The Business Case for International Development September 2011 - Tara Schmidt - Mark Tuckwood Presented at  Business - Sha...
© Wood Mackenzie  The business–charity paradigm and perceptions…  Business <ul><li>Short-termism </li></ul><ul><li>“ PROFI...
…  versus the broader perspective © Wood Mackenzie  Longer-term view Economic, environment, and social  Business Charity E...
Challenging the business–charity paradigm…  to create societal value © Wood Mackenzie  Short-termism “ PROFIT PROFIT PROFI...
We are now beginning to see convergence in the global market <ul><li>Finding a common ground… </li></ul>© Wood Mackenzie  ...
The Business Case for International Development  © Wood Mackenzie  1 Why should a medium sized Scottish business build loc...
Why should a medium sized Scottish business build local capacity abroad? <ul><li>Has a responsibility to all of its compan...
The business opportunity is significant for building local capacity abroad… <ul><li>A real opportunity across business sec...
Opportunities in Energy Sector © Wood Mackenzie  The provision of sustainable power in developing communities is  THE  emp...
…  especially for more entrepreneurial businesses © Wood Mackenzie  <ul><li>New economic development paradigms </li></ul><...
Interests of the  right  business can be aligned with the charity sector and government to deliver true sustainable develo...
The Business Case for International Development  © Wood Mackenzie  1 Why should a medium sized Scottish business build loc...
What are the potential benefits to business…  and to the communities in which they operate? <ul><li>Communities  </li></ul...
The Business Case for International Development  © Wood Mackenzie  1 Why should a medium sized Scottish business build loc...
How could business partner with charities and gov’ts to create value? <ul><li>Business challenges*  </li></ul><ul><ul><li>...
What’s the link? © Wood Mackenzie  “ When you change the way you see things, the things you see change” Mahatma Ghandi
Contacts © Wood Mackenzie  <ul><li>Name:  Tara Schmidt </li></ul><ul><li>Position: Corporate Development Analyst </li></ul...
© Wood Mackenzie  Global Offices Australia Brazil Canada China India Global Contact Details Europe +44 (0)131 243 4400 Ame...
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Business - Sharing Value? The Business Case for International Development

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  • To finished I thought I’d share this with you. Does anyone know the link? The distance between the wheels of a Roman chariot set the standard for carts in Europe, which in turn was used as the standard railway gauge. The design of the solid rocket boosters on the space shuttle was limited by the ability to transport them by train to the launch site, which meant passing then through railway tunnels. The width of which were determined by the track gauge. The limitations of the space shuttle is therefore a function of the width of two Roman horses side by side pulling a chariot. Just because something is the way its always been, doesn’t necessarily means it’s right - even if it is difficult to change. And in the words of Mahatma Ghandi, “When you change the way you see things, the things you see change”. Is this an opportunity to change the way we see deepwater?
  • Business - Sharing Value? The Business Case for International Development

    1. 1. The Business Case for International Development September 2011 - Tara Schmidt - Mark Tuckwood Presented at Business - Sharing Value? 20 th September 2011, Edinburgh A NIDOS event www.nidos.org.uk
    2. 2. © Wood Mackenzie The business–charity paradigm and perceptions… Business <ul><li>Short-termism </li></ul><ul><li>“ PROFIT PROFIT PROFIT” </li></ul><ul><li>“ All in for the money” </li></ul><ul><li>Greed </li></ul><ul><li>Personal gain </li></ul><ul><li>Lack morals </li></ul>Charity <ul><li>Inefficient </li></ul><ul><li>Do-gooders </li></ul><ul><li>“ Don’t live in the real world” </li></ul><ul><li>“ Hand-outs for lazy people” </li></ul><ul><li>Is the money going where it should be? </li></ul>
    3. 3. … versus the broader perspective © Wood Mackenzie Longer-term view Economic, environment, and social Business Charity Empowerment of people Capacity building
    4. 4. Challenging the business–charity paradigm… to create societal value © Wood Mackenzie Short-termism “ PROFIT PROFIT PROFIT” “ All in it for the money” Greed Personal gain Lack morals Inefficient Do-gooders “ Don’t live in the real world” “ Hand-outs for lazy people” Is the money going where it should be? Products and services Skills development Operational efficiencies Wealth creation Longevity Stakeholder value Governance Societal value Economic development Motivation & empowerment Innovation Infrastructure development Capacity building SUSTAINABILITY Awareness building Supply of basic goods and services Supporting communities Campaigns Training Opportunities for self-help Business Charity
    5. 5. We are now beginning to see convergence in the global market <ul><li>Finding a common ground… </li></ul>© Wood Mackenzie … to build strong effective partnerships that can achieve more through working together Societal Value Business Charity Government The People Regulatory framework, incentives, policies Sustainable income , operational efficiencies Community and individual needs Consumer demand, constituents, supporters
    6. 6. The Business Case for International Development © Wood Mackenzie 1 Why should a medium sized Scottish business build local capacity abroad? 2 What are the potential benefits to business and to the communities in which they operate? 3 How could business partner with charities and governments to create value?
    7. 7. Why should a medium sized Scottish business build local capacity abroad? <ul><li>Has a responsibility to all of its company stakeholders </li></ul><ul><ul><li>To persevere as a robust and profitable business </li></ul></ul><ul><ul><li>To sustainably grow business into the future </li></ul></ul><ul><li>Helps to ensure sustainable business growth </li></ul><ul><ul><li>Focus on a longer-term business outlook, adding strategic and tangible value while mitigating risks </li></ul></ul><ul><ul><li>Goldman Sachs Sustainability Index was founded on research that the companies who are leaders in environmental, social and governance policies are also the leaders in stock performance, delivering long-term sustainable competitive advantages </li></ul></ul><ul><ul><li>Despite the global recession, 70% of the 756 US companies surveyed by GlobeScan in 2009 said Corporate Citizenship should be a business priority and 60% said it makes a tangible contribution to their bottom line** </li></ul></ul><ul><ul><li>For the small companies surveyed, it was particularly key in managing reputation and business brand** </li></ul></ul><ul><li>“ It is simply the right thing to do.” </li></ul>© Wood Mackenzie * Source: Goldman Sachs Sustainability Index http://www2.goldmansachs.com/ideas/environment-and-energy/goldman-sachs/gs-sustain/index.html **Source: Hitachi Foundation “The 2009 State of Corporate Citizenship in the US” survey, www.hitachifoundation.org
    8. 8. The business opportunity is significant for building local capacity abroad… <ul><li>A real opportunity across business sectors to add to the triple bottom line* – people, planet and profit** </li></ul><ul><ul><li>Consumer goods – Unilever in West Africa </li></ul></ul><ul><ul><li>Pharmaceuticals – GSK across Africa </li></ul></ul><ul><ul><li>Microfinance – Citigroup in India </li></ul></ul><ul><ul><li>Technology – GSM in over 14 countries (Africa/ISC) </li></ul></ul><ul><ul><li>Energy – e nergy access to aid development, especially in rural communities - more challenging </li></ul></ul><ul><li>“ Spin-off” business units were needed to make this work – better placed for more entrepreneurial businesses? </li></ul>© Wood Mackenzie *Source: John Elkington in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business **Source: Sustainability Challenges and Solutions at the Bottom of the Pyramid , The Shell Foundation, Tara Schmidt & Christine Keating, 2008 ***Source: Survey results from interviews conducted by the authors with managers in 22 multinational business units Challenge versus Reward Profitable 50% Not for profit 5% Unknown 10% Not met targets discontinued 10% Not met targets continued 10% Commercially sustainable 15% Financial performance*** Motivational drivers*** - 10 20 30 40 50 60 70 80 90 Strategic Financial Philanthropic Responses (%)
    9. 9. Opportunities in Energy Sector © Wood Mackenzie The provision of sustainable power in developing communities is THE empowering enabler Over 1.6 bn people have no access to even rudimentary power source* Lack of access to reliable energy supply affects the lives of around 2 bn people* “ The source of material civilisation is developed power. If one has this developed power at hand, then a use for it will easily be found… The way to liberty, the way to equality of opportunity, the way from empty phrases to actualities, lies through power.” Henry Ford (1926) Power is one of the three fundamental inputs that determine the productivity of labour, the other two being materials and information. (*Huber and Mills, 2005) What are the possibilities?
    10. 10. … especially for more entrepreneurial businesses © Wood Mackenzie <ul><li>New economic development paradigms </li></ul><ul><li>Create new development pathways </li></ul><ul><li>Leapfrog legacy technology </li></ul><ul><li>Develop new commercial arrangements </li></ul><ul><li>E.g. Mobile phones in Africa </li></ul><ul><li>E.g. Green energy R&D in China </li></ul><ul><li>Market development </li></ul><ul><li>“ First mover advantage” – create a commercial space where there is limited or no competition </li></ul><ul><li>Ability to establish and shape the market </li></ul><ul><li>Brand building </li></ul><ul><li>Defining success differently </li></ul><ul><li>Holistic performance metrics </li></ul><ul><li>“ Triple bottom line” philosophy i.e. social and environmental as well as economic targets </li></ul>
    11. 11. Interests of the right business can be aligned with the charity sector and government to deliver true sustainable development <ul><li>Scotland has an “energy economy”, built on the foundations of the oil & gas sector, but is now a centre for innovation in renewables </li></ul><ul><li>Technology innovation should go hand-in-hand with commercial innovation in exploring means of creating value </li></ul><ul><li>Who are the real business innovators in this sector? </li></ul><ul><ul><li>Large incumbent energy companies – have a large vested interest in the status-quo, but a view to the long term (e.g. Shell Solar) </li></ul></ul><ul><ul><li>IT sector – a “young”, dynamic sector with a reputation for innovation - seeking a new market (e.g. Google Green) </li></ul></ul><ul><ul><li>University spin-offs – commercialising R&D </li></ul></ul><ul><ul><li>SMEs – owner managed business driven by passionate individuals - need to be innovative in order to survive </li></ul></ul><ul><ul><li>Who could you most easily align yourself with? </li></ul></ul>© Wood Mackenzie
    12. 12. The Business Case for International Development © Wood Mackenzie 1 Why should a medium sized Scottish business build local capacity abroad? 2 What are the potential benefits to business and to the communities in which they operate? 3 How could business partner with charities and governments to create value?
    13. 13. What are the potential benefits to business… and to the communities in which they operate? <ul><li>Communities </li></ul><ul><ul><li>Jobs and new skills </li></ul></ul><ul><ul><li>Capacity building of the country </li></ul></ul><ul><li>Builds a joint platform for addressing the needs of the community and the broader stakeholders </li></ul><ul><li>Business </li></ul>© Wood Mackenzie Company reputation and business development <ul><li>builds company ‘license to operate’ in developing countries / new market entry </li></ul><ul><li>develops new innovative ideas for business </li></ul>Employee excellence and skills development <ul><li>attracts new recruits who may have otherwise over looked the company </li></ul><ul><li>retains and cultivates a more diversified company team </li></ul>Company cohesion locally and globally <ul><li>builds a strong, effective team environment, particularly as a company may expand abroad </li></ul><ul><li>encourages stakeholders from potentially very different backgrounds to work more closely together </li></ul>Robust management of risks (and costs) <ul><li>considers social, environmental and economic issues for a more thorough assessment of risk </li></ul><ul><li>builds more robust ability to successfully manage local operations </li></ul>
    14. 14. The Business Case for International Development © Wood Mackenzie 1 Why should a medium sized Scottish business build local capacity abroad? 2 What are the potential benefits to business and to the communities in which they operate? 3 How could business partner with charities and governments to create value?
    15. 15. How could business partner with charities and gov’ts to create value? <ul><li>Business challenges* </li></ul><ul><ul><li>Understanding local consumers’ needs </li></ul></ul><ul><ul><li>Engaging with communities for supply chain development and product/service delivery </li></ul></ul><ul><ul><li>Redesigning their business model </li></ul></ul>© Wood Mackenzie <ul><li>Working with charities and government* </li></ul><ul><ul><li>Delivering built-for-purpose products/services </li></ul></ul><ul><ul><li>Strengthening value chain through partnership(s) </li></ul></ul><ul><ul><li>Focusing on core capabilities for all organisations (business, charity, government) </li></ul></ul>*Source: Sustainability Challenges and Solutions at the Bottom of the Pyramid , The Shell Foundation, Tara Schmidt & Christine Keating, 2008 **Source: Survey results from interviews conducted by the authors with managers in 22 multinational business units Business model Balancing innovation with mainstream business Products/services Leveraging core capabilities Value chain Strengthening through partnership Industry Market Challenges to the Business Model** 0 10 20 30 40 50 60 Stakeholders Funding Relationships Coordination Corruption Safety Distribution Responses (%)
    16. 16. What’s the link? © Wood Mackenzie “ When you change the way you see things, the things you see change” Mahatma Ghandi
    17. 17. Contacts © Wood Mackenzie <ul><li>Name: Tara Schmidt </li></ul><ul><li>Position: Corporate Development Analyst </li></ul><ul><li>T: 0131 2434526 </li></ul><ul><li>E: tara.schmidt@woodmac.com </li></ul><ul><li>Name: Mark Tuckwood </li></ul><ul><li>Position: Senior Associate </li></ul><ul><li>T: 0131 2434205 </li></ul><ul><li>E: mark.tuckwood@woodmac.com </li></ul>Presented at Business - Sharing Value? 20 th September 2011, Edinburgh A NIDOS event www.nidos.org.uk
    18. 18. © Wood Mackenzie Global Offices Australia Brazil Canada China India Global Contact Details Europe +44 (0)131 243 4400 Americas +1 713 470 1600 Asia Pacific +65 6518 0800 Email [email_address] Website www.woodmac.com Japan Malaysia Russia Singapore South Korea United Arab Emirates United Kingdom United States Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com

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