Michael E. Porter on Why Companies Must Address Social Issues

 

Dan Schawbel, a Contributor to Forbes magazine, recently published the following interview with management guru, Michael E. Porter.  Many thanks to Dan and Forbes magazine for such an enlightening piece.  Fleet News Daily is please to present it in its entirety as follows:

“I recently spoke to Michael E. Porter, who is the Bishop William Lawrence University Professor at Harvard Business School and

the leading authority on competitive strategy.  He is the author of 18 books, including Competitive Strategy: Techniques For Analyzing Industries and Competitors, and over 125 articles. Professor Porter is generally recognized as the father of the modern strategy field, as has been identified in a variety of rankings and surveys as the world’s most influential thinker on management and competitiveness. In 2001, Harvard Business School and Harvard University jointly created the Institute for Strategy and Competitiveness, dedicated to furthering Professor Porter’s work. You can follow him on Twitter @MichaelEPorter or on Facebook.

In this interview, he talks about how he originally become interested on competition and strategy, the companies that have most impressed him lately, how companies can better manage and support millennials, and more.

What originally got you hooked on competition and strategy?

As a multisport athlete, I was always fascinated with competition and how to win.  At HBS and later at the Harvard Department of Economics, I was drawn to the field of competition and strategy because it tackles perhaps the most basic question in both business management and industrial economics: What determines corporate performance?

I was one of very few people at the time who was trained both at a top business school and a world class economics department. This put me in the right place at the right time to bridge these fields in my own work.  My ideas on companies then became the foundation for later work on the competitiveness of countries and regions, as well as the relationship between business and societal issues such as the environment, health care, and corporate philanthropy.

What company has impressed you the most over the past year and why?

Today, the biggest opportunity to differentiate, innovate, and drive corporate growth is coming from an unlikely place – company engagement in social issues.  In an article with Mark Kramer last year, titled “Creating Shared Value,” we introduced the idea that the most powerful way for business to benefit society is not through charitable giving or even good corporate citizenship, but through addressing social issues connected to the company’s industry and strategy directly with a business model – that is, through capitalism!

When a company innovates in, say, lowering environmental impact, enhancing the health of its customers, or enabling personal financial security, it creates shared value. Scalable, self-funding solutions are then able to actually solve the pressing social problems we face while driving company growth and profitability.  Companies like Whole Foods and Novo Nordisk (who created an innovative model to profitably provide diabetes drugs in low income countries like China) are my heroes in leading the way. The many companies starting to think and act this way is the most optimistic thing I see happening in business globally.

How do you believe companies can manage the millennial generation?  How do you think millennials will transform business?

Millennials are more aware of society’s many challenges than previous generations, and less willing to accept maximizing shareholder value as a sufficient goal for their work.  They are looking for a broader social purpose, and want to work somewhere that has such a purpose.  While many talented young people have recently been drawn to NGOs (non-governmental organization), who do important work, there is a growing recognition that the traditional NGO model built on donations is not the whole answer.

Business has a chance to win back more of the best and brightest in this generation if it can embrace the concept of Creating Shared Value.  When Nestle starts defining itself as a nutrition company rather than a food company, for example, this connects its business with a social purpose.  Companies that can see the opportunity to engage societal problems connected to their business will compete with the best NGOs to attract

What impact will technology and globalization have on companies and employees in coming years?

Technology and globalization have already had a profound impact on companies by transforming the way they locate.  Companies now locate activities in the value chain all over the world wherever the skills are and where they can operate the most cost effectively. This has given rise to a serious competitiveness challenge for the U.S., as job creation and wage growth stagnated even before the Great Recession.

The U.S. Competitiveness Project at Harvard Business School, which I co-chair, has identified a series of U.S. weaknesses including lagging skills and a rising cost of doing business. The pressures on jobs and wages will not go away, especially as our Federal Government fails to tackle the real problems.

The implications for American workers are clear: Invest in real skills and training.  Those with capabilities in engineering, technology, knowledge work, and sophisticated management will be highly sought after.  Without such skills, it will be hard to earn a good wage given the competition for jobs globally.

What is the future of the U.S. as an economic power?

The U.S. retains its core strengths in entrepreneurship, innovation, great universities, and others, but we have allowed serious weaknesses to emerge in multiple areas: skills, physical infrastructure, unnecessary costly regulations and a costly legal system, and high business costs in areas like corporate taxes and health care.

Fortunately, our strengths mean that our future is still in our own hands. But Americans must move beyond sterile ideological debates and tackle the weaknesses head on.  In the HBS U.S. Competitiveness Project, we lay out eight Federal policy steps that are doable and would change the nation’s direction.  We also believe that business itself can tackle many of America’s competitiveness problems (like skills) while also benefiting the business, another example of shared value thinking.  There is no need to wait for Washington.”

About the Author

Dan Schawbel is a Gen Y career expert and the founder of Millennial Branding, a Gen Y research and consulting company. He is also the #1 international bestselling author of Me 2.0: 4 Steps to Building Your Future and was named to the Inc. Magazine 30 Under 30 list in 2010. Subscribe to his Personal Branding Blog for more self-help advice.

Tags: Harvard Business School, Management

Category: Management