Three Ways to Create Shared Value
Reconceiving Products
and Markets
Companies reconceive products and markets in order to address a need of an untapped market which is the ‘marginalized sector’ of the market as they are not given proper access to products and services they would need. Thus, the marginalized sectors are able to gain from the reconception of products and services to their needs. In return, being the first business to address the need of an untapped market produces a tremendous amount of growth enjoyed by the first-mover.
An example of a company that reconceived products and markets is CARD Pioneer Microinsurance inc. Insurance -- which was a product initially exclusively afforded by the rich -- was fitted to the poor who needed it the most. Because of CARD Pioneer, the poor are now able to collect claims fast without resorting to moneylenders with high interest rates. CARD Pioneer has been rewarded by the market, as the poor have been the fastest growing market of the Philippine insurance industry.
Redefining Productivity in the Value Chain
The value chain is the company’s activities which create value to the company. Social problems such as pollution, drought, and poor education can be detrimental to the value chain of the company. This creates an imperative for the company to actively address these problems which incur economic costs to the business. Solving these problems creates a twofold positive result: the company becomes more productive, and the societal and environmental ills are addressed. Companies can improve the way they do businesses and drive social development at the same time.
Nestle Philippines wanted to penetrate the carinderia market. However, carinderias are located in narrow spaces that cannot be passed using the traditional way of distributing products: trucks. To address the distribution problem, Nestle tapped tricycle drivers and named them “Business on Wheels” to distribute and sell the products to spaces that are impenetrable by trucks. With basic training from Nestle in salesmanship, the average income of the BOWers range from PHP25,000 to PHP60,000. The effect on Nestle is even more striking: in 2014, 20% of the national sales of Nestle Philippines came from BOWer distributors.
Enabling Local Cluster Development
Enabling local cluster development concerns with developing clusters that indirectly contribute to the company’s value chain. These clusters involve communities, the public sector, and other institutions. Developing these clusters guarantees multi-sectoral engagement of the business with numerous entities that push forward the development of society. This results in the company’s better access to resources and high human capital.
Before water was privatized in the Philippines, most of the informal settlers in Metro Manila were not given proper access to water by the government. This forced the poor to buy drums of water at PHP125 per cubic meter. As water was privatized in the Ramos administration, Manila Water Company Inc. began to provide access to clean, running water to the poor at a very affordable price of PHP 8.31 per cubic meter -- almost 85% in savings. Because of this, MWCI was able to garner profits from 1.8 million Filipinos.