Executive Leadership in Sustainable Business Development- Valutrics
The rapid spread of information and knowledge, the increasing expectations of customers and stakeholders, hyper-competition, the dramatically increased dependence on supply networks, and the breathtaking speed of change are making Sustainable Business Development a critical management concept. The implications of change are forcing corporate leaders to think more broadly about their roles and responsibilities. Corporations are becoming more connected with their customers, stakeholders, suppliers, distributors,and other partners. They are moving from owning and managing physical resources within the corporate umbrella to developing capabilities across the whole enterprise and motivating people engaged in any way with the corporation’s strategies and operations to be creative and innovative, and to produce superior and sustainable performance.
Staying ahead of changes in the business environment is a monumental challenge in the twenty-first century. Executives normally formulate the vision of the corporation and communicate it throughout the organization using every means possible to reinforce the message. Sustainable Business Development depends on executive leadership’s acceptance of its principles and commitment to integrating those beliefs into organizational culture and beyond into the whole enterprise.
Executive leadership has to devote its time and effort to the whole and not just to the parts. Often executive attention is focused on optimizing the present, while the implications of innovations and change are considered secondarily. While it is difficult to generalize on what executives should be doing, it is clear that they must articulate the vision for the future, select the strategies that will be used to pursue success, and ensure that the organization has the resources and capabilities it needs to do so. It is, to say the least, a demanding challenge.
Executives should have broad exposure and knowledge about every facet of the enterprise, they should be generalists with multiple skills and talents in many fields. They have to make decisions that improve the prospects of the enterprise at a rate greater than that of its peers or industry competitors. To be world class, a corporation must be in the top 10 percent of the competition, exceeding 90 percent of comparable corporations.
Executives and corporate management are the prime drivers of corporate strategies and the architects of the enterprise’s future positions. While many executives are concerned about the financial status of their corporations, the paradigm of ‘‘inventing the future’’ demands a more dynamic approach toward discovering opportunities and exploiting them to create sustainable competitive advantage. It demands exceptional management skills to realize the objectives of the short term without sacrificing the prospects for the future. Indeed, Sustainable Business Development is actually about achieving outstanding results in both the short and the long term.
In order to achieve success in a global business environment, executives and corporate management have to create management systems that include the cradle-to-grave aspects of the multidimensional enterprise (supply networks, customers, users, competitors, related industries, and afterlife entities). This includes integrating the value networks of customers, partners, allies, stakeholders, and government agencies and the internal structures and relationships for performing activities and meeting expectations. Executives’ work is about integration, innovation, and leadership.
Executives have to go beyond creating the strategic intent of the corporation and structuring organizational capability. They must promote change, for dramatic improvements in performance require substantial change and a commitment to ongoing change. While executives can motivate people to improve performance in the prevailing situation, they have to go further and inspire people to embrace change and to become part of the change process.
They must establish change as the norm, and work to keep people from just accepting the status quo, encouraging them to move toward a sustainable future. This requires an interactive management style that allows people to participate in strategic and tactical decisions. People at each level must be party to discussions and be able to contribute to solutions. Moreover, executives must participate in the processes with people to move and transform the enterprise. Active participation of the executive ranks provides the evidence of leadership and commitment and encourages managers and employees to reach beyond normal expectations and seek the extraordinary. Only then will they want to become part of the vision.
Leading this kind of continual change involves seeking new opportunities from every vantage point. Success comes through cooperation and collaboration, and builds the foundation and structure for sustainable competitive advantages. Success involves achieving that delicate balance between shortterm results and positioning the corporation for even greater accomplishments and outcomes in the future. For instance, the theory of profit maximization is fundamentally a narrow, and possibly a limiting, perspective because it addresses only a single perspective – profits: it values profits above all else. While profits are important to the long-term success of a corporation, they do not guarantee success.
Often maximizing short-term profitability affects long-term positioning and future success. Philip Fisher, financial consultant and entrepreneur, believed that successful corporations had to balance both short-term and the longterm prospects. His philosophy on what contributed to above-average performance formed the basis for Warren Buffett’s management and financial tenets. Fisher believed in sustained growth and profitability. He noted that: Many companies have adequate growth prospects from existing lines of products and services that will sustain these companies for several years, but few have policies in place to ensure consistent gains for ten to twenty years. Management must have a viable policy for attaining these ends with all of the willingness tosubordinate immediate profits for the long-range gains that this concept requires. Subordinating immediate profits should not be confused with sacrificing immediate profits. The above-average manager simultaneously has the ability to implement the company’s long-range plans while focusing on the daily operations of the company.
Fisher’s philosophy leads to one of the most important principles of strategic management. Management is not about maximizing profits or shareholder value in the short term, because that may be relatively easy to do if the corporation is willing to sacrifice its future; nor is management about investing everything into long-term prospects: it may be impossible to survive the cash flow constraints or the risks and uncertainties of making investments without seeming rewards. Rather, management is the art and science of achieving appropriate results, including financial rewards, in the short term and investing and being prepared to take advantage of opportunities in the long term, and in achieving sustainable success. Using Fisher’s language, ‘‘above-average’’ companies, with their management focus on both, and are able to achieve both. It is not an ‘‘either/or’’ proposition.
Great management has the capacity to obtain extraordinary rewards during the immediate term and sustain such rewards over the long term.
Finally, leadership must provide mechanisms for information to flow throughout the enterprise and facilitate broad understanding. Sustainable Business Development requires that professionals and practitioners operate with full information.
Leadership must promote both internal and external relationships that will increase knowledge and perspective. Most importantly, leadership must ensure that problems and solutions are discussed openly without fear of retribution.
Leading change in Sustainable Business Development
From a business perspective, ongoing change may be the greatest opportunity of the twenty-first century. While the most significant management constructs of the twentieth century, including strategic management, technological innovation, IPD, TQM, mass customization, lean production, and transformational leadership, are still prevalent and gaining significance, many corporations have found that the best way to keep up is to actually outpace changes in the business environment and become an agent of change. Setting the pace of change and influencing the standards and expectations of the future are prime ways to achieve sustainable positions and outcomes. The old notions of reacting to change or anticipating changes are defensive, and lead to vulnerabilities as conditions and trends rapidly change.
But confronting rapid change requires agility and flexibility, along with the ability to implement strategies quickly and at the same time eliminate the negative aspects of past decisions as quickly as possible. Many global corporations have legacy issues that require significant resources to mitigate, but provide no benefits for future opportunities. The best examples are the numerous remediation projects that corporations have undertaken to cleanup wastes from past operations. Investments in remedying the effects of the Exxon Valdez tanker accident or the Love Canal incident consumed capital without tangible benefits to the corporation. Such problems reduce the resources available to meet the needs of the future.
Agility and flexibility enable corporations to embrace change. Agility is the ability to move quickly in new directions, and flexibility means being able to transform existing core capabilities into new ones that are in sync with new realities: agile corporations are more likely to encourage change and discover new opportunities than to think about threats. Agility depends upon the skills, knowledge, and processes of the organization. It is also a function of the organization’s ability and willingness to learn. Rapid change necessitates rapid learning and there must be willingness to move from the old to the new.
Most agile corporations have flexible management systems that can quickly accommodate global change and exploit opportunities. These are the corporations that can aggressively position themselves to preempt the business environment and meet new needs. Eight of the key processes that facilitate rapid response are:
• Global surveillance of the business environment: Training people to think globally, to recognize opportunities, and to embrace the changing business environment enables corporations to discover opportunities wherever they may be.
• Reinventing strategic direction and leadership: Change necessitates a continuous reassessment of strategic direction and the development of new strategies to meet rapidly changing conditions. Such strategic changes require organizational constructs that are fluid enough to be reconfigured on an ongoing basis. Rapid strategic development is essential for keeping pace with reality, as is the ongoing development of competent leaders and capable people. Adept leadership is often the scarce resource.
• Cultural perspectives on change: Expertise, knowledge, and capabilities are subject to change. Organizations have to invest in resources and capabilities to acquire new knowledge, methods, and practices in order to lead rather than follow. The organization must be willing to replace the old with the new even when the old has world-class core competencies. Leadership, trust, and inspiration win consensus and buy-in.
• Change management prototypes: Having a flexible means to assess the advantages and disadvantages of change and to determine the most appropriate courses of action accelerates decision-making. Prototype processes allow management to understand the implications of change. This is most critical for organizational design and new structures that involve uncertainties: prototypes can provide feedback on a small scale before changes are instituted more broadly.
• Organizational learning process: The strengths of core competencies and capabilities automatically decline over time as others emulate them, reducing powerful advantages to commonplace abilities. Corporations must begin building new organizational competencies and capabilities before they are needed. They must work diligently to educate and train people to keep ahead of the pack.
• Innovation management: Innovation provides the means to create a new reality. It involves converting knowledge, learning, capabilities, and insights into valuable and creative new perspectives, products, and productive outcomes. Innovation is more than change: it is making incremental and/or radical improvements to systems, technologies, products, processes, and practices.
• Building strategic partnerships: Enhancing strategic partnerships and relationships across the enterprise is one of the most important actions of global corporations. Global reach requires multifaceted, diverse resources that are often best provided by outside entities. Partnerships facilitate rapid change by eliminating the need to invest in new strategic assets.
• Supply network development: Supply networks are crucial to meeting customer and stakeholder needs for new products and processes without providing all the necessary resources from within. Developing suppliers and distribution channels that have quality capabilities and values and the necessary sense of urgency is vital to creating the physical and virtual reality needed.
The most important processes of a corporation are those that prepare it for the future. Historically, companies have focused on the capabilities of the product delivery system. The ability to change in response to the changing business environment, however, requires processes that facilitate strategic thinking, business analysis, and sound decision-making. Like a rapid deployment of military forces that are specially trained to be able to move toward many different targets depending upon the situation, these processes must be flexible and able to function in diverse situations.
The use of management systems, rather than organizational structure, to execute strategies is central to a corporation’s agility and flexibility. It is easier and quicker to change the management system than it is to reorganize the corporate structure. Teams and other flexible organizational constructs allow the corporation to meet the challenges of change without losing time to determine ‘‘superior–subordinate’’ relationships, job titles and descriptions, and other structural aspects that can hinder change. Moreover, the management system can often be changed to accommodate the new requirements without threatening the stability of the organization.
Agile corporations are dedicated to change, creativity, and innovation.
They partner with external entities that share the same values and seek improvements at every level of the enterprise. They have a collective mindset that welcomes opportunities and challenges.
At the corporate management level, the key elements are discovering opportunities and creating insights about the future.
At the strategic management level, they are analysis and leading change, at the product delivery level, they are creating stability and achieving success. The processes within the corporate management level are the most critical because they focus on the future. By concentrating on positioning and reinventing the potential and promise of the corporation, they develop a new vision for the future. They identify opportunities and lead to initiatives that implement innovations and renew corporate strategies. For instance, based on surveillance of the global business environment, corporate management may redirect the corporation toward more sustainable activities or processes. BP plc is doing just that by building more renewable energy assets . The most important requirements for this kind of change are generating acceptance within the corporate culture and building relationships with the value and supply networks that support sustainable development.
Strategic leadership
Sustainable Business Development is based on the premise that corporations can create superior performance and create extraordinary value. Strategic leadership sets the stage for success. It determines the plans and programs, provides the resources and capabilities, and ensures that the courses of action are appropriate and executed properly. Leading change of this kind means energizing the organization to operate at the highest level of performance. This includes educating people and facilitating their contribution to the corporation; linking people together through an interactive system of relationships is what results in the positive transformation of inputs to outputs.
Leadership also involves translating objectives, information, analysis, communication, interactions, and feedback into a comprehensive understanding of reality for achieving exceptional outcomes. This kind of leadership exemplifies its commitment to positive transformation by putting its principles into action through its decisions, by ‘‘Walking the Talk.’’ Executives must demonstrate this kind of commitment to Sustainable Business Development if they hope to energize their employees and management teams and build credibility in the external business environment. And they must demonstrate this commitment continuously.
Management used the 2002 GRI Guidelines in preparing the 2003 Sustainability Report. The goal is to provide transparency and dialog within external individuals and entities. However, it is clear that, at BP, economic performance and the creation of value for shareholders enjoy more emphasis than they would in a more balanced approach.
This kind of committed leadership affects six key characteristics in an organization:
• Productivity: The organization and its people are able to carry out the mission and achieve their objectives effectively using resources and capabilities that are adequate to the task.
• Effectiveness: Strategic thinking and logic is predicated on the concept of selecting the right way to achieve results. Effectiveness improves when the best processes, practices, and methods are used.
• Efficiency: The use of resources and the consumption of time and money generate long-term value and represent the precise ratio of inputs to outputs that minimizes economic and environmental waste. Lean business practices focus on waste minimization and effective utilization of resources.
• Ability to satisfy: Outcomes result in more than satisfactory benefits and rewards for every participant, including employees, partners, customers, stakeholders, and shareholders. Such benefits are both tangible (money, promotion, value, products, etc.) and intangible (status, prestige, reduction in risks, etc.).
• Innovativeness: People within the organization think about new solutions and how to create and execute new technologies, products, processes, and practices to enrich the future and achieve more with less.
• Agility: The organization is ready to meet the needs and requirements of the future and change accordingly. There is no such thing as the status quo: either the organization is moving ahead or it is falling behind. The former is exciting, but takes hard work; the latter is the pathway to oblivion.
People perform because they are excited about the activities, the process, and the results.For long-term programs,the work itself has to be satisfying so that people can enjoy what they are doing on a daily, monthly, and yearly basis. If it takes years or decades to accomplish the end-results, the process for getting there has to be fulfilling. Good leaders know this and are able to draw the best out of people on both short- and long-term efforts.