Thursday, November 17, 2016
Three Elements of Sustainable Growth
Long-term survival of any organization requires successful execution of strategies that secure or “lock-in” elements of sustainability. Unfortunately, not all organizations have made the distinction between sustainable strategies vs. short-term tactics that undermines sustainability. For example, the business model of Walmart is somewhat predicated on becoming the lowest cost provider of consumer products. In order to grow the business and make a profit, Walmart must continuously increase volumes. This approach to strategy is not sustainable since it chases a lower and lower profit margin while at the same time, Walmart must desperately try to make-up for the loss through higher volumes. A sustainable strategy tends to “lock-in” a company's future by doing things that don't exhaust the company, but set it apart from the competition. Hanging your strategy on easy to duplicate tactics such as lower costs usually doesn't work since the barriers to competitors are minimal.
Contrast this to a company that hangs its strategy on strong relationships with its customers, building loyalty and retaining existing customers. This “customer relationship” approach does a much better job of securing a company's long-term future. Therefore, elements of sustainability tend to be harder to execute on, but have much more lasting and enduring effects, adding to a company's long-term survivability.
“Today the world of business is inescapable – businesses are no longer just local providers of goods and services, but extend to vast corporate enterprises operating on a global scale. Whether businesses are small or large, public or private, for-profit or nonprofit, they each play a key role in supporting the global economy, and together they form the backbone of the modern world.” – How Business Works: A Graphic Guide to Success, Georgina Palffy, Senior Editor for DK Publishing
Another important element of sustainability is branding of the business. As competition increases, it becomes increasingly difficult to get the attention of the customer. Therefore, strategic branding is now very important to many businesses. Without name recognition in the marketplace, holding on to market share is considerably difficult.
Perhaps the single most important element of sustainability is the ability of the organization to change. An organization must adopt and move with changes in the marketplace. When a company can react and suddenly run in a different strategic direction without significant lead-time, then it has a much higher chance of prospering within the changing marketplace. For example, years ago Microsoft dismissed the internet as insignificant. However, once Microsoft realized that the internet was the future, the company adapted to marketplace changes and responded quickly by changing its overall strategy. What makes this remarkable is that Microsoft is no small company – it was able to shift suddenly, becoming a leader of internet technology. This type of fast strategic redirection is truly one of the key elements of sustainability. After all, strategy is conditional on other things happening. And if what you think doesn't happen, then you have to move quickly in a new direction.
“In a world where many of the most valuable products can be produced in infinite quantities at no additional cost, where money is lent by central banks at zero interest rates (or less), and where innovation is the only thing that provides sustainable value, talent is key.” – Fortune Magazine, March 15, 2016
This article has touched on three elements of sustainability – customer relationships, strategic branding, and the ability of the organization to change. Each organization is unique and elements of sustainability will vary from organization to organization. The common theme behind sustainability is to secure a future through strategies that move a company away from the competition; i.e. competitive advantages that are difficult for others to replicate. Too often companies make decisions that undermine their sustainability – cutting costs in areas like research, marketing, and product development or embracing strategies that are easy for competitors to duplicate. Sustainability is more about making “value” decisions that are right for all stakeholders over the long run and carefully observing trends and changes in the marketplace, giving the company insights into how it can outlast the competition.
“Value can be anything. It can be something you write, a link to an article or video you find interesting, an intriguing question you pose, or some other information you share that means something to you and to your life. When you share something that has value for you, it will create value for your crowd. Value can be something that makes people laugh, makes people cry, or makes people marvel at the mystery of life.” – MindSharing by Lior Zuref