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Shared Value & Social Enterprise: A Match Made in Heaven

Posted by: Lalitha Vaidyanathan on 2/6/2012

There are many reasons why large corporations are challenged to capitalize on shared value opportunities. One that is frequently cited is the inability to look beyond current product lines to rethink solutions to social problems. Some corporations are however, finding ways to overcome this challenge. This is the story of one such corporation and how it overcame the challenge by striking a non-traditional alliance – one with a startup social enterprise.

In 2009, GE launched Healthymagination, a bold commitment to invest US $6 billion by 2015 to develop 100 new, more affordable, and simpler products that address severe health issues. In India, one of the severe health issues the company targeted addressing was infant mortality. A key Millennium Development Goal (MDG) for India, infant mortality had come to symbolize the country’s struggle to balance rapid economic progress with human development challenges. One of the causes of infant mortality is premature births and low birth weight. Babies born pre-term or at the low end of the weight scale do not have as much fat in their little bodies and struggle to stay warm. As a result, one in five of these babies don’t make it through the first month of their lives. In developed countries, such babies would be placed in incubators like the ones GE has traditional made. At a cost of US$20,000 and requiring steady electricity supply, this was too expensive and impractical a solution for India. 60% of India’s population lives in rural areas with unpredictable electricity supply and where vast majority of births are delivered by midwives at home. GE’s R&D engineers spent months reinventing their incubator and managed to bring the price down to an impressive US$2,000 – 10% of the original. However, this was still too expensive. It was then that GE chanced upon Embrace, a social enterprise born out of a Stanford Design class that had radically rethought the solution to the problem.

Bearing no resemblance to a traditional incubator, Embrace’s solution was instead fashioned as a sleeping bag with a pouch for a heating pad. The pad which could be warmed by an electric or water warmer in 20 minutes could keep the baby warm for 4-6 hours. Most of all the solution was priced at just $200 – or 1% of GE’s original incubator. Portable, affordable and practical, it was the perfect solution for the problem. GE recognized the power of Embrace’s solution and decided to partner with the social enterprise to distribute the product.

A screenshot from Embrace's website.

GE and Embrace bring very different and unique strengths to the alliance. Like most social enterprises, Embrace, unencumbered by a legacy product line was able to develop a disruptive solution to the problem. Further, it had the ability to quickly adapt and improve its design based on market inputs. GE on the other hand, brought very different strengths to the partnership. Its experience with healthcare regulatory requirements enabled it to turn a neat solution into something that was market-ready. This coupled with its awesome depth and breadth of market access as well as marketing prowess ensured the solution would reach the greatest number of population in need – far more than Embrace alone would have ever been able to reach.

In short, together, GE and Embrace will be able to capitalize on the opportunity in ways neither would have been able to alone. It is the ultimate “win-win” alliance – a match made in heaven. Both parties are quick to point out however, that it takes hard work to make such alliances successful. The speed of progress can seem painfully slow to social enterprises used to moving quickly. On the other hand, social enterprises can seem lacking in structure and organization to the large corporation. However, with enough trust, it is possible to make such alliances work as GE and Embrace have shown.

What is your experience with such alliances? We invite you to share what you see as the benefits and challenges of such alliances.



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aman khanna
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It is interesting to learn that while GE's prowess enabled it to reduce the price to a tenth, a startup was able to bring it down to another tenth with obviously much lesser resources!
At the same time, even in a situation where the sheer need for such a product should theoretically have provided the startup with a launchpad, it could not perhaps do much without GE's marketing and industry prowess. In my view, very few organizations would behave like GE in this case given the lure of expanding within their domains / existing product lines. The need for such support to disruptive innovations driven by sheer necessity in the developing world far exceeds the availability of such support. In my view, other support systems in terms of patient capital and "catalytic" philanthropy, may play out faster.
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Lalitha Vaidyanathan
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Hi Aman,
Thanks for your response!
You are right that companies like GE are the exception - that is absolutely true today. However, we are seeing that as growth slows in developed markets and companies look to the developing world for growth they are discovering that solving social problems is actually good business! So while not all companies may go in this direction, many are seriously exploring it. Our research is aimed at such companies.
I also agree that we will continue to need patient capital from philanthropy. In fact, we are seeing leading companies use philanthropic dollars to incubate shared value ideas.
Tamar
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We (Dualis, Israel Social Venture Fund) have just partnered in a smaller but very impactful initiative called 'Coffee & Company'. The partnership consists of HP Software (located in Yehud Israel –HP's largest world-wide R&D site); an Israeli NGO - Elem/Youth in Distress in Israel; and Dualis. The café operates a program that trains and employs youth in distress and helps them integrate into a normative framework. The café was founded based on a philosophy that seeks to promote social change through business activities.
We see this as a win-win situation for all parties involved. The NGO recruits the youth from the local area, Dualis invests and takes care of running the business, the corporate gets to both provide a new eating place while demonstrating the value of social involvement with the local community.
Joshua Frasier
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I'm a retired 40 year veteran of the IT Industry who is a big fan of social entrepreneurship. I have a start-up social enterprise called 21st Century Community Developers, LLC in Columbus Ohio. Our mission is to be a catalyst for improving the economic sustainability of urban communities from the bottom up. To do this, our first project will seek to solve the issue of low-performing schools and minority-owned small businesses. We will do this by offering a grant to a select group of small businesses and schools in the Columbus metropolitan area, consisting of a new Technology License and Turnaround Services for Financial and Performance Improvement. The selected participants will collaborate on a revenue-generating and revenue-sharing project using the technology which also serves as a tool to accelerate enhancement of performance and productivity of knowledge workers, teachers, and students. The patent pending technology is called "Knowledge Plasma" a knowledge/blood metaphor.
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FSG
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Many thanks for reading and for your comment, Joshua.
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