Business Transformation in 2022: 3 Questions Leaders are Asking
From stability to resilience, from competitive to collaborative, from extractive to regenerative: business leaders across every sector are re-evaluating the fundamental purpose and structure of their organizations. What questions are they asking?
Until recently, successful business has been synonymous with profit maximization. But business metrics are evolving. Profits are still important, but they are not enough. Social and environmental responsibility, inclusivity, and ethics are no longer optional.
This is not about feel-good PR or greenwashing, it is about leaders confronting the practical reality that the fate of any business wishing to survive long-term is directly tied to the fate of the planet and functional society. It is also about consumers’, prospective and current employees’, and investors’ perceptions of the business, and corresponding access to markets, talent, and finance.
These revelations are also impacting digital transformation– how organizations wield technologies and leverage data to deliver customer value, innovate, and sustain vitality. Our research and client work finds that the future of digital transformation is not just about doing more with less, but doing *better with less*– generating and distributing value across stakeholders and using the power of business and scale of technologies to do so.
Emerging technologies, from artificial intelligence to smart devices, blockchain to biotechnologies, are critical tools for aligning economic value with societal and environmental benefit. We’re supporting organizations on this journey, beyond sustainability. Here are three questions we hear from business leaders:
Question 1: How does our business become more sustainable? Beyond pledges and promises, where do we actually begin?
Hundreds of corporations (and governments) around the globe have made all manner of pledges around sustainability, diversity & inclusion, and ethics. Without action, metrics, and accountability, a pledge is nothing more than hollow words. But for business leaders who are sincerely committed to action, a long suite of decisions follows: alignment with business/product/customer/partner strategy, investment allocation, metrics and audits, and beyond.
Delivering on these pledges is not unlike delivering on other strategic endeavors insofar as it requires the right talent, resourcing, and governance. But there are two distinctions leaders must consider:
- The universal nature of the imperative. Every organization, community, and person has a stake in reducing planetary harm and improving the systems on which we all depend.
- The network effects of business (and digital) ecosystems, and the opportunities embedded therein.
What this translates to in practice is an obvious value proposition, and a wide range of stakeholders, nodes, and possibilities for realizing the effort. Take the example of Interface, a global carpet manufacturer. By applying principles of regeneration across the entire business (from HR to product to finance to factory operations) and its supply chain (both suppliers and potential competitors), efforts compounded to exceed its goals. After achieving its “net zero” target in 2019 (prior to its 2020 goal), Interface is now focused on net positive targets (i.e. not neutralizing harm, but improving benefits to planet and people). The key to action is not just taking a first step, but enabling all “nodes” internal the organization, and across the external ecosystem to act and benefit too.
Question 2: How does customer value fit into this shift towards sustainable and regenerative business?
Customer centricity is, of course, the mantra of modern business. But shifting from extractive business-as-usual requires re-evaluating assumptions around convenience, price, and trust. Who are we actually serving (or hurting) when we frame customer value around price? How are we building trust with customers, and is it obfuscating how products and services are developed? Companies that are embracing regenerative value creation understand that customer value is evolving:
- From harm to health
- From obfuscation to transparency
- From linear/wasteful to circular/re- or upcyclable
- From destructive to renewable
- From closed to open (knowledge, governance, markets, opportunities to monetize)
There are many examples of this, but IKEA offers a real-world illustration. Known as a global retailer of home furnishing, the company is not just bolting on sustainable practices to its operations, it is aligning rapid energy transformation with its customer strategy, unlocking novel value propositions (and market opportunities) in the process. Starting in Sweden, IKEA is offering customers affordable, certified solar and wind energy to power their homes, panels and technology infrastructure to support, as well as the capacity to sell back the electricity they don’t use themselves.
Creating a renewable energy marketplace for customers benefits a wide range of people (those who cannot put solar panels on their homes for financial reasons, low light exposure, or because they live in high-density or covenant-controlled areas). The sell-back program aligns incentives between customers, brand, and planet. Reducing customers’ carbon footprints works towards IKEA’s own carbon positive goal by reducing the post-purchase footprint of their products, which it estimates accounts for 20% of its total carbon footprint.
This is one of several examples of evolving customer value, away from one-and-done interactions, towards participating in a network IKEA enables that benefits everyone. The key is generating forms of value that build human capacity and contribute to local prosperity.
Question 3: Can we, as leading businesses in our field, really do this without the broader ecosystem (government, financial, supply chain) community onboard?
Yes. The irony of this question is that, through a competitive lens, innovation speed is dubbed first mover’s advantage. Embedded in this question is uncertainty around how capitalism will adapt to societal and environmental pressures. Leaders need look no further than the 4,152 companies across 77 countries and 153 industries which are B-Corps: those meeting the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.
Businesses– particularly those with massive reach, brand, and infrastructure– have unique leverage to accelerate global (systemic) change through local impact. For example:
- Improving equity (e.g. through talent acquisition, dignified work, anti-corruption, investing in communities)
- Improving environmental impact, by reducing emissions, waste, water usage; implementing clean-up, reforestation, and much more.
- Empowering local economies (e.g. via investment, regenerative agriculture, circular supply chains)
- Adopting performance, measurement, and legal standards, holding suppliers to those standards
- Investing in key enabling technologies (e.g. carbon capture, smart buildings, renewables)
This question also speaks to the mindset shift: business action is not just about repentance through offsetting, given that industry practices account for the vast majority of emissions. It is about overcoming the lack (or fragmentation) of political will, meeting consumer demands, and galvanizing global collaboration through economic influence. Ultimately, it is about wielding the power of business and markets as a positive force that restores, renews, or revitalizes. One that no longer acts in spite of nature, but as nature.
This article originally appeared on KaleidoInsights.com