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Monday, June 13, 2011

How to Keep Ahead of Sustainability's Twists and Turns | SUSTAINABILITY, ENTREPRENEURSHIP, AND THE FUTURE OF VALUE

Sustainability, Entrepreneurship, and the Future of Value with Eric Lowitt

I want you to close your eyes for a minute. Think of the word "sustainability." What images come to mind? Trees, grass. Perhaps the color green? Now think about sustainability and your business. What issues are most pertinent to your organization's performance?

Maybe you considered risks. Or opportunities. Perchance did you think about issues of social equality? Of child labor or anti-corruption? Or how your organization could sharpen its competitive advantages by working more closely with local communities?

Over the next five to 10 years a certain breed of organizations will complete an impressive double play: They will both embrace sustainability deeper and outperform financially their peers. If we had the benefit of racing ahead a half-decade to reflect on these organizations' successes, we'd marvel at their ability to evolve with, if not slightly ahead, of sustainability's twists and turns.

And what would these twists and turns be? While no one has the benefit of a crystal ball that sees the future in HD, the lack of such a crystal ball should not hold one back from making educated guesses either. Here are three changes to your conception of sustainability that your organization should consider today in order to increase the likelihood that it will continue to succeed over the next five to 10 years.

1. The Sustainability Movement within industry will morph into the Restorability Movement. This will be a sign of the Movement's success.

Conventional wisdom suggests industry is working through the third wave of environmental and social sustainability. The first wave occurred in the 1960s and 1970s. The next occurred around 1990. Both of these waves failed to lead to lasting change in corporate settings. Companies did not connect sustainability with core business activities and values during the previous two waves.

The current wave will be different. Today informed companies are investing financial and human capital to integrate sustainability into their DNA. In the future, talking about one's sustainability initiatives will seem out of step with the market as a whole. As an analogy, consider how often companies tout their quality levels these days. Or their internet capabilities. Not often, if at all. Organizations by and large have integrated such capabilities into their DNA. So it will be with sustainability.

As the Sustainability Movement fades, a new wave of environmental and social goals will emerge. Progressive organizations will shift their focus from a stance of 'Do less harm' to 'Do more good.' This shift will be typified as the Restorability Movement. Many organizations have found ways to earn economic returns from reducing their environmental impact, creative organizations will find ways to make money by restoring ecosystems to pre-industrial conditions.

2. The Sustainability Movement will combine with previous imperatives, such as globalization and the internet. New distinctive capabilities will emerge as a result.

A business imperative is a new circumstance in the economic environment that requires radical changes in a business's operations at every level. If changes are not made, the business cannot continue to create value consistent with previous levels; in extreme cases, the business cannot survive. Between the end of WWII and the dawn of this third wave of sustainability, industry faced four imperatives: quality, business process reengineering, globalization, and the dot-com.

Each imperative impacted the way business created value. Value first migrated to companies with high product quality levels, then businesses with quick turnaround times and high service levels, then global reach, and eventually multiple distribution channels. Some companies made adjustments early; others took time to catch up to these early adopters. Eventually the hotness of each imperative cooled. Left in their stead were a set of new capabilities.

Today many of these capabilities are intertwining to both complicate and simplify industry's sustainability response. For example, on the complicating side of the equation, a corporate misstep in a distant region of the globe can quickly become viral news via social media.

Companies that will succeed tomorrow will find ways to combine sustainability capabilities with capabilities developed in response to previous imperatives. Some companies are already responding this way. GE, for instance, is using social media to crowdsource smart grid innovations from around the world. The ability to intertwine newer capabilities will emerge as a lever of competitive differentiation and ultimately outperformance of peers.

3. The basis of industry competition will shift from company versus company to corporate network versus corporate network.

The Sustainability Movement is leading to the adoption of multi-stakeholder approaches to address environmental and social challenges. Several companies have developed venture arms to fund and guide investments in renewable energy. Given the scale and unique local challenges of such investments, the more successful venture organizations have partnered with industry, private equity, and local community entities to achieve their investment goals.

As more of these multi-stakeholder approaches take root, companies will forge new bonds with previously strange bedfellows. Talent and intellectual property will be shared, perhaps even among competitors. Organizations seeking to either compete or collaborate with these companies will find that they need to deal with network dynamics, not just individual company dynamics.

In the process, one of the business models of yesterday will reappear, albeit in a modified fashion. Competitive corporate networks will emerge, borrowing a page from the traditional keiretsu model of business groups in Japan. Instead of being bound by cross-stock ownership, however, these corporate networks will be bound by cross-IP ownership, fortified by values and goals held in common.

Companies are crafting multi-year strategies to adapt to and embrace sustainability. The companies that stand the test of time will be those that create capabilities to constantly evolve their sustainability strategies as the sustainability movement itself evolves. Considering the above three trends today will help organizations steer their strategies through sustainability's coming twists and turns.

Eric Lowitt is a student and teacher of strategy and sustainability – how companies grow, innovate, and become more agile by embracing sustainability. His first book on the topic, The Future of Value, will be published by Jossey-Bass, a Wiley imprint, in October 2011.

Learn more about Eric Lowitt at and follow him on Twitter @EricLowitt

For more information, please visit Eric's TNNWC Bio.

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