value insights

Building Strategic Capability through Good Works- Valutrics

Corporate philanthropy is big business these days. In 2014, according to a study by the Committee Encouraging Corporate Philanthropy and the Conference Board, companies gave more than US$18 billion in cash and in-kind contributions. But for most companies, these are ancillary efforts, with little or no bearing on core operations. Whether a firm sells hammers and nails, manufactures components that propel spaceships to Mars, or merely exists in the cloud, it may sponsor the local symphony or provide scholarships to worthy students. And it might even change its giving portfolio from year to year. Choosing the recipients is a relatively easy decision because the impact on the company itself is negligible.

But does that always have to be the case? In social capitalism circles, the term “Higher Ambition” is used to describe simultaneous efforts by a business to create social and financial value. Can such ambitious companies pursue altruistic efforts that help them build essential capabilities? These are questions that one large medical technology company, BD (Becton, Dickinson and Company), has posed as it has collaborated with an Argentine mechanic to build a device that focuses on improving maternal healthcare in the developing world.

BD has an active corporate social responsibility (CSR) program that, for example, pays employee teams to travel to developing countries such as Zambia, Haiti, and Papua New Guinea to help strengthen local health systems. But BD has also become more directly involved by working to develop the Odon Device, an alternative to C-section for women in developing countries who are experiencing potentially life-threatening complications from prolonged labor.

This device, which is currently being tested for safety, was designed not in a medical RD lab but in the workshop of an inventive auto mechanic in Argentina named Jorge Odon. Odon first came upon the idea about a decade ago when he saw a YouTube video of a trick for extracting a loose cork from an empty bottle. Perhaps because he was a father of five, he made the leap to applying the same concept to assisted vaginal delivery of a baby. The apparatus consists of a plastic sleeve that is inflated around the baby’s head and is used to gently pull and ease the head of the infant through the birth canal.

Odon developed a prototype that he showed to the World Health Organization (WHO) — and soon after, won initial funding from Saving Lives at Birth: Grand Challenges for Development, a program sponsored by five governments and the Bill Melinda Gates Foundation. That allowed Odon to more fully develop the apparatus. But the funds were not sufficient to develop it at the scale needed to have significant impact. Two WHO doctors introduced the device to BD, hoping that the company would back a larger manufacturing effort.

Working on the Odon Device has been a small-scale exercise in working on a social business to help build strategic capabilities.

This low-cost intervention, pitched at low-income consumers, won’t contribute directly to a significant increase in sales for BD, which has annual revenues of about $10 billion. But in 2013, BD’s leadership agreed to test, manufacture, and distribute the product. Why? As Gary Cohen, president for global health and development at BD, explained in an interview, the Odon device fit into the Higher Ambition theme that the company had adopted.

In essence, development of the Odon Device has been a small-scale exercise in working on a social business to help build strategic capabilities.

Cohen said the potential contributions lie in three areas.

• Expanding the knowledge base. The Odon Device provides entree into maternal and infant health, a new area for BD. Considering that as many as 10 million women face a serious medical complication from pregnancy each year, this is a significant market opportunity linked to an acute social good. “Our experience with the Odon Device helped inform us on how we approached a more recent maternal diagnostic testing collaboration with DiabetOmics Inc. for [the hypertensive pregnancy disorder] preeclampsia and gestational diabetes,” Cohen said.

• Attracting and retaining top talent. Like many other companies, BD is eager to connect its employees to a broader purpose. Cohen noted that when the company recruits graduates from top business schools such as Kellogg and Columbia, high-performing students often point out the attraction of BD’s global health work — even when the recruiters represent a different part of the business. The Odon Device is a marquee product for this popular aspect of BD’s organizational activities.

• Building complex relationships. Establishing a partnership with WHO and the developing countries where the Odon apparatus is being tested is far more cumbersome than putting together a supply chain. Although BD has been involved in public–private partnerships for more than 15 years, Cohen said this initiative was on “a whole new level.” Why? Because of the scale of the underlying health need and the number and variety of constituents — a group that included rural and urban communities in China, India, and South Africa where the Odon Device is currently being tested. Gaining proficiency at working with multi-stakeholder engagements and fostering cooperative innovation across regions “informs our business strategy more broadly in developing and emerging countries,” Cohen said.

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The jury is still very much out on this particular experiment. The Odon Device remains in clinical trials in Argentina and rural South Africa. And Cohen notes that higher ambition and purpose isn’t always an easy sell. “Even in a company where a [philanthropic] culture is deeply embedded, there is still considerable debate around investments that are outside of our core areas of business,” Cohen noted.

Even so, it may be that looking at the harder metrics of annual sales and production volumes obscures the return on such investments. If companies can use these types of social business initiatives to develop capabilities, foster an attractive culture, and build valuable relationships, the return on investment may prove to be significant.