In a recent post we explained how sustainability is the current megatrend, but we did not give you any tips on how to deal with this information. In this post we’ll overview some of the advice provided in a recent Harvard Business Review article on the sustainability imperative and address how the sustainability imperative may impact your supply chain.
The first piece of advice given in the article is to learn from past megatrends. For example, in both the IT and quality business megatrends, the market leaders evolved through four principal stages of value creation:
- Cost, Risk, and Waste Reduction
Initially, companies focussed on reducing costs, and on risks that could drive costs up and waste that also unnecessarily increased costs.
- Performance Optimization of Product, Process, or Business Functions
In this stage, businesses moved from doing old things in new ways to doing new things in new ways. Processes were transformed using new tools and methodologies so that overall operations were more efficient and more cost effective.
- Integration of Innovative Approaches into Core Strategies
Innovation was no longer relegated to a black-ops skunkworks unit as entire business strategies were built around continuous product innovation.
- Value Proposition Differentiation through New Business Models
Innovation was extended throughout the enterprise and transformed the underlying business models.
So what do these classic stages of value creation mean to your organization, and, ultimately, your supply chain?
- Cost, Risk, and Waste Reduction
In this stage, a company will focus on outperforming competitors on regulatory compliance and environmental risk management. The company will implement trade manage solutions to keep abreast of current and upcoming regulations, switch to greener raw materials when a choice is available, and switch to suppliers with a lower carbon footprint.
- Performance Optimization of Product, Process, or Business Functions
In this stage, a company will optimize natural resource efficiency across the value chain. Products will be redesigned to remove environmentally harmful materials and reduce the environmental impact of the production process. Lean, Six Sigma, and related approaches will be applied where appropriate to minimize waste.
- Integration of Innovative Approaches into Core Strategies
In this stage, sustainable innovations become the source of new revenue and growth. For example, the organization will switch from manual paper processes to automated systems to improve efficiency, move to the utilization and creation of energy efficient products, and embrace frugal innovation to capture an increasing share of emerging markets.
- Value Proposition Differentiation through New Business Models
In this stage, a company will embrace a new business model to the point where it permeates the corporate brand and employee engagement. For example, a car manufacturer may switch its entire product line to hybrids.
And that is how your organization will begin to deal with the sustainability megatrend.