Why Creating Shared Value is Good Business

Good Idea Light Bulb Why Creating Shared Value is Good Business

The concept of creating shared value stems from the foundational concept that the purpose of business is to satisfy the needs and wants of consumers. The most successful businesses in the world are the greatest servants of society, because service is good business. This idea is what creating shared value is all about: finding ways to satisfy the needs of society that inevitably benefits business.

The idea that creating shared value is good business answers the concerns around Corporate Social Responsibility, which has the reputation of being akin to charity and wealth redistribution.

However, the concept of shared value reveals that corporate social responsibility should be approached from a business-perspective. By taking responsibility for the well-being of consumers, businesses benefit themselves.

Origins of Creating Shared Value

The origins of this business concept comes from the Harvard Business Review, and was further elaborated on by Michael Porter. His premise is that consumers and companies are dependent on each other, and that benefiting one will inevitably benefit the other.

Ultimately, creating shared value is actually returning to the foundational purpose of business by defining it as good business practice to place the focus away from a sales-orientation (business first) in favor of a customer-orientation (customer first) perspective that results in lasting successful business growth.

A sales-orientated perspective communicates to consumers that the business is only concerned with its own needs, whereas customer-orientation communicates that businesses want to benefit consumers. Consumers do not care about company needs. They care about their own needs, which is why advertisements that focus on benefits, instead of features, result in higher sales.

Creating shared value is good business because it benefits companies via supporting the economy, supporting supply chain members, and assisting in product development.

Shared Value's Cycle of Benefits

Customers are the lifeline of a business. Without customers, and (increasingly important) their repeat business, companies of all sizes would fail to survive. As logically follows, if businesses were to fail their social responsibilities, they would ultimately destroy consumers, which would unavoidably destroy business.

Companies don't exist within a vacuum. They exist within society, which means that improving society benefits the business environment and overall economy. Creating shared value is about strengthening economies.

Benefits to the Supply Chain

Creating shared value focuses on the inefficiencies and reduced productivity caused by unaddressed social issues and logistic problems. It is useful for all members of the supply chain, and it benefits companies to consider their B2B partners as they would customers. Creating shared value between supply chain members will improve efficiency and positive communication.

Benefits for Product Development

A primary method of product development is discovering unmet needs and developing a product to satisfy those needs. Companies may also attempt to solve customer problems in order to re-purpose, improve, or develop products. All such strategies of product development create shared value for consumers and the company.

Example of Creating Shared Value

Consider a giant retail business that has positioned itself as obtaining products from local manufacturers. These independent manufacturers are struggling to survive, so the retail giant invests a sizable sum of money into these small companies. The retailer then advertises their investment, positioning it as supporting local business. The benefits include:

  • Strengthening supply chain
  • Creation of advertising position
  • Improving positive brand awareness

All of which improves the retailer's competitive advantage.

Ultimately, the idea of creating shared value is a relabeling of how businesses best perform, as well as the best practices producing the greatest benefit. Essentially, creating shared value relabels the idea of service and corporate social responsibility in order to make it more trendy.

Article: Online Business Entrepreneur: Build Your Own Online Business

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