Archive for June, 2013

Global Shared Value – a view from Down Under

June 12, 2013

A former Sydney financier, Phil Preston, was in Canberra yesterday (11 June 2013) to brief federal agencies on Global Shared Value. We had a coffee before the session, and Phil explained all about his interest in the power of collaboration, and where he wants to head with this – he can be contacted at phil@philpreston.co.

Phil penned the following article while in Boston last month at a workshop with Professor Michael Porter et al.

“I’m sitting in my hotel room, looking out a heavy clouds on the Boston horizon, at the end of four days of intensive work discussing shared value implementation with companies and practitioners from all around the world, including Colombia, India, Philippines, Canada, Czech Republic, Brazil, Australia, Italy, Hong Kong, Singapore, US, UK, Costa Rica, Mexico, Korea, Japan and Chile.

We rubbed shoulders with the likes of Harvard’s Professor Michael Porter, Mark Kramer of FSG and the Chairman of Nestle, Peter Brabeck-Letmathe, and that’s just the tip of the iceberg. This is a pivotal moment in the development of this field – you may like to refer to sharedvalue.org or this article of mine that Porter re-tweeted last year, if the topic is quite new to you.

It’s impossible to summarise everything in one go, but here’s three big take-aways for the business, government and the NGO sectors:

1. Meaning

For a business to have real purpose and be resilient to future shocks, it helps to identify it’s role in improving society. This approach underpins sustained profitability; if profitability is the primary short-term goal, then there is a risk that the business model fails overnight.

Nestle adopted “shared value” as a formal strategic initiative in 2006; however Chairman Peter Brabeck-Letmathe remarked that shared value is now the strategy. It has transformed from being a food and beverage company to one that seeks to improve nutrition, access to water and develop rural economies. Nike was once a footwear company, it now sees itself as a health and well-being player. Thermo-Fisher saw itself as a scientific company, it now sees its role as building a healthier and safer world.

On my table at the global summit, four companies talk about their evolution in the way that they define their purpose. They were all at different stages – for different reasons – and still had some way to go, but the point is that they were all conscious of the need to bring clarity.

2. Measurement

How do we measure if and when shared value is created? There are two sets of indicators that need to be present: those that prove business value and those that evidence social value. This is not always easy and sometimes proxies are required.

Novo Nordisk sells diabetes-related products and has a strong presence in China. It estimates that it has improved patient life years of those who use its products and services by 80%, while increasing its market share from below 40% to 63% in the second largest insulin market in the world. The strategy was underpinned by physician training and patient education.

We will hear a lot more about measurement in years to come and the Shared Value Initiative provides a community of practice to develop expertise and serve as a repository for case studies.

3. Momentum

The global summit started two years ago and the first meeting was a small collective of North American businesses. This year, 225 places were filled and many were turned away. The companies in the room were very large, significant and mostly multi-national players. But not just that, we saw great representation from the NGO, development agency and government sectors. If you want to dispel any myths about the quality of management in the non-business sectors, tap into what Judith Rodin of the Rockefeller Foundation, Neal Keny-Guyer of Mercy Corps or Peter Singer from Grand Challenges Canada are doing and saying in this space. By the end of it, our heads were spinning.

It has become a truly global, cross-sector conversation. Where NGOs were once adversaries of business, they are now becoming partners. This is not because they have traded their values or mission, it is because they have come to the realisation that philanthropy is not enough; if we want to make real change in the world, the power of business is required in order to do what it does best: bring innovation and scale to the real needs in our society.

Where to from here?

Implementing shared value is a process of internal challenge and discovery. As yet there is no prescriptive rule book, but there are principles and processes that we can use to evaluate the core assets, needs and challenges of any business, find where the key social intersection points exist and create strategies that drive financial results for business and positive impact for society.

All I can say is that I love being a part of the evolution of this discipline

Shadow Ministers soon in the sun

June 11, 2013

Interesting to reflect on the Shadow Ministers who will be running Australia in an Abbott Government. Here is a quick take on some.

Malcolm Turnbull (Communications) – will aim for a scaled back NBN wherever possible e.g. a fibre-to-the-node VDSL network, utilising Telstra’s existing copper network. Lots of fireworks.

Julie Bishop (Foreign Affairs & Trade) – this field is her passion. She is capable and will do a good job.

Kevin Andrews (Families and Community Services) – solid background in this field, traditional Catholic and family values. Expect radical changes.

Greg Hunt (Environment) – will oversee a drastic downsizing and reshaping of this portfolio. A rising star.

Joe Hockey (Treasurer) – my bet is he won’t last 18 months. His person skills will be used to better effect elsewhere.

Ian Macfarlane (Resources & Energy) – a seamless transition because he was a very good minister in the Howard Government and knows the issues.

More bang for your buck

June 11, 2013

Our Gippsland correspondent says that a government official should be like a pianist in a house of ill-repute – a facilitator at the lowest and most personal level, not a participant on a grand scale.

He’s right of course, but the problem is that most federal officials at least aren’t even in the same neighbourhood.

Food for thought – less officials will be needed to administer federal programs after post-September. So why not put some of the surplus officials into Action Teams to work on development projects with companies and local/state officials? Some of these federal officials could be very handy on a piano, or a violin or guitar. More bang for your buck.

Anyone for Memphis or Nashville?

June 11, 2013

I was recently invited by an American friend, Dr. Stuart Rosenfeld, to think about collaboration on creative economies. Among other things, he’s a Board member of South Arts, a creative arts network covering nine states – Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee.

I readily agreed on the proviso that any collaboration should extend to both the creative AND tourism industries because of their complementarity. There were also other timely reasons:

– Cultural tourism is the fastest growing segment of the tourism market, and has a high spend value.
– The Australian tourism market is flat, and Tourism Australia is looking for new markets. And we figured the Yanks are in the same boat.
– Qantas now has Dallas as its main US hub – a great gateway to the relatively untapped southern US market. Qantas and the US carriers surely want to drum up two-way business.
– In March, the Australian Government announced a Creative Arts Program ($235 million) AND a Precincts (Clusters) Program ($500 million for 10 precincts), with a creative arts precinct a distinct possibility.

We thus decided that the planets were in alignment. But, as always, the solution lies in finding the stakeholders with the vision and commitment to make something happen. It seems smart to think of Sydney as the Aussie precinct connected to counterparts in the USA. After all it’s the main entry point for US artists and tourists, and there are two precincts forming around University Technology Sydney, and Walsh Bay – the Rocks.

But Melbourne and other places have equally long and proud histories in the creative industries and strong international links. In any case, it’s our rural regions that appeal most to international tourists – disparate places like Bendigo, Katoomba, Broken Hill, Tamworth, Gladstone, Alice Springs, Cape York, Broome etc. The dilemma is that while the regions have cultural tourism product, much of it is under-developed and hard to get to – regional airfares outside the main trunk routes are crippling, and you’d be loathe to recommend most of our train services to international tourists.

But let’s not dwell on the negatives. We have some fascinating cultural tourism agendas that might form the basis of relationships with cities and towns in southern USA – New Orleans, Dallas, Memphis, Nashville, Houston and Miami come to mind.

We’ve fired off a discussion paper for Dr. Rosenfeld for his next Board meeting. The first hurdle is to get arts administrators thinking tourism, and tourism administrators thinking arts. The second hurdle is to get US tourism/arts administrators engaging with their Australian counterparts, and then somehow connecting their regional cousins into the agenda. The third hurdle is to market the opportunity. On this score, we’ve suggested engaging some champions once things take shape e.g. Harry Connick Jnr. (New Orleans) and Nicole Kidman & Keith Urban (Nashville).

The above scenarios are somewhat speculative, and it involves a lot of cat-herding and people looking to someone else to arrange things. If it doesn’t pan out with our American friends, we might see if there are cultural tourism links back to Italy for Griffith, Mareeba and Leichhardt, or to South Africa in the case of Perth. We’ve found a federal program to defray expenses – so please contact us if this aligns with your interests.

Contact Rod Brown, Cockatoo Network – apdcockatoo@iprimus.com.au if you would ike to collaborate in this field.

Urban affairs off the federal agenda?

June 11, 2013

A Cockatoo member recently asked for the name of the shadow Minister for Urban Affairs. Tough question. So I rang the Liberal Party HQ. ‘There isn’t one’ came the reply.

So I rang the Office of Warren Truss, shadow minister for infrastructure and transport. His staffer said that urban affairs is a state issue. ‘Not true!’ I countered. But she stuck to her guns and double-checked with another adviser – same message.

I respectfully suggested that the federal government MUST play in this field because of its responsibilities in the environment, infrastructure, building and planning codes, housing and community services etc. Still no traction, but we parted on cordial terms.

Urban councils need to an active interest here. At the very least, an Abbott Government needs a savvy young parliamentary secretary to the Minister for Infrastructure & Transport – to liaise with the States and local government and coordinate the many federal agencies in this critical area. This would allow Minister Truss to focus on the traditional love of the National Party.

We await developments with interest!!

Ford Australia’s demise calls for review of government assistance

June 11, 2013

My grandfather was a blacksmith in Trafalgar (Vic) and in the 1930s he became the local Ford dealer. His sons later ran the business as it expanded to Warragul and Pakenham. In the 1960s, Prefects and Zephyrs gave way to the mighty Falcon and the less-impressive Cortinas. On Sundays in October we sat transfixed in front of the TV watching the Bathurst 500 as Allan Moffat and Dick Johnson threw their Falcons around the track against the enemy Holden Toranas of Peter Brock and Colin Bond.

I think I need a shrink. I still can’t bring myself to hire a Holden at the airport, and my dog and I cruise around Canberra in my beloved Falcon. My wife and kids tell me to get with it, and to buy something decent.

I suspect that my personal mea culpa is just one of countless being offered following Ford’s recent decision to exit car manufacturing in Australia. It is additionally galling given Ford has received some $1.1 billion in federal assistance over the past decade. And to add further pain, Ford Australia President, Mr. Bob Graziano, then puts out a smokescreen that the cost of manufacturing a car in Australia is double that in Europe and four times that in Asia!

If that’s the case, was the federal government really thinking it could close the gap with subsidies? We’ll never know, but Graziano’s figures have been accepted as gospel and everyone is blithely accepting that the root causes are the high $A, the volume sensitivity of car production, and Ford’s inability to align its models with consumer preferences.

Well, the focus will now surely shift to co-investments (lovely word that) with Toyota and Holden. It is incumbent on the feds that they know how these two companies’ local operations measure up against their competitors in Thailand, South Korea, China etc. Without this information any federal assistance will be more blind faith. In this regard, you might note that there hasn’t been a full-blown Productivity Commission report on the industry since 2002! Shadow Minister Mirabella has stated that there will be a PC review of the car industry. It cannot come soon enough.

Value chains the answer

A value chain is a fancy word for supply chain. David Gregory, a Cockatoo colleague here in Canberra, is an expert in this field, and says that we made a fundamental mistake with industry policy in the 1970s by (i) supporting five car manufacturers in Australia, and (ii) focusing on industries. He argues that the reality is that industries don’t compete, businesses do – and there is often a huge difference between businesses within an industry in terms of their competitive performance.

David goes on to suggest that industry policy should be about fostering collaboration between high performing like-minded businesses within value chains. By such an approach, businesses can identify and deliver consumer value to specifically targeted consumers.

What has all of this got to do with local government? A lot. Local councils are well situated to help foster collaboration along these supply chains. Economic development managers can be helping the industry associations to align the parties – because the feds aren’t in this space any more.

THIS ARTICLE APPEARS IN THE JUNE 2013 EDITION OF LOCAL GOVERNMENT FOCUS