November 12, 2014
A perspective that matches your potential
We are surrounded by the constant churning of enterprises being built and then destroyed. In the midst of such competitive turmoil, a fresh perspective is critical to thriving and identifying new avenues for growth. Unfortunately, many of the strategic models used by businesses today fail to connect sustainability with strategy. These disconnects prevent enterprises from reaching their potential and opens them up to being eclipsed by their competitors.
This results in haphazard implementation of sustainability initiatives like those recently highlighted in the MIT-BCG report on “Sustainability’s Next Frontier.” Their study found that while nearly two-thirds of survey respondents felt issues around sustainability were important to their business, only 10% of companies say they are fully able to tackle sustainability related issues. However, the study found that linking sustainability and business strategy was a key difference in whether or not companies were able to make gains from sustainable practices.
A new model called the Abundance Cycle™ makes sustainability strategic and bridges this gap. Applying the framework generates wins for all stakeholders and reveals a new perspective, uncovering opportunities and unlocking innovation. In doing so, the Abundance Cycle™ offers companies a route to a continuously improving sustainable competitive advantage.
Creative destruction is changing the competitive context
As ever, the economy has marched on through the agricultural, industrial, as well as the information and service ages, assigning the former titans of industry to the dustbin of history as it passes them by. Companies must either adapt or fall prey to this cycle of creative destruction. A failure to adapt has meant that only one company listed in 1896 (when the Dow Jones Industrial Average was conceived and when commodities and agriculture reigned supreme) has been forward-looking enough to survive – General Electric. This constant turnover is only speeding up. For example, in the last five years nearly a third of the Dow components, or 9 of 30 companies, have been replaced. While the Dow tracks what is happening amongst the largest companies in the United States, the pace of change is similar for businesses large and small.
Reams of evidence, from books like Conscious Capitalism to Harvard Business Review articles and academic studies tracking stock market performance, show that we are in an age where sustainably focused companies are outperforming their peers. These companies are asking new questions and approaching business from a different perspective. For instance, African entrepreneurs and companies like M-Pesa are solving chronic social issues and reinventing the very concept of money in the mobile age, far ahead of the banking giants. In 2013, on an annualized basis, M-Pesa’s mobile phone platform handled transactions equivalent to more than a quarter of Kenya’s GDP.
Is your company operating with blinders on?
So, how do these phenomenally successful companies come undone? What are they lacking? In a word: perspective. A slew of companies listed on the Dow followed the path of former Dow component Eastman Kodak and that of technology companies like Blackberry. They became entrenched in what made them successful without keeping an eye on the change coming down the road. By using the models and frameworks of the past, these companies were operating with a limited field of vision and were blindsided by more forward-thinking competitors. This begs a personal question: Is your company going to be passed by? How do you find new opportunities for the next economic age and avoid becoming irrelevant?
A New Perspective: Making People, Profits and Planet Strategic
The ambiguity surrounding what people, profits and planet (3P) seeks to accomplish has led to a strategic disconnect and varying degrees of success of sustainability efforts. In figure 1 below, the outcomes and benefits of pursuing 3P are shown. With these, clearly defined new connections can be forged. Managers and executives can see the potential impacts of building a virtuous cycle whereby each action reinforces the other and abundance is created for all stakeholders.
Figure 1: Benefits from pursuing 3P practices
The opportunities to create change and maximize impact are presented in all of the activities of a company, from materials acquisition and production to marketing and sales. Each of these activities must be passed through the 3P lens. Explicitly making waste or, more accurately, unsold production part of analysis also identifies new sources of value. Finally, an enterprise should also reimagine their business by closing the loop and making unsold production an input. Sustainability becomes strategic when the 3P perspective changes the key activities creating a company’s competitive advantage (Figure 2). For example, Nine Dragons Paper made Zhang Yin the richest woman in China, using this principle. She started the company by bringing cardboard “waste” from the United States to China and remanufacturing it into boxes destined for the United States, lowering her raw materials cost and improving her margins.
Figure 2: People, Profits and Planet at Key Activities
The Abundance Cycle™ offers a sustainable competitive advantage
This new model helps a business examine each aspect of its operation, uncovering latent value and spurring creativity. General Electric’s ecomagination® division with revenues equal to a Fortune 150 company has done this, as has the world’s largest commercial carpet manufacturer – Interface. Not to be outdone, more recent entrants like Airbnb and Mosaic that are respectively redefining the hospitality and solar industries. Furthermore, because the interwoven parts are more difficult to copy, the Abundance Cycle™ (Figure 3) creates competitive barriers. Since the expectations of each stakeholder group are constantly evolving, the Abundance Cycle™ is regenerative. It highlights potential opportunities to refresh and revive as the company seeks to satisfy new stakeholder desires. As a result, this creates an atmosphere of continuous improvement, which is key to avoiding obsolescence.
Figure 3: The Abundance Cycle™
Understanding the broad model is only the beginning. An Abundance Cycle™ canvas and a portfolio of tactics are located at www.abundancecycle.com to assist you in uniting sustainability and strategy. As you think about your own company, ask yourself if you are taking a piecemeal or systemic approach to sustainability. It’s a question that your competitors will answer soon enough.
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