Friday, June 13, 2014

Applied Shared Value Creation: What Nestlé’s Botox-Strategy tells us

“Nestlé rejuvenates itself with Botox”. The Sunday papers were downright euphoric about the strategic reorientation of Nestlé. With the Nespresso model in mind, Nestlé is moving away from mass-produced consumer goods such as Maggi soup cubes and going towards more exclusive products. With targeted acquisitions, the gigantic enterprise, which many regard as cumbersome, is establishing a lucrative new foothold with its newly founded division Nestlé Skin Health. The journal also took away my suspicion that the nerve poison Botox might just get a euphemistic covering by calling the division Skin Health – at least half of the Botox applications are reportedly being used for medical reasons. The strategic move is thus convincing at first glance: Together with Skin Health, Nestlé is strengthening its Health Science sector, which produces food for lifestyle disease prevention.

The strategy follows the credo of “Shared Value Creation” that Nestlé has developed and internalized in collaboration with the strategy guru Michael Porter. The concept aims at no less than reorienting capitalism: Companies should search and find solutions to pressing social issues. The panacea Botox might indeed relief some of our everyday problems and thus create social value. It is supposed to not only flatten wrinkles temporarily, but also to be effective in the treatment of e.g. urinary incontinence, arthritis or premature ejaculation.

Nevertheless, Nestlé’s reorientation also reveals the pronounced symptoms of the strategic concept of “Shared Value Creation”: It is cherry picking the problems. On the strategic level, attention is only paid to the problems whose solution can be transformed into high-margin products. In addition, as one commentator in the same paper argued, Nestlé is fostering its connection to a specific stakeholder group: the baby boomers. When they were born, Nestlé was fighting for supremacy in the baby food market. As they now got wrinkles and lines, Nestlé is again caring about the worries of the strongest financial force in society. Nestlé is not rejuvenating but aging together with its preferred stakeholder group.

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