Creating Shared Value through Business Model Innovation

In this paper, Juan Florin and Elizabeth Schmid outline a strategy process through which innovation in a venture’s business model can be achieved. The purpose of designing and pursuing such a strategy is for the venture to create both public and private wealth (‘Shared Value’). This article focuses on hybrid ventures (L3C – low profit limited liability company, a U.S. legal form), which occupy the middle-ground between for-profit and non-profit entities.

The article is accessible for free and can be downloaded here.

Process Model

The process model (depicted below) and its use are explained in the article. Let us know what you make of it, if you think it could help you or how you have used it in the comments.

Creating Shared Value

Excerpts

The potential for business model innovation in the hybrid sector requires the integration of a customer value proposition with the creation of public value. Thompson and MacMillan (2010a) define social value creation as the enrichment of a part of society along specified, monitored, and measured improvements on one or more social dimensions. These dimensions might include health, nutrition, community development, and/or education among others.
Juan Florin & Elizabeth Schmidt, P. 169

As a result, they must utilize two different sets of value creating propositions: a customer value proposition (CVP) for customers paying for a product or service of value to them, and a public value proposition (PVP) for organizations, communities, and/or individuals receiving the social/environmental benefit […].
Juan Florin & Elizabeth Schmidt, P. 170

A CVP comprises the attributes that drive consumers to purchase the product or service from the venture. A PVP, on the other hand, includes the service or benefit provided to individuals for whom the unmet needs are being addressed. It also includes the benefit to communities, which can expect a long-term positive impact and to resource providers and operations partners, such as foundations and NGOs, that can realize their own missions through the PVP. We argue that by looking at shared value in these two dimensions, hybrid entrepreneurs are acknowledging the strategy paradox they need to address and are able to design innovative business models through cycles of experimentation and validation.
Juan Florin & Elizabeth Schmidt, P. 170

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