Let big business embrace the small for shared impact

Inclusive Economy02 Jul 2014Mathijs Koper

Co-creation and combining the strengths of business ecosystems are the key to creating shared value.

I believe in social entrepreneurship, but also in large corporates connecting with societal challenges. Corporate firms often fail to innovate and become sleeping giants – the opposite of fresh entrepreneurs. On the other hand, however, entrepreneurs often fail to find the proper resources while corporates have a lot of strengths and capabilities in-house. Connecting the two is not only a solution for innovation and new business development, but holds also the key to encourage social intrapreneurship and the scaling up of new impactful business models. And there is a need for new business models within corporate firms.

As Michael Porter and Mark Kramer say in their article Creating shared value (pdf), “the capitalist system is under siege.” Business has increasingly been viewed as a major cause of social, environmental and economic problems. But companies are increasingly forced to create shared value by recognizing that societal needs, and not just conventional economic needs, should define markets. Shared value also recognizes that social harms or weaknesses frequently create internal costs for firms. While many see this solution, few know how to properly profit from both worlds and the shared value for all stakeholders. The solution can be to trigger entrepreneurship within large corporations by creating new business models.

Let us take an obvious example: one of the major problems facing companies and society in general today is waste. In my opinion we should take an entrepreneurial perspective on this issue and see waste as an opportunity. A change in business model can help us to look at waste as a profitable part of business instead of a cost. The La Place restaurant chain, for instance, grows oyster mushrooms on coffee grounds. In this way, they solve two problems: they reduce their waste and create another source of income. When we make coffee, most of what we make is actually waste: 99.8% is coffee grounds. But because they have already been sterilized by hot water, coffee grounds make perfect soil for several types of mushrooms. That means you are not only a restaurant chain, but also a mushroom soil sterilizer and a grower. In my opinion this example shows us that we can add and combine social and economic value everywhere.

The government also plays an important role in this. As we can read in the article Priming the pump by Matt Bannick and Paula Goldman (pdf), the government can do many things to trigger social innovation, including establishing appropriate regulations. In my opinion, besides enforcing social innovation, the government can also provide incentives for it and promote entrepreneurship. As the article says, “new sectors are only as good as the entrepreneurs and teams that develop innovative products and services”. But it is not only governments that can promote entrepreneurship; NGOs can also play a role. A good example of this is Endeavor, a global nonprofit that “transforms the economies of emerging markets by identifying and supporting high-impact entrepreneurs”.

I therefore believe that creating shared value is co-creation and combining the strengths of business ecosystems are key to creating shared value. Innovation should be initiated not only by corporates, entrepreneurs, governments or NGOs, but by all of them working together. Let big business embrace the small and co-create for the better!