REIMAGINING BUSINESS STRATEGY

INGO BOBEL


TEDx Talk delivered June 6, 2014 in Monaco during the TEDxIUM Event Small is the New Big



REIMAGINING BUSINESS STRATEGY

I come to you to present a small idea that I hope can transform itself into a big movement and
being a Professor working at IUM in Monaco it is not surprising that I will put Business in
the focus of my speech.
I have entitled my talk REIMAGINING BUSINESS STRATEGY because my small idea is to expand
on a new purpose-driven BUSINESS-Model that supports my faith in the positive power of
business operating in a world thats volatile, uncertain, complex, and ambiguous (VUCA).
Anita Roddick, the entrepreneur and The Body Shop Founder (1942-2007) once said:
In terms of power and influence you can forget about the church, forget politics. There is no
more powerful institution in society than business (Roddick 2005).
I fully agree.
And this power can best unfold in a positive way if business can do what only business can do
best and that is: creating shared value! This is not about sharing value already created by
business! It is rather creating value by applying a new business model where firms co-create
economic prosperity and social welfare.
My small idea builds on ideas that have been discussed in prior research by numerous
colleagues - but one person stands out - Michael E. Porter, a HBS University Professor. He is
relentless in successfully changing the way how business leaders and the academic business
school-community see the world.
About ten years ago - together with his congenial co-author Mark Kramer he started a
scientific journey by joining forces with entrepreneur Peter Brabeck-Letmathe, to rediscover
and popularize the idea of Creating Shared Value (CSV), that is, to increase a companys
competitiveness while measurably improving the prosperity of communities, regions, and
nations in which they operate through solving social problems (Porter and Kramer 1999; 2002;
2006; 2011; Schwarz 2010)
Somewhat miraculously this CSV-based business model is cutting the Gordian Knot of a
problem that seems to be insoluble in its own terms:
Pairing and matching capitalism-based economic success with doing good for the benefit of
the society.

There is change in the air and CSV has the potential to become the biggest mind changer for
the business community.
Why?
Because it will transform the traditional strategy-paradigm that is nested in Porters
explanation of What is Strategy? (which I label Strategy 1.0) (Porter 1996).
What is the traditional strategy 1.0-model like?
In a nutshell, the establishment of strategic positioning follows a set of fundamental strategic
principles that all center around the ultimate business goal, that is, to maximize the long-term
return on investment (Porter 2001).
Astonishingly, not one of these strategic principles explicitly mentions the genuine role that
business plays in society. Business only purpose is limited to maximizing profit or shareholder
value - as Economics-guru Milton Friedman, the spiritual father of the Chicago School, has
described it in his influential 1970-contribution in the NYT Magazine (Friedman 1970).
This raises the fundamental question: What really is the role of business in society?
Businesses next to families - are the most powerful organizational institution in any society.
Businesses, by making profits, are the income creators, the wealth-creating machine. Neither
governments nor NGOs do create wealth! Governments redistribute wealth and value already
created by businesses (and they do it with very different degrees of success). When providing
public goods they depend on the amount (quantity) of value created at the microeconomic
level of the economy. And - there is obviously never enough to redistribute in order to tackle
our massive social problems in a sufficient way. Without profitable businesses there would be
no economic prosperity and improvements in standards of living.
In addition, businesses, by providing labor, constitute an important part of the social value-
context that motivates us and gives our lives a true purpose. It creates self-confidence, shapes
personality, and defines why we matter.
As we know since Adam Smiths Theory of Moral Sentiments (1759), it is definitely not the
singular dominance of the selfish profit motive that defines capitalism or drives economic
growth. It is rather a mix of profit-driven and non-profit-driven values like "humanity, justice,
generosity, and public spirit, [that] are the qualities most useful to others", as Nobel Laureate
Amatya Sen has put it (Sen 2009).


These qualities among others show up in the concept of CSV without violating its
capitalistic core. With CSV a new strategy paradigm is born and I call the related social
purpose-driven business model Strategy 2.0.
It has the power to change the way
- how we define the role of business in society,
- how we compete when we do business,
- how we position ourselves in global and local markets,
- how we see the role of the community where we do business,
- how we define value propositions to lure consumers to buy the products that we
produce,
- how we configure value chains and manage supply chains,
- how we attract young talent,
- how we teach Strategy to our MBAs, and
- on a company-level, how Mission Statements will be rewritten.
Never ever before have we seen such prospective potential for mindful re-orientation of
business strategy and economic development as in the case of CSV!
CSV has already changed the business landscape in a fundamental way as numerous (small and
large) companies around the world have started to apply the concept and we strongly believe
that it will exert its impact on future generations of managers in a not-foreseeable positive way.
Let me give you a CSV in practice- example. Each year more than 1 million babies die on their
day of birth, 98% of them die in the developing world. Years ago General Electric set up a
program, Healthymagination, where GE creates medical devices to meet the needs of low-
income populations around the world. In 2010, GE started a global partnership with an
American non-profit organization called Embrace to address infant mortality in rural India.
One of the leading causes of these deaths is prematurity and hypothermia (low birth weight
which prevents babies to regulate their own temperature). They literally freeze to death.
Embrace had invented an innovative, low-cost infant warmer that looks like a small sleeping
bag which carries a sealed pouch of wax that is placed in a small compartment, and one can
heat the wax either via an electrical heater or in hot water (or even over fire). A new-born child
can be kept warm for hours and the final product sells for $200 (which is 1% of the cost of the
regular incubator used in a hospital that costs $20.000). By providing production- and sales
capacity, GE helped Embrace to prosper and helped to solve a critical societal problem.


As we learn from this example, CSV is not limited to advanced economies. It equally applies to
emerging or developing economies and regions.
The case of Tony Elumelu, a Nigerian CSV-entrepreneur, who founded Heirs Holdings an
African proprietary investment company - is a good example how a small idea can transform
itself in a big philosophical movement - called Africapitalsim.
Africapitalism advocates the private sectors commitment to Africas development through
long-term investment in key sectors of the economy that drive both economic prosperity and
social wealth.
Every day we become aware of the mounting pressures, problems and issues as we are living in
a period of history that is characterized by an incredible degree of awareness and perception
of societal challenges. Due to the fast process of technological transmission of information (via
the internet and social media), problems become immediately visible and have the capacity to
spill over to all parts in society.
Business is in terrible need to revise its traditional re-active role when it comes to solving
societal problems; in doing this it has to develop measures that go beyond the popular tools
like philanthropy and CSR.
CSV turns the traditional approach on its head by asking: how can we as business be of use for
the society and the environment in a sustainable way without compromising the ability to
creating economic value? Thus, a trade-off between economic and social value creation does
not exist. You dont have to sacrifice social value in order to create economic value! Social
value creation does not arise at the expense of less shareholder value.
This is where CSV-based Strategy 2.0 can play a leadership role by providing higher purpose
and justification for the existence of firms:
Business exists because it creates shared value and enhances the welfare (benefits) of the
people!
AND - all firms can create shared value! Businesses are only limited by their own will and the
business-specific capabilities when putting the concept into practice and implementing it in the
everyday business activities performance.
The general public - and especially the intelligent, ambitious young generation who
desperately seek valuable and meaningful jobs that give their lives a substance - is hungry to

learn this. When looking for a job they seek congruence between a business culture and their
own morals.
Let us open a window and let my small idea fly out I believe it is an idea worth spreading!
Thank you very much.
Bibliography
Elumelu,T.O.,Africapitalism(http://www.heirsholdings.com/wp-
content/uploads/2013/04/Africapitalism-Path-to-Economic-Prosperity-and-Social-
Wealth.pdf) and http://www.sharedvalue.org/ and
http://www.fsg.org/OurApproach/SharedValue.aspx?gclid=CJ7yyLDR774CFWnpwgodx6
UAcw
Friedman, M. (1970), The Social Responsibility of Business Is to Increase Its Profits, New
York Times Magazine, September 13
Porter, M.E. (1996), What is Strategy?, reprinted in: M. E. Porter, On Competition,
Boston: HBS Publ. (2008) 37-72
Porter, M. E. (2001), Strategy and the Internet, reprinted in: M. E. Porter, On
Competition, Boston: HBS Publ. (2008) 97-132
Porter, Michael E. and Kramer, Mark R. (1999), Philanthropys New Agenda, reprinted
in: M. E. Porter, On Competition, Boston: HBS Publ. (2008) 431-450.
Porter, Michael E. and Kramer, Mark R. (2002), The Competitive Advantage of Corporate
Philanthropy, reprinted in: M. E. Porter, On Competition, Boston: HBS Publ. (2008) 451-
477
Porter, M.E. and Kramer, M.R. (2006), Strategy and Society. The Link Between
Competitive Advantage and Corporate Social Responsibility, reprinted in: M. E. Porter,
On Competition, Boston: HBS Publ. (2008) 479-503
Porter, Michael E. and Kramer, Mark R. (2011), Creating Shared Value, Harvard Business
Review (January-February) Reprint R1101C
Roddick, A. (2005), Business As Unusual: My Entrepreneurial Journey, Profits With
Principles, Anita Roddick Books.
Schwarz, F. (2010), Peter Brabeck-Letmathe and Nestle a Portrait: Creating Shared
Value, Bern: Stmpfli.
Sen, Amartya (2009), Adam Smiths Market Never Stood Alone, Financial Times (March
10) (http://www.ft.com/intl/cms/s/0/8f2829fa-0daf-11de-8ea3-0000779fd2ac.html)
Smith, Adam (1759), The Theory of Moral Sentiments (Econlib:
http://www.econlib.org/library/Smith/smMS.html)