FSG is a nonprofit consulting firm specializing in strategy, evaluation, and research. The firm was founded in 2000 as Foundation Strategy Group by Harvard Business School Professor Michael E. Porter and Harvard Kennedy School Senior Fellow, Mark Kramer. Today, FSG works across sectors in every region of the world—partnering with corporations, foundations, nonprofits, and governments to develop more effective solutions to the world’s most challenging issues. FSG’s ideas are frequently published in journals such as Forbes, Harvard Business Review and Stanford Social Innovation Review.
This post originally appeared on FSG's social impact blog.
There are many reasons why large corporations are challenged to capitalise on shared value opportunities. One that is frequently cited is the inability to look beyond current product lines to rethink solutions to social problems. Some corporations are, however, finding ways to overcome this challenge. This is the story of one such corporation and how it overcame the challenge by striking a non-traditional alliance – one with a startup social enterprise.
In 2009, General Electric (GE) launched Healthymagination, a bold commitment to invest $6 billion by 2015 to develop 100 new, more affordable, and simpler products that address severe health issues. In India, one of the severe health issues the company aimed to address was infant mortality.
A key Millennium Development Goal (MDG) for India, infant mortality had come to symbolise the country’s struggle to balance rapid economic progress with human development challenges. One of the causes of infant mortality is premature births and low weight at birth. Babies born pre-term or at the low end of the weight scale do not have as much fat in their little bodies and struggle to stay warm. As a result, one in five of these babies don’t make it through the first month of their lives.
In developed countries, such babies would be placed in incubators like the ones GE has traditionally made. At a cost of $20,000 and requiring steady electricity supply, this was too expensive and impractical a solution for India. More than 60 percent of its population lives in rural areas with unpredictable electricity supply and a vast majority of deliveries happening at home.
GE’s R&D engineers spent months reinventing their incubator and managed to bring the price down to an impressive $2,000 – 10 percent of the original. However, this was still too expensive. It was then that GE chanced upon Embrace, a social enterprise born out of a Stanford Design class that had radically rethought the solution to the problem.
Bearing no resemblance to a traditional incubator, Embrace’s solution was fashioned as a sleeping bag with a pouch for a heating pad. The pad which could be warmed by an electric or water warmer in 20 minutes could keep the baby warm for 4-6 hours. Most importantly, this came at just $200 – or 1 percent the price of GE’s original incubator. Portable, affordable and practical, it was the perfect solution to the problem. GE recognised the power of Embrace’s solution and decided to partner with the social enterprise to distribute the product.
GE and Embrace bring very different and unique strengths to the alliance. Like most social enterprises, Embrace, unencumbered by a legacy product line was able to develop a disruptive solution to the problem. Further, it had the ability to quickly adapt and improve its design based on market inputs. GE on the other hand, brought very different strengths to the partnership. Its experience in healthcare regulatory requirements enabled it to turn a neat solution into something that was market-ready. This coupled with its awesome depth and breadth of market access as well as marketing prowess ensured the solution would reach the greatest number of population in need – far more than Embrace alone would have been able to reach.
In short, together, GE and Embrace will be able to capitalise on the opportunity in ways neither would have been able to on their own. It is the ultimate 'win-win' alliance – a match made in heaven. Both parties are quick to point out, however, that it takes hard work to make such alliances successful. The speed of progress can seem painfully slow to social enterprises which are used to moving quickly. On the other hand, social enterprises can seem lacking in structure and organisation as compared to a large corporation. However, with enough trust, it is possible to make such alliances work as GE and Embrace have demonstrated.
What is your experience with such alliances? We invite you to share what you see as the benefits and challenges of such alliances.
By Lalitha Vaidyanathan, FSG Managing Director (Lalitha leads FSG’s efforts in India. She has advised a variety of clients while at FSG including corporations, private foundations, multilaterals, government community foundations, and nonprofits. Her clients in India include the Godrej Group, the Shakti Sustainable Energy Foundation, UN Women, The World Bank, and Eli Lilly)