NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Shared value is a management strategy focused on companies creating measurable business value by identifying and addressing social problems that intersect with their business. The shared value framework creates new opportunities for companies, civil society organizations, and governments to leverage the power of market-based competition in addressing social problems.

The concept was defined in the Harvard Business Review article “Creating Shared Value” (January/February 2011), by Professor Michael E. Porter and Mark R. Kramer. The authors identified three ways in which shared value can be created:

Reconceiving products and markets – Defining markets in terms of unmet needs or social ills and developing profitable products or services that remedy these conditions.

Example: BD developed a new type of safety syringe to reduce healthcare worker needle-stick injuries. This product innovation grew to $2 billion, approximately a quarter of the company’s revenue. (Read the BD case study.)

Redefining productivity in the value chain – Increasing the productivity of the company or its suppliers by addressing the social and environmental constraints in its value chain.

Example: By reducing packaging and improving delivery logistics, Walmart saved $200M in distribution costs while growing the quantities being shipped. (Learn more about Walmart’s shared value commitments.)

Local cluster development – Strengthening the competitive context in key regions where the company operates in ways that contribute to the company’s growth and productivity.