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Inside magazine issue 12 | Part 03 - From a corporate perspective How can a CSR strategy based on core capabilities and existing resources be developed? Phases of CSR-Strategy selection 01 02 03 04 Social impact and sustainability contribute to profits by encouraging revenue growth through the Five Ps of the marketing mix and driving efficiency gains A CSR strategy that is based on core capabilities, will create significant opportunities and can generate added value beyond mere compliance for companies. A well-crafted CSR strategy contributes directly to generating profits by 1. Encouraging revenue growth through contributing to the Five Ps of the Marketing Mix, Preparation Strategic analysis Selection Implementation If a company wishes to craft a CSR strategy based on core capabilities and create the maximum added value for society and the environment, but also for its own purposes, it needs to follow a structured approach, starting with a detailed preparation phase. This preparatory phase should incorporate an analysis of the current strategy and business model of the company, including its core capabilities and the supply chain, as well as the most important environmental and societal challenges. In the subsequent strategic analysis phase, a mapping of core capabilities with current environmental and social challenges allows the identification of activities that will generate the most added value for both society at large and the company in particular. Combining this with the strategic objectives of the firm will allow executives to design an appropriate CSR strategy in the selection phase, before proceeding to implementation. A well-crafted CSR strategy requires a company to reconsider its entire supply and distribution chain, and to identify possibilities for positive social or environmental impact. 2. Driving efficiency gains. So let’s have a closer look at these business benefits! 1. Encouraging revenue growth through contributing to the Five Ps of the marketing mix Social impact and sustainability can have a positive effect on each of the five dimensions of the Five Ps marketing mix: •• Products •• Place •• Promotion •• Price •• People Products: An in-depth analysis of societal and environmental challenges combined with a mapping of company strategy and objectives encourages innovation and allows the development of new products. A company developing a well-crafted strategy for sustainability and social impact will need to analyze societal and environmental challenges in detail and compare these with the core capabilities and strategic objectives of the company. This will create partnering opportunities, which create value for both the company and society, rather than just philanthropic activities or propaganda. 112
Inside magazine issue 12 | Part 03 - From a corporate perspective This process will help companies to better understand customers and identify currently underserved needs. The identification of these underserved needs leads to innovation and market opportunities. A key example of a company that has been able to capitalize on its CSR strategy and engage in product innovation is Vodafone. Vodafone’s M-Pesa product, which generated significant social impact, has also become the worldwide largest mobile payment service and helped Vodafone to diversify its product portfolio from pure telecommunications to include operations typically associated with the banking sector. Place: Identifying new distribution channels to access new customers and disposing of inefficient or costly channels. The Vodafone case study also highlights the opportunities that CSR can generate in terms of product distribution. Although it initially capitalized on its existing network of vendors, Vodafone was able to develop a much larger network of individual vendors through M-Pesa, eventually reaching a much larger part of the Kenyan population than before and consequently being able to access new customers. A well-crafted CSR strategy requires a company to reconsider its entire supply and distribution chain, and to identify possibilities for positive social or environmental impact. This in-depth analysis allows the company to identify new innovative distribution channels and dispose of costly, less efficient channels, all while having a positive social or environmental impact. Promotion: Communication on social and environmental impact has a multitude of benefits. In terms of promotion, CSR can have two key benefits. Firstly, a stringent CSR strategy will allow a company to actively communicate about it and engage in credible cause marketing, which can have significant benefits for a company. Case Study: Vodafone— business model innovation through CSR In 2004, Vodafone carried out a study on CSR, which showed that information and communication technologies were one of the main tools in combating social and economic challenges in third world countries. The CSR team subsequently decided to reflect upon CSR initiatives that Vodafone could undertake in this area. The CSR team leader, Nick Hughes, proposed a concept using Vodafone’s existing mobile network in Kenya to provide a mobile payment solution called M-Pesa to a largely unbanked population. Initially, the board, which was preparing the launch of 3G at the time, did not support the project. Hughes believed in his project, however, and obtained almost £1,000,000 in funding from the UK Government’s Challenge Fund, which covered 50 percent of his capital requirements. Returning to the CFO of Vodafone with this backing, he was more successful. Vodafone’s CFO now supported Hughes’ project, recognizing its potential business benefits. M-Pesa was launched as a pilot product in Kenya through Vodafone’s subsidiary Safaricom in 2007 and allowed Kenyans to deposit, withdraw and transfer money using mobile phones. M-Pesa provides payment services to a largely unbanked population in developing countries. A market study carried out by Safaricom shows that Kenyans identify the following as the main positive social impacts: increased personal savings due to less money being lost to theft, increased convenience and reduced transaction costs when sending money, reduced travel costs when receiving money through M-Pesa and increased access to funds, especially in remote locations. Within three years of its launch, M-Pesa had more than 10 million users and supported transactions amounting to US$375 million every month. In 2013, the Economist reported that 25 percent of Kenya’s GDP flowed through M-Pesa. M-Pesa was able to generate business benefits beyond returns for Vodafone and the product has been internationally rolled out in other countries, such as India and South Africa. Some of the tangible benefits M-Pesa generated for Vodafone are: •• New profits: Safaricom, Vodafone’s subsidiary, reported a record profit of approximately US$315 million. M-Pesa was the key driver in revenue growth, contributing 20 percent of revenues in 2015. •• New customers: Vodafone was able to gain new customers through its M-Pesa offering, which attracted a great following, especially as network effects started to materialize with increasing market penetration. •• Long-term customer loyalty: M-Pesa is credited with reducing churn rates and binding customers to Safaricom in the long term. In 2011, Kenya introduced mobile number portability and Safaricom was concerned it might lose up to 1 million customers. In reality they lost only 30,000—research carried out by the independent research institute CGAP shows that attachment to M-Pesa was the main reason for this. 113
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Inside Triannually insights from De
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Inside magazine issue 12 | Contents
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Inside magazine issue 12 | Foreword
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Inside magazine issue 12 | Part 01
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Page 62 and 63: Inside magazine issue 12 | Part 02
Page 144 and 145: Inside magazine issue 12 | Contacts
Page 146: Our expert authors, who are brimmin
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