When your business is subject to a constantly moving and tumbling horizon – when there are forces at work that you cannot predict or legislate for that impact upon your very survival – how do you build a resilient and flexible strategy that can carry you through?
Businesses must analyse their impact on the wider world before they are able to build a successful strategy for the long term.
The way that companies approach the job of strategic planning needs to change wholesale.
Every business faces the same tough challenges, including how to grow revenues and forward plan in a fast-changing world and an uncertain economy; how to anticipate the next generation of customer needs and how to maintain discipline on costs.
Yet too many companies adopt a short-sighted and narrow approach to strategic management. They focus on beating their competitors by matching their activities, developing similar products through incremental improvements and delivering value through the same old business models.
Such business models may have been sufficient when the average lifespan of an S&P 500 company was 61 years in 1958. The average lifespan of such a company today however, is just 18 years.
In the wake of Blockbuster, HMV, Jessops and other businesses that failed to adapt fast enough to new market dynamics, there has emerged a new way of doing things.
A new study by leading global corporate responsibility consultancy Corporate Citizenship promises boardrooms that powerful insights for innovation will be uncovered, enabling their businesses to thrive for years to come, if they align their strategies with their context.
The report, called Mastering Resilient Growth, which brings together the perspectives and ideas of several senior experts across Corporate Citizenship, warns that business does not exist in a vacuum.
“Context refers to the economic, social, political, technological and environmental issues that create business opportunities and risk,” says author of the report Richard Hardyment. “These factors have traditionally been considered as part of a limited risk assessment by most companies. But now there is a bigger opportunity.”
The Corporate Citizenship team contends that an analysis of relevant relationships, impacts and trends, when approached strategically and holistically, will help businesses weather the storms of unexpected regulation, wider economic fluctuations and almost constantly changing customer needs, fashions and desires.
The report challenges businesses to ‘map their context’ by understanding the complex interactions of its many markets and stakeholders, analysing the market forces and influences that have the potential to impact future success and integrate this thinking into business strategy.
It cites Danone, Vodafone and Unilever as businesses that have benefitted through new products which emerged from using similar approaches to Resilient Growth.
“By being more in-tune with the world and its expectations,” says Hardyment, “businesses benefit their stakeholders, society and the environment.
Business can be a powerful force for social good by applying their resources strategically so as to ensure long-term profi tability that is in step with society.”
So how exactly does ‘resilient growth’ work?
MAPPING THE CONTEXT
No business is an island. Invisible bonds shape the firm through a complex interaction of economic, social, political, technological and environmental trends.
Companies that want to be positioned for long-term success need to gain a holistic understanding of the relationships that shape their context. This should consist of:
1) Understanding the company’s complex interactions in its many markets, and with its many stakeholders.
2) Analysing the kinds of market forces and influences that have potential to impact business success today and in the future.
3) Identifying how to integrate this thinking into business strategy and planning to capture the most value and ensure long-term success.
There is a two-way interaction between the business and its context. Society creates costs and value for businesses and business creates value and costs for society. A deeper analysis of these relationships can provide a springboard for innovation.
Innovation With A Wide-Angle Lens
Innovation is essential to unlock the opportunities for resilient growth. The business context should be assessed holistically with a ‘wide angle lens’ that looks at a broad range of factors over multiple time scales, including 10, 20 and 30 years ahead. By stretching this frame of vision, companies can identify enduring opportunities that can be sustained for long-term success. Analysing the context can shed light on new angles for companies to innovate more creatively, reduce risks and build greater resilience.
At its heart, this process is about identifying and responding to previously unidentified, unarticulated or unmet needs through new products, services and business models. These often stem from an analysis of trends and impacts, and how the interdependencies between them could shape unexpected outcomes in the future.
In our paper ‘Future Business’ we outline some of the mega-trends from our Futures Database that companies should be preparing for. Once adapted to an individual company’s growth strategy, they can become extremely powerful if a business wants to shape the future in a different direction.
The opportunities are unique to each company.
They will depend on the specific context and company ambitions. No two interactions are the same and these issues vary from company to company as well as continent to continent.
The dynamic nature of the context means that new issues are always emerging. Forward-looking companies should seek to capture the emergent value before competitors do. But leading companies don’t just react to trends; they actively try to shape them to their advantage. “Companies wanting to redefine their markets do not just accept the future, they seek to change the rules of the game and transform systems and people to their advantage”, says Hardyment. Possible pull quote – “Companies wanting to redefine their markets do not just accept the future, they seek to change the rules of the game”.
Mastering Resilient Growth
Corporate Citizenship’s Mastering Resilient Growth framework helps businesses to quantify relevant impacts, identify new opportunities and innovate for the future. It provides clear steps to ensure that a company integrates the insights that stem from the innovation process into a profitable and enduring strategy for long-term success.
The first stage of Insights typically involves:
- Understanding the current and future issues in the context that are unique to your business
- Mapping the most relevant issues and impacts for your company, both value and costs
- Horizon scanning for medium to longterm risks and opportunities that have not so far been capitalised on
- Engaging stakeholders to offer fresh perspectives and shed light on new trends, expectations and ideas.
Innovation harnesses the insights to identify the new strategy required to deliver value for the business. We find that this stage is often the most challenging, but also inspiring. The outcomes can be a new venture, or a strategy for the entire business. The best approaches deliver value through fresh ways of thinking, embrace new business models, and manage and minimise risk.
A Plan commits the company to a pathway for growth, detailing how this value will be captured and on what timescales.
A detailed action plan serves to guide management on the implementation of the strategy. Future research to be published in May 2014 will outline our tools in each of these areas in more detail.
The happy by-products of a resilient strategy
By being more in-tune with the world and its expectations, businesses benefit their stakeholders, society and the environment along the way.
We find that “being seen” to be “doing good” only for reputational reasons is typically less profitable than identifying the right actions that can help the business to succeed in the long term.
We tell our clients that social benefits and stronger reputations should not be thought of as the goals of such a strategy, but a supporting side-act, the happy byproduct of a sustained focus on commercial success.
Ways of Working for the Long-Term
Effective strategy requires companies to secure and sustain competitive advantage. Resilient Growth is a way of thinking that can unlock value through looking at the world in a new way. In times of change, it can provide the fresh insights needed to head off a new competitor, increase revenues and sustain growth into the future. It provides a new language and new thinking for business.
Two new ways of thinking are required to fully realise the benefits of Resilient Growth.
Firstly, interdependencies need to be really understood. No business is an island, but also no issue exists on its own. Trends in the context interact and shape one and other. How might consumer expectations shape regulation? How could a new technology influence the supply chain? The most profitable insights often come from looking holistically, not at single issues in isolation.
Secondly, new ways of working through collaboration can bring about bigger benefits for all. Collaboration begins through discussion with the outside world at the Insights stage. Businesses often don’t come up with great ideas by themselves.
Partnership can also extend to linking up with the right supplier, joint venture partner or non-profit at the implementation stage. This is because effective partnership can provide fresh insights, reduce costs to the business, scale an initiative more rapidly and increase the size of the pie for all.
Applying the ideas in practice is no easy task. Decision-making requires data; but not everything can be accurately measured. Managers need to be comfortable dealing with uncertainty. Trade-offs may be needed. No solution can be perfect and sometimes five steps forward requires three back. All this means that the manager’s mind-set may need to change for Resilient Growth strategies to be effective.
Resilient Growth means an interdependent and mutually beneficial relationship between the company and society. The prize is a business that is more innovative and forward-thinking than the competition; a firm that anticipates new customer needs, and experiences fewer surprises in the market.
But most of all, Resilient Growth ensures that the company can sustain its performance year after year.
By fine-tuning the business to be in sync with the outside world, the company can thrive for years to come.
