CBA Executive Director Mariana Lamont shares this insightful leadership article from Harvard Business Review.
By the end of the year, our days are packed to the brim with holidays, family celebrations and travel. While you take a break from day-to-day operations, take a step back to reflect. The year’s end means the beginning of a new one with new possibilities. Be the leader, be the change. Start now to lay the groundwork for new perspectives in your business.
Demands for sustainable practices have transformed the competitive landscape. Pressure from both sides - consumers and government - is forcing companies to change the way they think about products, technologies, processes and business models.
In tough times, the human instinct is to cut costs, hunker down, stick with the familiar and try to wait it out. This can get you through a short dip, but in a real economic crisis these are the companies who shrink their way into quiet bankruptcy or a unprofitable takeover.
The key to survival in an economic crisis is innovation.
The companies who thrived after the bust in 2000 and at the end of the 2007-2010 recession were the ones who challenged the status quo.
- Google made comparison shopping and finding information quicker.
- Microsoft made business admin cheaper and easier.
- Amazon allowed you to buy the next book in the series immediately.
- In 2009, Uber reimagined the taxi industry.
- In 2008 AirBnB reinvented the hospitality industry.
All these innovative “game changers” hit the profitability the current major players overnight, because they took advantage of the “new reality” of thriftiness.
Here in South Africa, Discovery Bank and Capitec are changing the nature of banking, although in different ways. They are leaving the other “too big to fail” South African banks scrambling for customers.
But these companies did not achieve success by innovating DURING the hard times, they did it by anticipating the future.
Treat sustainability as a goal today! The early movers will develop competencies that rivals will be hard-pressed to match.
That competitive advantage will stand them in good stead, because sustainability is not going away. In many countries it is already a requirement – single use plastic bags and cups are being banned almost overnight in European and Canadian cities. Car emissions get stricter, and electric cars are being launched by new players.
In our own industry, energy-efficiency specifications in housing are now universal and concrete manufacturers are experimenting with additives.
Did you know there is a concrete that traps CO2 emissions forever, while provides strength that reduces the volume of cement needed! (www.carboncure.com). Innovation is not only evolution, it is revolution! And it’s already here!
How is your company responding to changing legislation, changing customers and a changing construction landscape? Will YOU be the leader?
It isn’t going to be easy!
Studies shows that companies will go through five distinct stages of change. They face different challenges at each stage and must develop new capabilities to tackle them. Mapping the road ahead will save companies time—and that could be critical, because the clock is ticking.
It’s tempting to adhere to the lowest environmental standards for as long as possible. However, it’s smarter to comply with the most stringent rules, and to do so before they are enforced. This yields substantial first-mover advantages in terms of fostering innovation.
Companies that focus on meeting emerging norms gain more time to experiment with materials, technologies, and processes.
Stage 1: Compliance as Opportunity
The first steps companies must take on the long march to sustainability usually arise from the law. Compliance is complicated: Mining, Environmental regulations, Carbon tax bill signed in this year.
Stage 2: Making Value Chains Sustainable
Once companies have learned to keep pace with regulation, they become more proactive about environmental issues. Many then focus on reducing the consumption of non-renewable resources such as coal, petroleum, and natural gas along with renewable resources such as water and timber. The drive to be more efficient extends from manufacturing facilities and offices to the value chain. At this stage, corporations work with suppliers and retailers to develop eco-friendly raw materials and components and reduce waste. The initial aim is usually to create a better image, but most corporations end up reducing costs or creating new businesses as well. That’s particularly helpful in difficult economic times, when corporations are desperate to boost profits.
Companies develop sustainable operations by analyzing each link in the value chain, make changes in obvious areas, such as supply chains.
Tools such as enterprise carbon management, carbon and energy footprint analysis, and life-cycle assessment help companies identify the sources of waste. Life-cycle assessment is particularly useful: It captures the environment-related inputs and outputs of entire value chains, from raw-materials supply through product use to returns. This has helped companies discover, for instance, that vendors consume as much as 80% of the energy, water, and other resources used by a supply chain, and that they must be a priority in the drive to create sustainable operations.
Central to building a sustainable supply chain are operational innovations that lead to greater energy efficiency and reduce companies’ dependence on fossil fuels. Is your plant moving equipment fuel efficient? Are you delivering with fuel efficient transport to customers? If you have Solar-energy systems in place the next step could be hybrid vans that are 42% more fuel efficient in the future this could be replacing large trucks.
Stage 3: Designing Sustainable Products and Services
At this stage executives start waking up to the fact that a sizable number of consumers prefer eco-friendly offerings, and that their businesses can score over rivals by being the first to redesign existing products or develop new ones. In order to identify product innovation priorities, enterprises must use competencies and tools they acquired at earlier stages of their evolution.
To design sustainable products, companies have to understand consumer concerns and carefully examine product life cycles. They must learn to combine marketing skills with their expertise in scaling up raw materials supplies and distribution. As they move into markets that lie beyond their traditional expertise, they have to team up with nongovernmental organizations. Smart companies like P&G and Clorox, which have continued to invest in eco-friendly products despite the recession, look beyond the public-relations benefits to hone competencies that will enable them to dominate markets tomorrow.
Stage 4: Developing New Business Models
Most executives assume that creating a sustainable business model entails simply rethinking the customer value proposition and figuring out how to deliver a new one. However, successful models include novel ways of capturing revenues and delivering services in tandem with other companies.
New technologies provide start-ups with the ability to challenge conventional wisdom.
Developing a new business model requires exploring alternatives to current ways of doing business as well as understanding how companies can meet customers’ needs differently. Executives must learn to question existing models and to act entrepreneurially to develop new delivery mechanisms. As companies become more adept at this, the experience will lead them to the final stage of sustainable innovation, where the impact of a new product or process extends beyond a single market.
Stage 5: Creating Next-Practice Platforms
Next practices change existing paradigms. To develop innovations that lead to next practices, executives must question the implicit assumptions behind current practices. This is exactly what led to today’s industrial and services economy. Somebody once asked: Can we create a carriage that moves without horses pulling it? Can we fly like birds? Can we dive like whales? By questioning the status quo, people and companies have changed it. In like vein, we must ask questions about scarce resources: Can we develop waterless detergents? Can we breed rice that grows without water? Can biodegradable packaging help seed the earth with plants and trees?
Sustainability can lead to interesting next-practice platforms
When a company’s top management team decides to focus on the problem, change happens quickly.
Leadership and talent are critical for developing a low-carbon economy. The current economic system has placed enormous pressure on the planet while catering to the needs of only about a quarter of the people on it, but over the next decade twice that number will become consumers and producers. Traditional approaches to business will collapse, and companies will have to develop innovative solutions. That will happen only when executives recognize a simple truth: Sustainability = Innovation.
Edited from Harvard Business review