Creating Shared Value in Business Planning

Michael Porter

This week I started to work on a few business plans – some are for projects that I am working on and others are business as usual. I was challenged, however, not to do a standard business plan, but to do something a bit different, which was influenced by some Harvard Business Review articles that I had just read.

In the January edition of HBR there were several articles that highlighted some new practices in business plans. Michael Porter and Mark Kramer wrote about the concept of creating shared value as a strong element of any business plan (2011, pp. 1-12). This is a concept about clusters, bring like industries together, geographically, in order to reduce costs and wastage. I have seen this concept with some sporting clubs in Adelaide. This sporting concepts has been to bring other sporting clubs into a potential sporting hub, sharing facilities and services in order to drive new revenue streams and to reduce costs. In other countries this could also include having R&D, manufacturing and a sporting team closely together in a cluster to drive development of sporting products for the players, building the product nearby and then testing on the players.

In Adelaide we have an established auto manufacturing industry with two manufactures in the state. Over the year we have seen component industries pop up near the manufacturer’s sites in order to achieve this cluster, thereby reducing costs and wastage. Unfortunately for Adelaide we are now down to just one car manufacturer and this has reduced the economies of scale for these industries.

For me it has been a good experience this week to think about clusters. This is really important for a number of my business plans and for my part time role as a consultant to conceive an idea of bring clusters together to create a better business plan for the business. In order for this to work the plan will need to be flexible (Casadesus-Masanell & Ricart, 2001, pp.103) to adapt to the changing and at times challenging needs of the other strategic alliances. Any business plan will also need to cater for the middle market rather than top or low end of the market (Eyring et al, 2011) and to reinvent options for this segment.

So it is not a matter of just rolling out another stock standard business plan, rather tailoring a solution specifically for the project or business plan and considering any strategic alliances to create flexibility for a middle market segment around the concept of industry clusters.


What Lessons Have I Learned?

  • Not to have a closed mind to business plan and to follow a rigid guideline
  • To create a flexible plan that allows for growth and for a number of businesses being involved over time
  • Understanding the key driver – industry clusters (in this case) and keeping the business plan on delivering this outcome


References

Casadesus-Masanell, R & Ricart, JE, 2011, ‘How to Design a Winning Business Model’, Harvard Business Review , January, pp. 100-107

Eyring, MJ, Johnson, MW & Nair, H, 2011, ‘New Business Models in Emerging Markets’, Harvard Business Review , January, pp. 1-6, viewed 23/12/10

Porter, ME & Kramer, MR, 2011, ‘The Big Idea: Creating Shared Value’, Harvard Business Review , January, pp. 1-12, viewed 23/12/10

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