be based on the positive or incremental effect of communicating shared value, not just on the defensive position of defining the cost of the missed opportunity should external organizations hamper operations.
Porter and Kramer develop the concept of recapturing trust between companies and their wider markets, and of the societies in which they operate and with which they engage. Trust is built on two things: actions and understanding. Understanding creates a context for the actions. Without that context, actions can often appear to revert to the pursuit of shorter-term financial returns at the expense of a broader, longer-term shared value (even if this is not true).
Having this context also helps hold a company to account for its actions.
Companies need to consider who they recruit internally or externally to manage and nurture this important context, alongside their commercial operations.
This context also provides evidence of shared value to legislators. It is naïve to expect legislators simply to believe that companies are creating shared value more than perhaps is the case today.
In the future, legislators with influence over a company’s operations may also have sway in countries other than that in which the company has its HQ. All will need evidence of shared value, especially if their view is that a company has a legacy of exploitation (whether true or not), or if they themselves come under increasing pressure from their own constituents.
Examples of how this can go awry are not new. At the beginning of the 20th century, the great Quaker families running the confection businesses based in the United Kingdom, especially the Cadbury family, suddenly found themselves under considerable social and political pressure because of exploitation of workers in the cocoa fields of West Africa in particular, from where they bought their raw cocoa. In countries such as Portuguese Angola, slavery was still common, even if transcontinental slave trading was not. For Quaker families steeped in the values of creating the common good for everyman, this was an appalling situation. They responded by both taking direct action, including going to the countries affected to get the evidence they needed to apply political pressure to stop the exploitation, and briefing the media of the day (and taking some of them to court for libel and slander) and political figures in the UK.
Hitherto, these families had concentrated on the act of creating business and social conditions that improved the quality of life of their workers. What changed was how they explained what they were doing, even as they changed the overseas practices for the better.
As Porter and Kramer put it, “the concept of shared value resets the boundaries of capitalism. By better connecting companies’ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets.” This is a marketing mantra as familiar as any.
Communications, as part of a strategic plan, integrated with the operations and ‘moral backbone’ of a company, are an essential element of making this a reality.