Creating Shared Value
MBA6008, Global Economic Environment
June 6, 2014

The article “Creating Shared Value“ is a business concept created by the Harvard Business Review and written by Michael Porter and Mark Kramer on January 1, 2011. The article deals with the idea of innovating the purpose of a corporation and their relationship to the social environment in order to identify unknown customer needs and to expand the relationship with the communities in order to be mutually dependent.
Porter and Kramer urge leaders to recognize that "shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success". They advocate that creating shared value will drive the next wave of innovation and growth in the global economy (Porter & Kramer, 2011). Several large corporations have already started implementing a shared value initiative – such as Google, IBM and Wal-Mart (Porter at el, 2011).
Shared value creates economic value for the corporation through innovations that address society's needs and challenges. Companies create shared value in three ways: 

1. By redefining products and markets 

2. By redefining productivity in the value chain 

3. By enabling local cluster development
1Arguably, products and markets are the greatest unmet needs in the global economy (Porter at el, 2011). Too many companies fail to reevaluate their strategy and ask themselves if their product is right for the customer. 2A company’s value chain is definitely affected by – numerous societal issues, such as natural resources and water use, health and safety (Porter at el, 2011). Opportunities to create shared value arise because societal issues can create economic cost in the value chain. 3 “The success of every company is affected by the supporting companies and infrastructure around it” (Porter at el, 2011). Productivity and innovation are strongly influenced by “clusters,” or geographic concentrations. Though, shared value can be applied to every major company decision, not every company can have them in every area. Asking the right questions can help fill the gaps. Creating shared value will require a well-implemented plan in each of the three areas. Shared value creation will heighten collaboration and overall opportunities. Not all profits are equal. “Profits involving a social purpose represent a higher form of capitalism, one that creates a positive cycle of company and community prosperity” (Porter at el, 2011). Shared value focuses companies on the right kind of profits – profits that create societal benefits rather than diminish them (Porter, at el, 2011). “The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy” (Porter, at el, 2011). Creating shared value will not solve all the issues, though it is a step in the right direction to winning back the respect of society.

Reference

Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1/2), 62–77.