The Good Company

"To build or not to build?" - That is the question

Companies in emerging markets are going beyond traditional CSR approaches to unlock business potential by solving a social problem.

Updated: Oct 16, 2012 10:42:56 AM UTC

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.

Here’s a dilemma: You are the owner of a construction company and to expand your market, you need to go into neighborhoods where clients can’t pay the typical construction costs; where there is a dearth of skilled labour and where it is nearly impossible to transport the materials typically associated with your conventional construction methods. You ask yourself: Why make the effort – is the 'juice worth the squeeze?'

This was the situation faced by Moladi, a South African family-owned business. Sure, there was a demand for new construction – after all, affordable housing in low-income areas can provide a pivotal asset and source of stability that can pull a family out of poverty. In fact, many families were trying to build houses on their own, leading to sub-standard construction and often dangerous living conditions.

Moladi, however, was ready to rise to the challenge. They put a lot of 'skin in the game' from a technological innovation perspective, and in the process designed a new construction material to meet the constraints of the target market – a removable, reusable, recyclable, and lightweight plastic formwork mould, which when filled with aerated mortar, could form the wall structure of a house in as early as one day. Better yet, each set of Moladi formwork panels could be reused 50 times, without electricity, and by unskilled labourers.

This was a game-changer for Moladi as a company. The new formwork mould technology now makes up the majority of the company’s business, and is being exported to other markets such as Ghana, Sierra Leone and Nigeria. By taking an informed risk and creating an innovative new product, Moladi not only improved their company’s financial position, but also played a catalytic role in the lives of many families in poverty.

This is one of the many transformational stories on how companies unlock their potential by expanding their businesses in emerging markets. Like Moladi, they are looking beyond typical CSR efforts to understand how they can create a new business opportunity, by better understanding and meeting critical social needs.

And like Moladi, businesses which are successful in these efforts do so by being intentional in what they hope to achieve (for example, understanding the social constraints and how a strategy can address them) and support it with resources and leadership time commiserate with a significant new business strategy.

So the real question isn't 'to build or not to build?' but rather 'to innovate or not to innovate?' We’re finding that game-changing companies have realised they can’t afford to not innovate with shared value strategies while approaching emerging markets.

Moladi is just one of thirty success stories we came across while conducting research for Shared Value in Emerging Markets, a white paper written in partnership with the Rockefeller Foundation to explore how multi-national corporations could play an increasingly valuable role in addressing social issues across emerging markets.

Like Rockefeller, FSG is committed to learning more about how companies can play a transformational role in reversing the downward social trends we are seeing in many communities. In fact, another joint effort with the Rockefeller Foundation (among others), the Shared Value Initiative, was featured last week as a Commitment to Action for the Clinton Global Initiative (CGI) Annual Meeting.

This is only the beginning of the journey and we invite you to share your thoughts. If you have additional ideas on how shared value is being created in emerging markets, or pre-conditions for success, we’d love to hear them and incorporate them into the continuing dialogue.

By Patty Russell, FSG Director (Patty is a part of FSG's leadership group and leads the Catalytic Philanthropy approach area. She has over 12 years' experience in advising corporations, private foundations, and non-profit organisations on strategy, programme design, evaluation, and operational improvement.)

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