How do brands stay meaningful and relevant in the 21st century? One powerful route is to deliver high value to customers while addressing wider social and environmental issues as an integral way of doing business. But doing this requires rethinking how value is created. In this article, we explore case studies of leading companies who are putting this new value creation and sharing into practice. From these we draw seven recommendations for enterprises wanting to follow this transformative economic path.
To understand how to go forward, it’s useful to briefly look back at how the transformative path has emerged as the latest wave of value creation. The initial wave arose during the Industrial Revolution when large numbers of newly-urbanised people first had access to mass-produced goods that improved their lives. In the 1980s, this form of value creation came under pressure in advanced economies as businesses faced relentless competition, market saturation, changing labor conditions and stricter regulation.
With products becoming commodities, leading companies began developing experiences as a way to compete, setting the scene for aspirational brands such as Armani, Louis Vuitton, Camel and Apple. In the 1990s and the 2000s, the Internet and digital information and communication technologies triggered a third wave, where value creation became democratised with almost anyone able to generate value. Digital platforms such as eBay, KickStarter and Shapeways 3D Printing supported self-empowerment, e-business and peer-to-peer opportunities.
Today, these various economic paradigms coexist in advanced and emerging markets, progressing at different speeds and scale. And a fourth wave is starting to appear: the “Transformation Economy”. This is driven by the realisation that despite economic progress, the world’s population is facing persistent socio-economic inequality (especially in emerging markets) and mounting environmental challenges. People are looking for solutions to global issues that affect their quality of life, and this is opening new business spaces. (See Table 1)
Recognising this shift, certain brands are directing some of their value creation efforts in new directions, in particular towards the UN’s 17 Sustainable Development Goals (SDGs).1 The quest for answers and opportunities in societal goals and collective needs is influencing research, development and design in companies as diverse as Danone, DSM, Interface, Johnson & Johnson, Tesla, Unilever, Vodafone, and Royal Philips, to name a few. This is not philanthropy or Corporate Social Responsibility. These companies are following a commercial rationale to re-direct part of their investments in innovation towards new meaningful solutions that can drive business development.
The size of the challenge – and the opportunity – is huge. According to one estimate by the United Nations Conference on Trade and Development (UNCTAD), the SDGs could cost between USD 2.5 and 4.5 trillion a year2 between 2015 and 2030. However, complex global issues cannot be solved by any single company or stakeholder. In this new paradigm, business value is associated with inclusive value networks that can develop context-specific solutions. The way ahead lies in a variety of venturing and cooperation models that share complementary capabilities, resources, investment risks and return on investments – networks which together can amplify positive social, economic and environmental impact.
Such networks may include Private-Public-Partnerships (PPPs), as well as a variety of For-Profit and Not-for-Profit cooperation platforms. But these PPPs differ from their traditional task-oriented, transactional “contract-out” counterparts in which private companies are seen as vendors used to save costs rather than as partners in helping to maximise outcomes. The new PPPs are collaborative, value-sharing ecosystems of governments, large companies, start-ups, NGOs, and international and academic institutions. They mobilise multiple stakeholders around a common goal and specific targets: for instance, reduction of maternal mortality or CO2 emissions by a given percentage, instead of conventional PPP activities such as building air purification systems or new hospitals.
This evolution has been documented by authors such as W. D. Eggers and P. Macmillan in their book The Solution Revolution,3 and in publications such as the World Economic Forum’s 2016 paper, Health System Leapfrogging in Emerging Economies.4 Often initiated by visionary leaders or motivated core cross-sector teams, value networks target long-term financial sustainability incorporating innovative financing, efficient cost structures and new sources of revenue. And they are able to adapt over time to ensure the fulfillment of the pre-defined goal.
About the Authors
Dr. Simona Rocchi is Senior Design Research Director in Innovation and Sustainability at Philips Design. She manages the creative direction of strategic design initiatives, and she oversees multi-stakeholder collaborative activities in emerging markets. Simona holds a PhD in Sustainability, an MSc. in Environmental Management and Policy and an MSc. in Architecture.
Dr. Bahaa Eddine Sarroukh is Head of the Philips Africa Innovation Hub in Kenya. He focuses on developing innovations within the African ecosystem. He has built leadership in innovation in low resource settings, and recently developed the Philips Community Life Center approach. He holds a PhD in Signal Processing and Applied Mathematics.
Karthik Subbaraman is a healthcare professional with clinical and managerial experience in emerging and developed markets. A thought-leader in healthcare requirements and solutions in Sub-Saharan Africa and India, Karthik is engaged in consultancy projects with governments and global organisations to design and deploy clinical and operational workflows in primary care.
Luc De Clerck manages the Philips CLC program in the African Innovation Hub. At Philips, he has conducted clinical studies in emergency obstetrics with South African universities and implemented an emergency obstetrics program with the WHO and the Namibian government. He also manages healthcare delivery strengthening initiatives with private and public partners in Africa and South Asia.
Dr. Reon Brand is a Senior Research Director in Foresight, Socio-cultural research and Innovation Strategy at Philips Design. He focuses on the exploration of emerging socio-economic paradigms and leads initiatives related to systemic transformative change. He has a PhD in molecular biology from the University of Cape Town, South Africa.
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37. Philips (2017) from figures provided by the local Health Information Management System in Githurai used to report to the District level (2) on a monthly basis.