- A 2011 paper on "Creating shared Value" was a game-changer for many; now, it is being re-envisioned for the data age.
- There remains a disconnect between the pursuit of profit and the realization of shared values that benefit society at large.
- Bringing data into the shared value construct means others can benefit from its power and not just for-profit entities.
In 2011, I was co-teaching a course on Corporate Social Innovation at the Stanford Graduate School of Business, when our syllabus nearly went astray. A paper appeared in Harvard Business Review (HBR), titled “Creating Shared Value,” by Michael E. Porter and Mark R. Kramer. The students' excitement was palpable: This could transform capitalism, enabling Adam Smith’s “invisible hand” to bend the arc of history toward not just efficiency and profit, but toward social impact.
It was a seminal moment. Watching our students’ enthusiastic notions that they could realize their dreams of changing the world for the better without having to give up their dreams of being financially successful. Suddenly, “doing well” and “doing good” rhymed. And now, over a decade later, the Fourth Industrial Revolution necessitates we re-envision the shared value framework to align with the current data age.
The promise of shared value
The immediate impact of Kramer and Porter’s paper was far bigger than just our Stanford class. “Creating Shared Value” offered a roadmap for companies for balancing profit and corporate responsibility. The core idea is that shared value consists of policies and operating practices that improve competitiveness while simultaneously enhancing the economic and social conditions in the communities in which the business operates. It is not charity or philanthropy, it is enlightened self-interest.
Essentially, they argued that all profits are not equal and it is possible to enact a higher form of capitalism. When companies pursue shared values, it benefits society and improves the world the business functions in, which in turn benefits the organization. As Porter and Kramer noted in their HBR paper, “If all companies individually pursued shared value connected to their particular businesses, society’s overall interests would be served.”
Has shared value been realized?
History shows that the promise of shared value hasn’t exactly been realized. In the past decade, most indexes of inequality, health, and climate change have gotten worse, not better. The gap in wealth equality has widened – the combined worth of the top 1% in the United States increased from 29% of all wealth in 2011 to 32.3% in 2021 and the bottom 50% increased their share from 0.4% to 2.6% of overall wealth; everyone in between saw their share of wealth decline. The federal minimum wage has remained stagnant at $7.25 per hour while the US dollar has seen a cumulative price increase of 27.81%.
Meanwhile, corporations have realized significant profits and growth in their market evaluations over that same timeframe. Ten years ago, not a single company was valued at a trillion dollars or more. Today there are three. Clearly, there remains a disconnect between the pursuit of profit and efforts to implement shared values and adopting practices that benefit society and the world at large.
The role of data in a shared value construct
While corporations, in general, have experienced growth, it seems that data-driven technology organizations have achieved extraordinary success. Between 2011 and 2022, the market capitalization of both Microsoft and Facebook/Meta skyrocketed by approximately 850%. Google’s market capitalization has grown more than 300% just since 2014. This growth is largely a function of the Fourth Industrial Revolution and the role of data in digital transformation and the evolving economy.
That said, data is by no means the only – or even primary – obstacle to achieving shared value, but the role of data is a key aspect that needs to change. In a shared value construct, data is used primarily for profit and not the societal benefit at the speed and scale required.
Unfortunately, the technology transformation has resulted in an emerging data divide. While data strategies have benefited the commercial sector, the public sector and nonprofits lag in education, tools, resources, and talent to use data in finding and scaling solutions. The result is the disparity between the expanding use of data to create commercial value, and the comparatively weak use of data to solve social and environmental challenges.
The path forward
Data is part of our future and is being used by corporations to drive success, as they should. Bringing data into the shared value framework is about ensuring that other entities and organizations also have the access and tools to harness data for solving social and environmental challenges as well.
In today’s world, the most critical issues – cyber attacks, supply chain issues, and geopolitical fragmentation – are much harder for civil society and governments to address because they don’t have the same level of sophisticated data resources that the private sector leverages. The consequences for society are immense.
Kramer and Porter’s construct of shared value had promise, but it did not take into account the enormous, transformational power of data. We know more now than a decade ago and we know that the power and volume of data is going to increase exponentially.
Business has the opportunity to help solve the data divide through a shared value framework by bringing talent, product and resources to bear beyond corporate boundaries to help solve our social and environmental challenges. To succeed, it’s essential to re-envision the shared value framework to ensure data is at the core to collectively solve these challenges for everyone. This will require a strong commitment to collaboration between business, government and NGOs – and it will undoubtedly require a dedication to increasing data literacy at all levels of education.
So far, the promise of shared value is just that, a promise. We have not yet cracked the code on mobilizing the power of business to drive social impact and profit to realize the aspirations that excited my students back in 2011. While there is no silver bullet, data is an essential ingredient and the power of data is now evident. Let’s not wait another decade for action, the time for change is now.