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Shared Value As A Concept Is Very Relevant For India, Says Mark Kramer

Mark Kramer, Co-founder and Managing Director of consulting firm FSG, talks about how the Shared Value concept can be relevant for India

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Mark R. Kramer is Co-founder and Managing Director of FSG, a non-profit consulting firm established in 2000 and specialising in strategy, evaluation, and research. Kramer along with his partner Michael E. Porter have brought forth the concept of 'Shared Value'. The central premise behind creating Shared Value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Recognising and capitalising on these connections between societal and economic progress has the power to unleash the next wave of global growth and to redefine capitalism.

Mark, who is in Delhi for a seminar, shares his views on how the Shared Value concept can be relevant for India and throws light on examples from around the world in an engaging conversation with Anurag Batra, Editor-in-Chief, BW Businessworld. Edited Excerpts:

Can you talk to us with some examples of Shared Value in Indian context keeping in mind such a vast disparity that exists between the rich and the poor?

I think in many ways the housing example, which I just shared, is the best one that comes to mind. How do you provide housing to poor people who are living in slums without any formal employment is a huge problem that has been solved via Shared Value strategy. The slum people have been paying more and more rents every year without owning anything. To design a solution to this problem by providing apartment ownership for slum tenants took many years.

To really come up with a model that a family could live in a house which was built with only a few thousand dollars or to figure out how to get the finance done for such a project was the hardest part because to find a builder who will do that is very difficult as there was so much opportunity in the premium building market. So they had to start in rural areas and smaller cities. This programme is not operating in Delhi or Mumbai. Therefore, one of the challenges in India is that it has been such a rapidly growing successful economy that the incentive to go out and find solutions to social problems is considered very risky.

You talked about the NGOs and their role in your presentation. There was a World Bank report some 18 months back that spoke about the state of affairs of NGOs working in India. Can we really trust the NGOs with the money that they are supposed to put to use as part of the Shared Value concept?

I think India is still in the early stages of development of the non-profit sector. There is such a variety of non-profit organisations in India. Some of the good work using Philanthropy for solving social issues is still evolving. There are some great non-profit organisations working for the good of the society and in line with the social goals of their stakeholders and governments. But there are also those who are working in different directions.

We need to make a distinction between the two kinds and focus on those NGOs who have aligned themselves to the goals set by governments and social enterprises rather than on those that are not doing so.

When you wrote your piece in the Harvard Business Review your good friend Steve Denning wrote in Forbes a critical piece saying it was an old wine in a new bottle. Then others criticised Shared Value concept saying it was too shallow. When you talk of Shared Value you talk of trade-off. Most often we see that the goals of businesses are to maximise profits and in doing so may not align with the goals of the society. So how do you respond to the trade-off question?

Of course, there has been a lot of criticism of the idea. And I would say that the idea is still developing. We are developing course materials for the Harvard Business School. Case studies are being prepared to support the Shared Value concept. We are still building a body of knowledge that takes it beyond this nice phrase that we have.

Having said that there are companies that have been doing this long before the concept or this term came in our article. We don't think it will become a separate stream for companies in the future rather the Shared Value concept will allow companies to think differently on what their business does for society and how it can be grown. Then certainly there are companies that are very focussed on the short term gains while there are other companies who think very long term and they are seeing the benefits of Shared Value.

Also we are developing some material on what should be the shared value for the investors. Because as long as investors are driving the short term results, quarter-on-quarter profits, they will not be driving Shared Value which required a longer term perspective. So many large Indian companies are family owned and privately controlled. And they do think about the long term growth of their companies and the future of their families rather than the short term gains and returns because they believe in creating Shared Value.

You have mentioned GE and Walmart as the shining examples of companies aligning themselves to the Shared Value concept. I would also like to bring forth the example of Volkswagen here though not related to Shared Value. How do you view Volkswagen in the backdrop of Shared Value?

Shared Value is not about whether the company is good or evil. Coca Cola has a wonderful programme in Brazil. It is training and deploying youth in the slums giving them career opportunities to increase the family income. But at the end they are selling Coca Cola which can contribute to obesity and even diabetes. We work with oil and gas companies because they can be tremendous and powerful source of development and economic opportunities in the communities they operate in. But carbon emission at the end of day is not a good thing.

There are lots of big companies whose values are based on legacy model that now we know is harmful be it the energy companies or Coca Cola to the world and the people. They are making so much money from their business that it is hard for them to let go and shift. Nestle is a very interesting example. Because Nestle decided 10 or 15 years back that instead of being a food and Beverage Company we would want to be a nutrition, health and Wellness Company and we will create nutritional profile of all our products based on World Health Organisation and other public data. And we are going to move our portfolio so that it moves to 100 per cent of the products that align to what public believes to be healthy products.

Nestle believed that there was a direct connection between nutrition and health. Their research showed that certain nutritional elements reduced epilepsy or reduced depression. And they created a new business model for themselves that is mid-way between food and pharma that was based on clinical trials and documented evidence. So they did make the shift. But for many companies it is very hard to make the shift. Just a word on Volkswagen. They had been deliberately and fraudulently controlling emissions. Such companies, I think, believe in the fact that whatever our society may think is of no consequence to us. We are only about making money and we do not see ourselves as connected to society. No company that is actually following the Shared Value strategy can actually have that value within that company.

Driverless cars may come to India at some point then what happens to those thousands of jobs? What is your view on the social impact that technology may have in the future with reference to Shared Value concept?

It's a great question. Many of the innovations that you just mentioned are a wonderful things for the world. I was born in the 1950s and back then there were great fears that computers and technology progress will put people out of work. It is true that there are very few secretaries typing but the technology created a huge industry and more jobs. It raised productivity which raised standard of living and great economic activity which enabled the businesses to grow and perform better than before.

New innovations will create different kinds of job going forward. But what I do worry about is that there is a mismatch between the number of jobs and the number of people in the world and I do not have a Shared Value answer to this worry of mine.

Who according to you is the Donald Trump of Management in America?

Honestly, I do not know. There is a lot of good work being done across business schools but gosh I really don't have the answer. Though it is a clever question but I do not have an answer for it.