The digital era has triggered the commencement of a major transformation shift that will see business enter a new stage in its evolution. It has been here before but the scale of the change this time around makes this shift much more significant.
It will deliver some winners for those that choose to rise to the challenge but will also see many businesses become uncompetitive because they have chosen to keep their head in the past – with the hope that the same storybook will continue rewarding a philosophy of ‘volume and numbers’ that allowed many to grow and prosper through the industrial era.
As a society, we owe much to the industrial era. It delivered great wealth and prosperity to nations and created society’s middle classes; but the digital era shift will undo all that good work if society and its economic models still continue to think and execute with its same principles. The time for industrial age thinking and its business models that have served so well – are gone. To remain sustainable in this era shift and move with the evolution curve, it is time for a new ‘business equation’ that will allow for the emergence of new business model approaches that will contribute positively to shaping a new society model along with securing their economic resilience.
To begin this story of great change, it is important to understand what business sustainability means and how its thinking and application to the business world has been influenced and reshaped overtime.
SUSTAINABILITY AND WHAT IT MEANS
As the need for a broader thinking approach to remain competitive was realised and rewarded by a better return, the term ‘sustainability’ has entered into the business vocabulary. To some, it is associated with ‘green’ business initiatives and to others it is finding the right mix between remaining competitive and staying relevant to their customer base and associated influencers. In general terms it means to have a capacity to endure and have the ability and foresight to last overtime, i.e. to ingrain a position of resilience that allows a business to move with environmental effects and build through continuous renewal and position for revolutionary change when demanded.
In terms of the business equations that have shaped value creation through the changing of eras; sustainability has had different interpretations and will undergo another major shift as businesses structure to remain sustainable in the digital paradigm shift.
Let’s start by looking at what ‘sustainability’ meant for the first 25 years of the 20th century.
SUSTAINABILITY IN THE 20th CENTURY
This was a period of great growth and progress that is often referred to in many sources as the roaring twenties. It delivered many innovative advances in agriculture and across industry with technology making an entrance. Fulfilling financial needs was central to business and individuals driven by the ethos of the ‘survival of the fittest’- as it truly fitted the reality of the time. This was so because to remain sustainable, profit maximisation is what drove value creation until Henry Ford introduced the assembly line to take industry to its next level integrating the efficiencies of structure and repetitive processes – hence the beginning of real change and growth on a new era dimension.
As the century moved on, unions and legislation became part of the industry fabric and technology advances were increasing across the factory floor. The big shift in the business equation at this time was on the value of the worker and their well-being. No longer was it about maximising their output but more about a developmental and joint participation approach to keep the workforce motivated in creating value. Hence the business equation added the human relationship factor to its sustainability thinking. However, it soon began to show that in the changing business world an ‘all in’ approach wasn’t going to allow for sustainability to be achievable – as humans are emotional beings. As much as humans believe that they can make rational decisions when required, self-interest is always an influencing factor and sometimes good business decisions don’t have the interests of the majority at their heart to remain competitive. Thus as much as we don’t want to believe it, evidence shows that the human relationship factor couldn’t be the driving factor in determining the business equation for sustainability.
SUSTAINABILITY IN THE 20th CENTURY SHIFT to 21ST CENTURY
As the business environment evolved and got more demanding, the need for sustainability started to take on a new level of complexity and added the extra dimension of striving to achieve a business model that provided for a pathway to achieving ‘long-term’ sustainability. This made for an entrance of the ‘triple bottom line’ formula to shape strategy initiatives allowing for better control of risk; and obligations and opportunities presented around financial, social and environmental interests. This thinking has been further supplemented by the ‘shared-value’ management principle that works on the theory that businesses can play a key societal role in the way that it makes its money and still be competitive. This makes a lot of sense in a modern society that is competing for limited resources, seeking new growth opportunities while still contributing to creating a better world. Adhering to this management principle also allows for a pathway to long-term sustainability to be planned for and executed on by business – pushing it to look further than its short-term performance cycles.
Sounds good – but the digital era is further changing things and the intensity placed onto cycles with its reduced time and cost effects and the accelerated flow of resources across a globalised world are refocusing the sustainability equation that these principles are built around. ‘Shared value’ and ‘triple-bottom line’ only serve as a back story for the major shift that is now upon us. Hence, the equation that many businesses are modelling themselves on today; Economic Value plus Social Value equals Long-Term Sustainability; is now looking weaker and won’t necessarily provide for a pathway to achieving sustainability with a ‘long-term’ view.
SUSTAINABILITY IN THE DIGITAL ERA SHIFT
From undertaking research across the digital paradigm shift, it is becoming evident that the quest to achieve ‘long-term sustainability’ is no longer possible for business. The business environment is now heavily impacted by digital and technology effects that are combining to amplify the globalisation and mega-trend effects with the forces of connectivity and transparency. This has placed business onto a new dimension that will require them to operate beyond a ‘shared-value’ or ‘triple-bottom line’ management principle to remain competitive. Upon reflection, you would have to wonder if finding a pathway to achieving ‘long-term sustainability’ was ever possible and only really part of an aspiration that could never be grounded – rather than playing a part in formulating the business mission.
Therefore the digital era shift is seeing a new business equation form that will reshape the way management makes its decisions. Decision making will be based on a long-term drive to remain sustainable rather than seeking ‘long-term’ sustainability which is a very different approach to business management. The ‘set’ and ‘forget’ approach to achieving long-term sustainability has gone along with its established strategies and 20-year mission view. Value creation in the digital era shift has now moved to be an intelligence game that will be required to be played in the quest to remain sustainable.
The new business equation is demanding from a management perspective, but in its execution, will set a new course for business. It is going to depend upon who wants to play.