Novartis’s Arogya Parivar unit recognized that a lack of financing in rural areas prevented
doctors and pharmacists from purchasing diagnostic equipment and stocking essential
medicines. Since Novartis didn’t consider financing to be a core competence, its team
decided to partner with a local microfinance enterprise.To create social and business value,
all five ingredients—social purpose, a defined need, measurement, the right innovation
structure, and co-creation—are essential. Indeed, they reinforce one another. Social
purpose helps a firm identify the needs it might want to address, but the reverse is also
true: As a company understands social problems more thoroughly, employees’
commitment to its social purpose will increase. A deeply held social purpose is also
important for co-creation, forming the basis for trusted relationships. Understanding a
region’s particular needs helps define what can be improved and by how much, and the
value of that change to the business. The degree to which the potential for shared value
can be anticipated and aligned with the company’s financial criteria determines the
optimal innovation structure for the social venture. And the requirements for delivering
both business and social value, in turn, establish which capabilities are needed from new
hires or external partners.