_The three levels of shared value

Shared value can be pursued via a three-step approach1:

  1. rethinking products and services and markets;
  2. reformulating the notion of productivity in the value chain;
  3. strengthening local and regional competition.

Where possible, the first level involves trying to meet unmet social needs using the entity’s products/services.

In previous MAG Group reports, we referenced the development of the very light jet segment tumultuously triggered in the early 2000s by the terrorist attacks, which led to a more widespread need for safe travel over distances which can only be covered by air travel. The roll-out of development programmes for very technologically advanced turboprop aircraft designed for cheaper air travel than that of the business jet market resulted in agile and efficient point-to-point transport being made available to more people.

MAG made an initial large investment at that time in the Eclipse E500 aircraft which, despite subsequent difficulties, helped open up the market and was also for a certain period a benchmark for established OEMs in the turbofan segment.

Though it was undoubtedly neither easy nor straightforward for a start-up like Eclipse Aviation to get its business case to where it needed to be, we can safely say that MAG’s experience in that programme was a unique opportunity to measure itself against a sector somewhat new to it (fixed wing), a new market (very light jets), and a product with levels of innovation that went beyond technology into the realms of marketing strategy, underpinned by that change in thinking familiar to Vern Raburn2 since his early experience with Bill Gates.

MAG’s goal of entering the urban aerial mobility segment was along these lines, an exciting frontier in the application and evolution of technologies developed in the unmanned aircraft field as part of strategic collaborations with leading OEMs (seeErrore. L’origine riferimento non è stata trovata.).

The second level involves reformulating an entity’s productivity in the value chain, pursuing a new application of resources, energy logistics and labour.

Although seemingly abstract notions, it is apparent to anyone who has examined or experienced how a business works at its heart that the in-built mechanisms make it a living organism, which does not always work seamlessly, which conceals the secrets of its ability to generate value for itself and for all its stakeholders.

The assimilation of the supply chain is a tangible example. Suppliers are strategic partners and the responsibility of a group such as MAG is to establish and protect a relationship that generates quality processes, efficiency and boosts employment. These considerations go beyond price or purchase terms of the sub-supply and their effects are measured in the medium to long term, determining whether a programme was successful and whether a supply chain generates benefits for the local economy.

When presenting quality parameters or discussing performance levels, it should be remembered that for a group like MAG, which outsources between 30 and 60% of its production, the value chain is strategic to its production output and successful achievement of goals.

The third level relates to interactions with the local area in a broader sense, which scholars define as clusters. On closer inspection, it is also the framework on which the entity depends, including the regulatory context, institutional support and the financial community.

At this level, MAG’s business model often has to grapple with the issue of availability of specialist expertise in the areas in which it operates and, likewise, its appeal to new graduates from disciplines such as engineering, which represent the main channel to develop the capacity to innovate products and processes.

Over its barely twenty years of history, MAG has slowly but steadily established itself in the field of engineering expertise. Today this can be measured not only in terms of the value of its internal resources dedicated to programmes and tasks but also to its ability to retain its employees and contractors, which is a surprisingly effective aspect in safeguarding the enormous investments made over time.

Some of the investments in innovation are immediately apparent: the large product development figures, the achievement of contractual milestones or the certification of own systems. The equally important but hidden portion is comprised of the background know-how, made up of expertise, procedures and knowledge but also the wealth of know-how that the group possesses in its human resources.

While know-how has connotations of secrecy, expertise has broader implications for the surrounding environment, attracting new resources and wealth to the area through collaborations with research centres and universities, where the business-university paradigm moves from the theoretical to become a vital lever in increasing a country’s competitiveness. Compared to its size, MAG has invested enormous resources in developing technologies. This has been acknowledged, for instance, by the patent box ruling recently agreed with the Piedmont tax authorities, recognising the collective value of the large amount of intellectual property via tax relief which includes a tax refund.

  1. Inspired by “How to Create Shared Value Opportunities”, Institute for Strategy & Competitiveness, Harvard Business School. 

  2. Vern Raburn, currently CEO of Titan Aerospace, founder of Eclipse Aviation, previously at Microsoft Corporation and President of Microsoft’s Consumer Product Division.