Michael Porter pays little attention to the organizational and leadership prerequisites that need to underpin strategy implementation. He failed to do so in his classical work on competitive strategy and also his work on Shared Value gives scant attention to these prerequisites. More broadly, Porter’s industry sector based theory of competitive differentiation may not be able to reveal the dominant logic of value capture in most new industries. This dominant logic is now recognized to be the way businesses develop core resources that are unique, rare, difficult to imitate, and by definition take a long time to grow and materialize. This is the resource-based view of the business as the source of sustained advantage, developed by Jay Barney, a strategy professor at Ohio State University. Core resources are Knowledge, Relationships, Capabilities and Business Purpose. “Business Purpose” as a strategic resource is a concept I explored with Robert Grant, a strategy professor at Bocconi University Milan. Our hypothesis is that one of the main reasons that the shareholder value movement had such detrimental effects on business was its disregard of business purpose as the cohesive binding commitments that sustain a business in the long term. We need to make this “hard” by more research. Stakeholders are of course key in generating strategic resources like knowledge, relationships and business purpose.
A further strategic resource is capability, more specifically “Dynamic Capability”, as identified by David Teece, building on the work by Gary Hamel and CK Prahalad. It is defined as the capability of the firm to purposefully creating, extending and modifying the resource base of the business, by building, integrating and reconfiguring internal and external competences to respond to rapidly changing environments and contexts. The challenge of sustainable development requires a shift in the dynamic capabilities of firms and it is beginning to show as we have explored in Part V.
Grasping Context requires understanding macro trends, understanding economic, political, and cultural globalisation processes, sensing maturity stages of issues, and scenario building. It presupposes intellectual curiosity and a rather eclectic mindset.
Embracing Complexity requires a deep awareness of systemic interdependencies, the ability to thrive in conditions of ambiguity, uncertainty and low agreement, and to act on emerging processes. It presupposes emotional intelligence, fast learning loops, comfort with the unknown, and mindfulness.
Maintaining Connectedness requires empathic engagement with multiple actors, building effective professional and social networks, and an ability to forge groundbreaking partnerships. It presupposes a capability for self awareness, deep dialogue, and boundary spanning in order to generate legitimacy and trust.
This will be elaborated on by Marc Jones and Matthew Gitsham in the Chaps. 28 and 31.
Teece, David; Pisano, Gary; Shuen, Amy (August 1997). “Dynamic Capabilities and Strategic Management” . Strategic Management Journal . 18 (7): 509–533.
How are the business knowledge, relationships, capabilities and purpose developed for a sustainable future?
Which dynamic capabilities will be required for innovation?
What organisational structures and processes are required to support a shift to a sustainable enterprise model?
What kind of leadership, decision-making and managerial frameworks would support this?
What are the implications for talent development and HRM, strategy development and implementation, performance management, organisational change management?
In a similar vein to the authors of Chap. 6, Marc Jones lists the following giga trends: climate change, energy depletion, the rise of the emerging economies, demographic shifts, fiscal crises, threats to the democratic state and the emergence of the permanent “crisis state”. He demonstrates how these trends are intertwined and reinforce each other. The implications for executive education may amount to a paradigm shift in cognitive and social skills development. The conventional ways to analyse the larger business context are no longer adequate. Single leaders cannot provide the capacity to grasp the complexity of the business context and horizons at an abstract level, connect with the merging issues at the grassroots level, and design strategies to keep business on a sustainable footing. Intensive teamwork and networking will need to be fostered in executive education.
In Chap. 21, Unilever’s Sustainable Living Plan strategy was presented as an outwardly ambitious if not iconoclastic attempt to decouple growth from negative impacts and instead to couple it to social and progress. In this chapter, the authors go deeper into the organisational characteristics and requirements of this strategy and the change management in relation to organisational structure, systems, processes and culture that is required, without which Unilever’s ambitious goals cannot be achieved. From the outset, the HR department was seen as being at the centre of strategy delivery by developing the managerial talents and getting the requisite managerial profiles on board. Organisationally, the hardware reconfiguration required new performance metrics and new core decision-making and business processes. The software reconfiguration required leadership alignment on the sustainability strategy reaching to the middle management levels, which are crucial for consistent and streamlined implementation. “Winning hearts and minds” at all organisational levels and in all regions of the world was seen as imperative, with experiential learning as a useful tool in achieving this. In a nutshell, the challenge is very simple, yet very difficult: how can the product managers of 250 branded products, who care about market share, product performance, brand performance, profitability, and return, equally care about reducing environmental footprints and enhancing social performance? The jury is still out as to whether the SLP will be viewed as a brilliantly conceived business strategy that ultimately failed because organisational alignment proved to be to insufficient; or whether it becomes a showcase for organisational change management and talent development for a sustainability-led strategic transformation. The stakes are huge for Paul Polman and the company alike.
This case offers an in-depth analysis of the organisational and management processes implemented by Novo Nordisk to underpin its sustainability strategy in a successful way. These processes are based on a vision and on values and commitments for financial, environmental and social responsibility. The company recognised through a number of controversies that the health care and pharmaceutical sector has a huge impact on society and is very sensitive to social issues and political backlashes in developed and in developing markets. Therefore, it needs the organisational built-in assurances that its business is conducted consistent with and as integral to its sustainability strategy. If sustainability is integral to business strategy, it needs to be integral to business operations in a consistent way, which can be monitored systematically. This is the Novo Nordisk Way of Management. A key management process is built around a cascading balanced scorecard integrating sustainability KPI’s with financial and operational objectives at all organisational levels. The management reporting process is based on the “triple bottom line” model, reporting financial, environmental and social performance concurrently, both internally and externally. Internal consultants or “facilitators” who audit operational units on meeting sustainability targets, provide on-site consulting and identify and communicate best practices to support continuous improvement.
This book contains a number of success stories of companies like IBM, Unilever, Umicore, Novo Nordisk, General Electric, and illy. They all have a few characteristics in common. First, their CEOs and top leadership are inspiring and committed to making their companies a force for good. They consider themselves public leaders instead of merely executive administrators. These leaders take a long term view and are committed to delivering value to shareholders and other stakeholders. The financial performance of their companies has been stable and above average in the industry sector over time. Second, these companies excel in human resource and talent development and maintain high quality processes in recruitment, training and development, career progression, organisational learning, and networking. As a consequence, they are able to attract the best talent available. Third, they are keeping a broad economic, social and political perspective in strategic processes and encourage intellectual curiosity and literacy beyond the traditional boundaries of business. Fourth, they are committed to continuous innovation by setting ambitious targets for business renewal from the top and allowing for experiments in the margins to encourage bottom up and lateral creativity. Fifth, they grasp sustainability issues as opportunities for profitable business investment growth, and business model transformations. In keeping with these observations, this chapter goes deeper into the requirements for new leadership and new talent for sustainable business.