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.
While shared value usually focuses on corporates, questions about shared value are increasingly coming from an unconventional source: NGOs. Nonprofits are transforming their operating model from grantee to business partner to serve an important role in the shared value space.
NGOs and social enterprises alike offer tremendous shared value partnership opportunities to companies. The people these organizations serve represent untapped market segments and under-utilized suppliers. Shared value also offers benefits to NGOs in the form of innovative business models, which can oftentimes be more sustainable than more traditional approaches.
Companies should partner with NGOs to gain insight into the diverse, complex communities where they work in order to:
• Discover new markets or customers
• Reduce costs in the value chain
• Enhance vitality in the communities where workers live
• Provide a continuous supply of high quality inputs and talent
However, the question remains: how can companies and NGOs partner together to find improved, sustainable solutions to complex problems? These two groups have often been viewed on opposite ends of the spectrum – business capitalizing on market opportunities and NGOs filling in for market failures. We see many examples of business-NGO partnerships overcoming this antiquated perception by striking a balance between complementary offerings. Each side is looking for particular, non-existent relationships, knowledge, and resources:
Corporate-NGO partnerships to create shared value can happen in three distinct ways:
1. Reconceiving products and markets - better serving existing markets, accessing new ones, or developing innovative products that meet social needs
2. Redefining productivity in the value chain – improving the quality, quantity, cost, and reliability of inputs, production processes, and distribution systems
3. Enabling local cluster development – improving the operating environment affecting business while alleviating social problems
Reconceiving products and markets: NGOs can provide invaluable insight into both the consumer behavior of low-income consumers as well as perspective on larger social mandates that require market-based solutions. This is especially true when thinking about combating malnutrition in India, which led to a partnership among Britannia, the Indian biscuit manufacturer; the Global Alliance for Improved Nutrition (GAIN), an international NGO; and the Naandi Foundation. The Naandi Foundation and GAIN were working together to deliver the mid-day meals program to children in Andhra Pradesh and faced challenges fortifying the meals with iron. They asked Britannia to create a fortified biscuit that kids would still find tasty. The partners worked together to develop a tasty biscuit and then distribute it across the state of Andhra Pradesh. Following this pilot, Britannia launched on the mass market as “Tiger” biscuits and simultaneously ran a nutrition awareness campaign with GAIN.
Redefining productivity in the value chain. Potential exists for companies and NGOs to partner together to improve efficiencies in the value chain that have immense social and environmental benefits.
In addition to devising new products to combat malnutrition, Indian corporation often face challenges in both distributing these products in poor communities where they are needed and educating the target market of the value of using the product. This was true for Coca-Cola India’s fortified low-cost beverage Vitingo, which delivers iron, folic acid, vitamin A, vitamin C, and zinc. In order to get this product into the hands of those that needed it most, Coca-Cola partnered with the NGO Bharat Integrated Social Welfare Agency (BISWA) in 2009 to launch an awareness problem on micro-nutrient malnutrition among poor populations. By working with an agency with established trust and buy-in among target consumers, Coca-Cola was able to more effectively reach these customers and combat malnutrition.
Enabling local cluster development. As NGOs are oftentimes working in areas previously considered market failures, great opportunity exists to remove the barriers that create the environment of “failure” in the pre-competitive space. In this capacity, NGOs can oftentimes serve as the lynchpin to bring uncommon partners together to enable local cluster development. Ashoka India has leveraged its strong network of Ashoka fellow social entrepreneurs to foster growth in the affordable housing sector. Through its Housing for All program and Hybrid Value Chain framework, Ashoka uses the trust and community ties it has through social enterprises such as Saath to aggregate demand among low-income consumers for affordable housing. With these consumers in place, Ashoka is able to attract other stakeholders required for a successful affordable housing project, including developers like DBS communities and sources of finance such as Muthoot. Through their social entrepreneurs, Ashoka is able to lower the risk for the market-based partners while simultaneously delivering high-quality, affordable housing to those in need.
So how can companies take advantage of these opportunities?
• Think more strategically about partnerships with NGOs, reorienting the NGO relationship from grantee to strategic partner supporting shared value strategies with their relationships, knowledge, and resources.
• Fund NGOs to work on concepts that lie on the “shared value frontier” – an idea at the cusp of what was previously considered a market failure that, with some innovation and experimentation, can be solved through a shared value approach.
• Work closely with NGOs to evaluate programs, as NGOs are inherently impact-first oriented, and companies can help them evaluate the sustainability of shared value efforts and find ways to achieve their mission in a sustainable way.
By Kyle Peterson, FSG Managing Director and Melissa Scott, FSG Consultant
(Kyle had more than 25 years of international development experience. He leads many of FSG's global health and global development engagements. Melissa is a consultant based in FSG's Mumbai office.)