How Business Must Rethink Its Role in Education

Q&A with Kate Tallant, Director, FSG

Around the world, corporate and civil society leaders are sounding alarms for business to rethink how it engages in education. Yet debate remains around the ideal role for companies, and how to balance the risks of introducing a profit motive into education with the positive benefits that companies can have on youth.

Shared value recasts this debate through a lens of mutual opportunity: an opportunity for companies to increase profitability and strengthen long-term competitiveness, and an opportunity for civil society to leverage the unique capabilities of business to improve learning outcomes.

Business Fights Poverty recently sat down with FSG Director Kate Tallant to discuss how companies can create shared value in education and why this approach is so important to helping solve our global education crisis.

BFP: What is shared value in education?
KT: Shared value in education is not philanthropy or corporate responsibility. Instead, it is a business approach that puts education at the core of corporate strategy and operations. In doing so, shared value enables companies to scale solutions to our world’s greatest education problems far beyond what they could do with limited giving budgets.

How do companies create shared value in education?
Companies create shared value in education when they generate economic benefits for their businesses while simultaneously addressing unmet educational needs. All companies can create shared value in education, but their opportunities to do so depend on their specific needs and capabilities.

Through our research and experience working with dozens of the world’s leading corporations, we’ve found there are two fundamentally different approaches to creating shared value in education: First, companies that are in the business of selling products to the education sector (such as Pearson, Lego, and Intel) can create shared value by developing cost-effective products that improve learning outcomes and enable them to gain competitive advantage based on student success. For example, Pearson just launched an “efficacy framework” which puts learning outcomes at the center of its global education strategy. Instead of looking at financial performance alone, Pearson will now measure and report on the progress its products are making to improve learner outcomes as well. To make this happen, Pearson is undergoing a major cultural transformation – learning outcomes are now a central pillar of its HR policies and product roles are being reshaped to focus on delivering outcomes rather than inputs.

Second, companies across all industries that are constrained by skills shortages can create shared value by sourcing and training the employees, suppliers, and customers they need to grow their business. In India, for example, the Godrej Group – a major Indian conglomerate with businesses across real estate, consumer goods, appliance, and agricultural products – has committed to training one million underemployed youth by 2020. These programs will build a pipeline of talent not only for Godrej companies, but also for their suppliers and distributors.

In both instances, taking a shared value approach enables business to transform from a passive consumer of talent to an essential partner for schools, governments, and nonprofits, in improving education outcomes.

Why is creating shared value important in education? And why is it so important now?
The simplest way I’ve heard this put was by Michael Porter at the Roundtable on Shared Value in Education that FSG and Stanford Social Innovation Review hosted earlier this year in Davos. He started the conversation by saying, “Capitalism is a magic thing—if you can actually meet a real need and actually do so profitably, wealth is created in society.” Those few words were so clear. The power to create wealth is unique to business. Yes, governments and NGOs play an incredibly valuable role in society, but they cannot create wealth. Business on the other hand can apply the capitalist model to create scalable and sustainable solutions to education problems.

Shared value is not a silver bullet. But it can, when done right, leverage the power of business in a far more powerful way than philanthropy.

In the last five years, we’ve seen more and more companies begin to adopt a shared value approach to engaging with society. Still few apply this approach to education because the education sector has historically been viewed as the realm of government and the timeline to see results can be long. Very long. Yet as we know, disruptions in technology, the growing global middle class, and the rising demand for quality are dramatically changing the education landscape. These dynamics present tremendous potential for business leaders to break free of traditional modes of thinking and engage in a new way.

What is your vision for business’s role in education in the future?
My hope is that in the next five to ten years, these changing market dynamics will catalyze business leaders to embrace new opportunities to create greater value for business and society through a shared value approach. And that, in doing so, the positive benefits of bringing a profit motive into education will far outweigh the risks, improving learning outcomes for millions of students across the globe.

FSG’s new report, The New Role of Business in Global Education, was sponsored by Houghton Mifflin Harcourt, Intel, Pearson, SAP, Western Union, and the Rockefeller Foundation. Download the complete report here.

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