As you are reading this, I am working full force on my new book in order to help companies differentiate themselves when user experience and convenience become a commodity. I believe that one very essential strategy to accomplish that, is by focussing on shared value: by creating value for the company, the customer and society. This approach is furthermore especially relevant in these times where many companies are investigating how they could provide solutions which can help alleviate the COVID-19 crisis, but that’s a different story. Now as shared value is a subject about which my friend Filip Caeldries, Professor and Associate Dean Company-Specific Programs at the Tias School for Business and Society, has a lot of expertise (and passion), I decided to pick his brain on the matter. I had a great talk with him for my podcast channel, so be sure to check that, but here are also the highlights of our conversation.
Filip started out by explaining that it was the renowned strategist and economist Michael Porter who first introduced the concept of shared value. He was investigating new ways to create competitive advantage and value for customers and argued that societal challenges could provide a fantastic opportunity. Simply put, he advised companies to develop breakthrough value propositions that would solve important societal problems as a way to differentiate themselves in economically viable ways.
Filip clearly warned that the starting point of such an approach had to be real societal problems and that customers are too smart to be blindsided by ‘fake’ initiatives. “The good news is that there is a lot of opportunity here as many customers are more prepared to trust brands than they do governments”, he explained. “That’s because one in five customers no longer believes that “the system is working for them”. But at the same time, about 60% of them also believe that organizations are trust washing. So don’t insult their intelligence: they will see right through initiatives that merely put a thin cosmetic layer on top of the same old activities.”
Shared value = strong purpose + strong brand
If you do want to get this shared value approach right, though, there are two important levels to tackle, Filip explained. The first is of course finding problems and challenges that your company can solve. Now, if you think that that is enough to differentiate yourself, think again: “these types of solution are rapidly moving into the hygiene sphere”, said Filip. “If your products are not low fat or if you use too much plastic packaging, you’re simply no longer on the customer’s radar screen. The truth is that a high number of these new development trajectories have rapidly commoditized.” That of course begs the question “if you’re going to compete on social purpose, what are the productive routes to follow?”
Filip believes that a big part of the answer lies in brand identity and heritage, which is the second level of successful shared value: “The reason why shared value kings like Lego, Nike, Walmart, Levi’s or Nestle are so successful is because they find problems and solutions which show a fantastic fit with their own image and past activities. Take Lego: it has always been known for stimulating creativity and preparing the ‘builders’ of the future. But today’s kids’ futures are very different, because of this perfect technological storm that has been raging amongst us and the slow response of the schooling system to that change. So Lego added its very core – helping kids prepare for the future – to the current increasing skills gap and they digitized their products. Same brand, same story but adapted to a changed environment. And that is why the customer follows, because they remained so perfectly true to their unique brand heritage.”
Look in the mirror
He went on by explaining why that is the reason why branding will become more important than ever. It’s something that I have been claiming myself as well, but on a different level: when brands disappear behind the filters of voice assistants like Google Home and Alexa, brand awareness will remain one of the true differentiators (you can read about that here.) “If you haven’t managed your corporate identity and don’t truly know what it is that makes you unique, then you’ll definitely have a very hard time to cultivate a next generation competitive advantage in the Porterian sense of the word that is coherent with your brand”, stated Filip. “I think that companies now need to confront that head on and look in the mirror to find out who they really are. “What is our core purpose?” “What do we stand for? “In what way are we uniquely different?” These are the true questions to ask. These are the fundaments of creating authentic shared value where both society and the company wins. Take Nike: they know perfectly who they are and have always been known to take a clear stand for good causes. So when they launch a campaign that gives a voice to the grossly underpaid women athletes, people buy into that. They believe it, because that’s what Nike has always done.”
So, find a problem and solve it in a way that stays true to your brand history. That being said, there are different ways to go about that: Filip explained that Porter identified the three most important ones. The first one was to develop new products and tap into new markets. Filip gave the example of SodaStream that tackled the plastic bottle pollution problem with their soda makers which save close to 11,000 bottles per typical family per a 5-year period. The second track that Porter identified was to find ways to reconceive the value chain. A great example here is Levi’s and their premium Water<less brand that saves up to 3800 liters of water in the production process of every single pair of jeans. Though that’s truly impressive, the only question I have here is if the customer will put if with the fact that their other jeans brands still consume that amount of water, but that’s just a side-note. The best thing of all, though, is that they have open sourced this novel and sustainable way of making denim so that other competing brands could use it too, the thought being that it would be unethical to keep that to themselves.
Redesigning the entire ecosystem
But perhaps the most radical and far-reaching track of all, is the third, where companies create a shared value that redesigns the entire ecosystem in which the organization operates. I loved Filip’s example of the Nestle milk roads: “When Nestle develops a dairy business in a new country, they need a good road infrastructure as well as local milk which often is of a poorer quality. Now instead of importing high quality milk or relocating when their needs are not met, they change the entire system. They build new roads to bring the milk faster to the factory. They pay the farmers a higher price and offer them low interest loans so they can invest in better stables and so their children don’t need to work but can go to school (schools they have built themselves). They organize veterinary and hygiene programs so the farmers learn to treat their animals better, which results in better quality of milk. So basically what you see here is a private company, upgrading the entire community ecosystem: from farming, distributions, supply chain, schooling, water use and so on. They basically take the whole community to the next level while solving major social problems.”
I will repeat it ad nauseam, because it’s too important to miss this trend: the days that ‘just’ a great product and a great customer service will keep your brand alive, are over as you can conclude from the many fantastic examples above. Find ways to differentiate yourself and become “an offer you can’t refuse” for your customers. Creating shared value is a very powerful way to achieve that. Filip’s podcast interview offers a great inspiration in the matter, so be sure to you listen to our full conversation here, which has many more valuable insights and examples.