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In today’s complex world, companies everywhere are confronting long-entrenched social or envi ronmental problems that have major financial consequences for the company and its shareholders yet cannot be addressed by normal business practices. Poor diet and insufficient exercise lead to increased health care costs and diminished employee productivity; inadequate recycling systems are increasing raw materials scarcity and prices; weak infrastructure and government corruption limit entry into emerging markets; low productivity of smallholder farmers leads to poverty, deforesta tion, and unreliable sourcing; and ineffective educational systems increase employee training and turnover costs. Faced with these dilemmas, companies have typically responded by joining global industry coali tions and donating to social sector organizations. These broad and well-intentioned efforts, however, have done little to overcome the bottom-line impact of such challenges in companies’ key markets. An entirely new approach is needed if companies are to capture the many important opportunities for growth and profitability that are blocked by today’s societal failings. Fortunately, a handful of pioneering companies have already demonstrated how to identify, manage, and overcome these ecosystem barriers. For example, when Novo Nordisk, a leading provider of insulin to treat diabetes, entered the Indonesian market in 2003, it was stymied for a decade by the lack of health care infrastructure, inadequate training of health care providers, and limited patient awareness of the disease. By 2013, only 3 million of an estimated 7.6 million Indonesian diabetics received any treatment at all, and fewer than 50,000 patients actually adhered to the appropriate regimen and achieved their treatment targets.1 Socioeconomic indicators suggested that diabetes would become more preva lent over time. Improved diagnosis and patient adherence could increase the current insulin market fourfold by 2020, saving 4.6 million life-years,a reducing government health care costs by $5.8 billion, and increasing the country’s GDP by $2.14 trillion. Yet neither the government nor social sector organizations were making much progress. Neither were global anti-diabetes coalitions likely to address the specific treatment obstacles in Indonesia. Novo estimated that the company could capture up to half the market increase and determined that the potential sales justified an eight-figure investment to launch a public-private partnership. Working with the Ministry of Health, the Indonesian Society of Endocrinology, and the Indonesian Diabetes Association, Novo’s leadership and funding catalyzed a new level of cross-sector engage ment and alignment that has begun to improve patient care and awareness. Diagnostic rates have already improved by 10%, generating increased sales for the company as well as improved health for tens of thousands of Indonesians. This guide is based on such examples and FSG’s analysis of a dozen corporations that are leading change in the social ecosystems that matter most to their business. Their success is based on five key steps, which we describe in greater detail in the main text, and illustrate through a selection of stories.

The Social Ecosystem Dilemma-and How to Fix It

Resource Key: BXRFYG34

Document Type: Report

Creator:

Author:

  • Marc Pfitzer
  • Helge Mahne
  • Mark Kramer

Creators Name: {mb_resource_zotero_creatorsname}

Place: Boston, MA

Institution: FSG

Date: January 2020

Language: en

In today’s complex world, companies everywhere are confronting long-entrenched social or envi ronmental problems that have major financial consequences for the company and its shareholders yet cannot be addressed by normal business practices. Poor diet and insufficient exercise lead to increased health care costs and diminished employee productivity; inadequate recycling systems are increasing raw materials scarcity and prices; weak infrastructure and government corruption limit entry into emerging markets; low productivity of smallholder farmers leads to poverty, deforesta tion, and unreliable sourcing; and ineffective educational systems increase employee training and turnover costs. Faced with these dilemmas, companies have typically responded by joining global industry coali tions and donating to social sector organizations. These broad and well-intentioned efforts, however, have done little to overcome the bottom-line impact of such challenges in companies’ key markets. An entirely new approach is needed if companies are to capture the many important opportunities for growth and profitability that are blocked by today’s societal failings. Fortunately, a handful of pioneering companies have already demonstrated how to identify, manage, and overcome these ecosystem barriers. For example, when Novo Nordisk, a leading provider of insulin to treat diabetes, entered the Indonesian market in 2003, it was stymied for a decade by the lack of health care infrastructure, inadequate training of health care providers, and limited patient awareness of the disease. By 2013, only 3 million of an estimated 7.6 million Indonesian diabetics received any treatment at all, and fewer than 50,000 patients actually adhered to the appropriate regimen and achieved their treatment targets.1 Socioeconomic indicators suggested that diabetes would become more preva lent over time. Improved diagnosis and patient adherence could increase the current insulin market fourfold by 2020, saving 4.6 million life-years,a reducing government health care costs by $5.8 billion, and increasing the country’s GDP by $2.14 trillion. Yet neither the government nor social sector organizations were making much progress. Neither were global anti-diabetes coalitions likely to address the specific treatment obstacles in Indonesia. Novo estimated that the company could capture up to half the market increase and determined that the potential sales justified an eight-figure investment to launch a public-private partnership. Working with the Ministry of Health, the Indonesian Society of Endocrinology, and the Indonesian Diabetes Association, Novo’s leadership and funding catalyzed a new level of cross-sector engage ment and alignment that has begun to improve patient care and awareness. Diagnostic rates have already improved by 10%, generating increased sales for the company as well as improved health for tens of thousands of Indonesians. This guide is based on such examples and FSG’s analysis of a dozen corporations that are leading change in the social ecosystems that matter most to their business. Their success is based on five key steps, which we describe in greater detail in the main text, and illustrate through a selection of stories.

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