September 6, 2012
Your Competitive Position Is Always Eroding
Note: I've been out on a leave of absence -- thanks to those who wondered why my blog and twitter feed had gone quiet. I'm back and have some new blogs coming in the next week...but I discovered that I never posted this one from HBR from the spring...
Whenever I share stories about "green" business strategy, someone inevitably asks me whether pursuing sustainability is against a company's best interests. The question is understandable, but unfortunately it's based on deep misconceptions about how businesses need to operate in a world of constant change.
Here's a concrete example: I often talk about how Xerox (along with all its printer-making peers) ishelping customers print less. As part of the fast-growing "managed print services" sector, the company shows organizations how to reduce the number of printers they use. The shift helps customers reduce their environmental impacts and costs by cutting back on paper, energy, and waste.
To me it's a clear story of serving customers better, but recently an executive at one company I was working with asked me, "Doesn't pursuing those green goals reduce Xerox's profits and eliminate jobs?"
There are a couple core answers to this question: First, as Xerox's CEO Ursula Burns replied when I asked her basically the same question, "Maybe, but someone else doing it is much worse." In short, if your company doesn't implement green, customer-friendly solutions, someone else will, and you'll be cannibalized from the outside rather than proactively innovating from within. But a second reason has become increasingly clear to me lately, and it is fundamentally important to the way that we understand sustainability in a business context.
I think many of us harbor a dangerous misconception (perhaps even a cognitive bias?) about the nature of "business as usual" — namely, that there is such a thing. It's taken as a given that when we're considering any change — in business or in our personal lives — that we compare it against a world where things stay as they are.
But the reality is that any company's competitive position is always eroding: the status quo is on a downward trend. As the great guru on innovation Clayton Christensen has said, we base our thinking on "an assumption that the status quo in the business will maintain itself into the future. You're comparing the upside generated by this innovation with the present state of affairs. But the present status quo...is on a declining trajectory of performance which will accelerate over time."
As Christensen's warning implies, this misconception is dangerous in strategic contexts because it makes us miscalculate the risks and rewards of preparing for different futures. But we have to consider — where will our customers be in five, fifteen, thirty years? How will our competition evolve to meet those new needs? How will systematic pressures like rising commodity and energy prices, or water and resource scarcity, affect our business and our customers? These are the kinds of questions we need to ask and plan for.
Consider the printing business again. Customer expectations are changing fast, along with competitive actions to meet them. Even without sustainability pressures, change would be the norm. Xerox and its brethren are always competing to offer the highest print quality in dots-per-inch or fastest printer speed. But the sustainability lens offers a deeper understanding of market forces. No printer company — whatever the dpi of their printers' output — would stand a chance against those who go beyond normal product innovation to the whole business model. The competitors that help customers reduce their footprint and cost will win. Seeing the business through a sustainability lens provides an increasingly critical way of understanding those ever-evolving market needs and future business models.
So, to circle back to answering the main question, in a competitive world of scarce, more expensive resources and rising customer demands, green goals are not at odds with a company's "best interest" — they're one in the same.
The companies that don't pursue deep, sustainability-driven innovation that challenges business models will become irrelevant. "Change or die" has always rung true, but now big-picture sustainability forces are creating conditions for much deeper, much faster changes to the status quo.
In the end, it's better to create the new, sustainable norm than to wait for it to crush you.
(This post first appeared at Harvard Business Online.)