Origins and development of shared value A literature review was conducted into the important early work of 'shared value'. Researchers found some literature focusing on the development of shared value by Porter and Kramer (2006) with most work coming from few sources like
the Monitor Group. More extensively the literature is from development organisations focusing on case studies into the interrelated area of business ventures at the
bottom of the pyramid or
inclusive business strategies/models. Outside these case studies, limited literature was found so the paper presented lessons learnt from
shared value and
interrelated business models to show how they developed and business strategies to engage with the
bottom of the pyramid. To create shared value companies should:- • Reconceive products and markets to provide appropriate services and meet unmet needs. For example, the provision of low-cost
cell phones developed new market opportunities as well as new services for people living in
poverty. • Redefine productivity in the value chain to mitigate risks and boost productivity. For example, in reducing excess packing in product distribution reducing cost and environmental degradation. • Enable local cluster development by improving the external framework that supports the company's operations, for example by developing the skills of suppliers. about how the corporate sector is highly non-uniform and Caroline Ashley's 2009 paper, "Harnessing core business for development impact" illustrating four inclusive business models with different value propositions and the variation in size of inclusive business models: presenting the results of a survey analysing the obstacles to companies wishing to incorporate inclusive business models in their value chains. Around 90% of the 167 applicants identified
access to finance as one of the main obstacles to their business. also identifying further obstacles including a hard-to-reach customer base, suppliers with limited capabilities, limited market information and inadequate regulation. They found Lucci's 2012 paper "Post-2015 Millennium Development Goals: What role for business?" identifying two dominant core business models pursued at the bottom of the pyramid: "harnessing innovation capacity" and "leveraging supply chains and the production process". which relied on a high return of capital employed, often through shared access services, and a low cost, high volume strategy. who argued there was a flaw in this low-price, low-margin, high-volume strategy that MNCs have adopted and only works if two characteristics exist: the ability to leverage existing infrastructure that already serves wealthier customers; and consumers already know how to buy and use the product offering. They found Simanis theorised these characteristics were often missing with him concluding that "because the high costs of doing business among the very poor demand a high contribution per transaction, companies must embrace the reality that high margins aren't just a top-of-the-pyramid phenomenon; they're also a necessity for ensuring sustainable businesses at the bottom of the pyramid." which suggests that costs to serve the poor are still too high and the bottom of the pyramid will not be reached. The researchers found consistencies with an IFC report that a number of its successful models were 'whole pyramid' models, with the 'bottom of the pyramid' segments part of a broader market, allowing companies to leverage existing infrastructure, achieve
economies of scale, cross subsidise and manage risk. Karnanis paper also criticises the focus on MNCs in exploiting opportunities at the bottom of the pyramid given the greater development impact that SMEs could potentially have and he argues that inclusive business models frameworks should see the poor primarily as producers rather than as consumers. analysed the specific constraints producers face: on value creation that relate to a producer's ability to access affordable and high-quality raw material, financial, and production resources; and on value capture that relate to a producer's ability to access the marketplace, assert market power, and obtain secure and consistent transactions. with a greater focus on value chain development as opposed to product innovation. Lucci' identifies a range of model types which include:- • "micro distribution and retail" which leverages existing retail outlets in neighbourhoods where consumers make small, frequent purchases locally, like telecommunication companies selling airtime; • "experience-based customer credit" provided by non-financial firms mostly to their own employees, providing access to finance and to the provider companies. • "last-mile grid utilities" through a combination of financing, technology and management innovations, mitigate normal constraints extend grid coverage to more distant and often lower-income neighbourhoods; • "
smallholder procurement" value chain upgrades through aggregation methods; • "value for money housing" through a combination of facilitating mortgage financial and new housing products which are appropriate to the poor including support services, such as understanding training in the mortgage process; and • "e-transaction platforms" which can bring a range of new services (and therefore new markets) more conveniently and securely to the poor." who suggest that despite some successes, given the levels of investment, inclusive business models record is limited and there are systemic barriers to scale that can only be tackled in collaboration with other players in the private sector, in government and in civil society. says that feel-good stories aside, it's been nearly impossible to gauge the success of these ventures." And this further complicated in relation to inclusive business models by the variety of business cases for companies operating at the bottom of the pyramid They found London for a description of current methods used. discuss the problems of current measurement tools that measure business and social impact separately and provides guidance in how to link social benefit to core indicators. methodology, by using shared value criteria in decision making and using different stakeholders, an step by step framework is provided.
Successful strategies Notwithstanding the limitations in the evidence base there have been a number of reports that have sought to capture and synthesise lessons from successful shared value and
inclusive business ventures. In an extensive report looking into various aspects of inclusive business models, Gradl and Knobloch document a range of benefits for business, in particular access to new markets, in terms of access to new consumers and producers and through the potential for cheaper and higher quality production based on growth-intensive sales and the development of new products. found that revenue growth had been the main business outcome for business, whereas development outcomes included expanded economic opportunities for suppliers, distributors and retailers and access to goods and services mention a number of external conditions were also identified that successful shared value companies had been able to leverage, including governments' openness to private sector participation in socio-economic development and/or the availability of external funding. • Indian government support of
ICICI Lombard's weather-based insurance and microfinance providers (through priority lending mechanisms), •
DFID's support of
Vodafone in developing
M-PESA. Strong partners are also important, either through civil society organisations that provide insights into local needs or other companies that share similar philosophies, for example distributors who may also need to adapt their business model. The level of penetration in ICT can significantly lower transactions costs and link informal economies to more established markets. They found Hills et al. identify two key areas that are essential for successful create shared value companies, "intentionality" and "materiality." Intentionality requires a company or business unit to set specific goals for intended social and financial benefits with clear guidelines that can guide resource allocation decisions along the way and recommend looking at Gradl and Jenkins. A number of company factors are identified that help successful implementation, these include: a culture of innovation that allows experimentation, together with a long term outlook; senior management embracing shared value principles; cross department buy in; and strong local buy in at a local level like affiliates in developing countries. They also stress the importance of building local knowledge through developing local structures and/or strong local partners and employing multidisciplinary teams that are open to new ideas The concluded by saying that materiality is important as it incentivises management to support CSV. It represents the extent to which creating shared value is central to the financial performance of a business unit or company and as materiality grows strategies are likely to be scaled up. ==Shared Value Initiative==