Shared value

What is shared value?

Shared value is a strategy in which a company earns its profit by solving a social problem, so the business gain and the social gain come from the same work. Michael Porter and Mark Kramer introduced the idea in Harvard Business Review in 2011. They set it apart from philanthropy and corporate social responsibility programs, which sit beside the business. Here the social benefit is part of how the company competes.

Why it matters to a revenue leader

In environmental, life safety and energy services, the social outcome and the product can be the same thing. A building that passes its fire inspection or a plant that meets its discharge permit is what the customer pays for. A revenue leader who frames offers around those outcomes can tie price to results the customer can measure, and a sponsor can point to growth that customers and regulators both want to see continue.

An energy services company with 12 sellers repositions its retrofit offer around guaranteed reductions in a building's energy use. Customers pay from the savings, and the company earns a share of them for five years. Average agreement value rises from $40K to $95K because the price now ties to an outcome the customer can measure and defend to its own board.