Competitive Strategy and Social Impact: Creating Shared Value

Course Number 1415

Visiting Lecturer Mark R. Kramer
Fall; Q1; 1.5 credits
14 Sessions
Paper

The course will be offered on a Q1 X schedule. Students who would like to continue with an IP in Q2 for another 1.5 credits should contact Professor Kramer in advance, as the IP registration deadline is 8:30 am on Thursday, September 5.

Overview

This course is relevant for anyone who recognizes the growing importance of social issues to corporate success and the power of companies to change the world. It offers an expanded vision of corporate strategy and purpose by incorporating social impact as a source of competitive advantage. The cases demonstrate how large multinationals and smaller entrepreneurial companies in a wide range of industries, in both developed and emerging markets, improve their economic performance by delivering large-scale impact on health, education, poverty, climate change, gender and racial equity and other Sustainable Development Goals. The cases also illustrate the unique role that large  public companies can play in advancing social progress and the way cross-sector collaboration among businesses, NGOs and governments can amplify value for all three sectors.

We examine companies founded with a shared value strategy, as well as the difficult challenges of shifting the organizational culture and business models of some of the world’s largest companies in response to changing societal pressures on their industry structure (e.g., how energy companies use climate change to stimulate innovation). Class discussions and readings will explore the difficult balancing act shared value companies face as they pursue private profit for their shareholders while also trying to act as agents of social change.

The course builds a social impact dimension into Professor Porter’s key strategy frameworks and includes a guest lecture by Professor Porter, as well as module on security analysis that links shared value to Alpha. Taken together, the cases provides a clear and actionable framework for putting the concept of shared value into practice.

Background

The hotly debated concept of creating shared value (CSV) rejects the deeply ingrained notion that there is an inevitable trade-off between social benefits and shareholder returns.  It offers a more sophisticated way to think about capitalism, one imbued with a social purpose that arises not out of charity or obligation but out of a deeper understanding of competition and economic value creation.

Classical economics taught that the social and environmental impacts of business were externalities to be handled by government regulation, philanthropy or corporate social responsibility. Classical finance went further, arguing that any corporate focus on “social” factors was a misuse of shareholders’ resources. As a result, most companies developed strategies and business models that ignored both their own social impact and the costs that social issues impose on their growth and profitability.

We have since learned, however, that societal problems create substantial internal costs and that addressing the world’s urgent problems offers companies new opportunities for differentiation and growth.  Companies that integrate a social purpose into their competitive positions find opportunities for innovation and profitability that competitors miss. CSV, therefore, offers a major evolution of business thinking to drive competitive advantage in the global economy. Future business leaders will find it important to understand and be able to apply this framework over the course of their careers.

Course Content and Organization

The course is based on the ideas first introduced in the Porter & Kramer 2011 HBR article Creating Shared Value  (Links to an external site.)  Unlike other approaches that analyze the social impact of business in abstract moral or philosophical terms, CSV offers corporate leaders practical guidance in driving business results through measurable social impact. It is fundamentally a course on competitive strategy, not corporate social responsibility or social enterprise. The course will provide a clear framework and rigorous tools for putting the concept of CSV into practice, enabling companies to move beyond the vague idea of having a corporate purpose to a concrete strategy for delivering results. 

The course includes 12 recent cases authored by Professors Porter and Kramer, along with frequent guest protagonists. Industries covered include health, energy, insurance, food and beverage, retail, consumer goods, chemicals, venture capital, and entertainment. Cases address all three levels of CSV: creating new products and markets, redefining productivity in the value chain, and improving the broader ecosystem in which the company operates. Cases will be supplemented by readings on strategy and the role of business in society.

We will address the challenges involved in shifting organizational culture, measuring social impact, engaging investors, and managing public-private partnerships as well as new forms of cross-sector partnership built on collective impact and shared value creation. We will examine companies “born” with a CSV strategy, as well as those transitioning to CSV in response to external pressure from emerging social issues.  A module on investment analysis will distinguish CSV from other approaches such as ESG, or socially responsible investing. 

Supplemental course materials will include critiques of CSV as well as readings and research reports on CSV opportunities in different industries (healthcare, extractives, banking, and insurance) and in particular social issues (education, global health, employment, racial equity). All cases focus on social impact as integral to company performance in a rapidly evolving market and societal environment.

Target Audience

CSV is intended as a mainstream strategy course for future corporate leaders and entrepreneurs who want to understand how social issues intersect with corporate strategy to create new opportunities for competitive advantage, and who are committed to purpose-based corporate leadership. 

Increasingly, social enterprises, NGOs and governments are recognizing that the private sector is an essential partner in solving the world’s problems.   The course is therefore also suited to students who aspire to work in governments or social enterprises that hope to partner with businesses to deliver social impact.   A limited number of cross-registrants from other schools in related disciplines will be accepted to enrich the class discussions.

Attendance and Preparation.  Given the cumulative nature of the course content and the relatively small number of class sessions, attendance at every class is mandatory and important.  Students must notify the instructor of any absence in advance of class by e-mail (mkramer@hbs.edu) in addition to utilizing the HBS Student Absence Notification Application.  In case of unavoidable absences, students are still responsible for assignment preparation. Professor Kramer will be available to meet individually with students to discuss the cases they missed in class.

Please come to the first class prepared to discuss the Discovery case.

Classroom Discussion

The course utilizes the case method in most sessions.  Students are expected to complete all the background reading and thoroughly prepare the case, guided by the assignment questions posted on Canvas.  Class discussions will consist of a combination of volunteers and “cold-calling.”  In their participation, students will be expected to assimilate and build on the class contributions of other students.  Students who volunteer to contribute by raising their hand should be prepared to do so in a concise and logical manner, marshaling evidence to support their views.  The capacity to integrate across facts, issues, and cases is valued.  All discussions should be constructive in approach and tone. Students should be prepared for follow-up questions from the instructor and/or other students.

 Course Evaluation and Grading.  50% of the grade will be based on class participation and 50 % on a final paper of roughly 5-6 pages in length in which students will be asked to apply the concepts of the course to specific companies, industries or social issues.

  This course is part of a portfolio of courses relevant to Social Enterprise. For a full listing, see the Social Enterprise Initiative (Links to an external site).

Cases Included in the Course:

Discovery Limited (2018)

Intercorp (2017)

Yara International: Africa Strategy (2018)

Nestle’s Created Shared Value Strategy (2017)

Enel: The Future of Energy (2018)

Dow: Breakthroughs to World Challenges (2017)

Walmart: Navigating a Changing Retail Landscape (2019)

DBL Partners: Double Bottom Line Venture Capital (2018)

Dove and Real Beauty: Building a Brand with Purpose (2019)

Participant Media: Social Impact in Hollywood (2019)

Sustainable Investing at Generation Investment Management (2016)