Regardless if you believe that climate change is caused by human behaviors or caused by the natural warming and cooling of the planet. there are certain aspects to this topic that are bound to affect large and small businesses. There are intense weather patterns which are disruptive. Beyond climate change, there are questions about certain resources becoming more scarce such as oil, helium and some metals.
Certainty and uncertainty
The certainty is that particular parts of the world, specific countries even, are growing economically and therefore buying more stuff. This creates higher prices for commodities.
The uncertainty lies in how weather, costs and resources become unpredictable and affect the day to day operations of a business. The polar vortex experienced this winter in the US may have had a $5 billion effect. Natural disasters such as flooding, volcanic eruptions and typhoons can disrupt travel, supply lines and cause workers to slow down or stop production. While most businesses are looking at how the banks are functioning and other economic indicators, they may need to expand to include the environment(s) in which they operate.
Andrew Winston’s “Big Pivot”
Andrew Winston, author of The Big Pivot: Radically Practical Strategies for a Hotter, Scarcer, and More Open World, advocates a more “…profound change in strategy, operations, and business philosophy that will make organizations more resilient and help them create new value in a hotter, resource-scarce world.” This is the “Big Pivot.”
In his Harvard Business Review article, “Resilience in a Hotter World,” he explains that there are three types of resilience that organizations must put in place:
- Cost and risk resilience
- Revenue resilience
- Brand resilience
Pivot strategies: Vision, Valuation and Partners
These resiliencies are created when the pivot strategies are adhered to. According to Winston, companies who are more willing to make “…dramatic improvements in operational efficiency and cuts in material and energy use, waste, and carbon emissions, companies become much more flexible and, possibly, antifragile.” He also points out that this pivot is not based on corporate social responsibility. It is based on self-interest. As in, companies who uses renewable energy sources, seek ways to use less resources and increase trust in its relationships with consumers, competitors and communities are more likely to make a profit and thrive.
Winston’s perspective (in a nutshell)
Vision: Rather than simply looking at quarterly reports, companies need to take on a more long-term perspective that looks at years and not months. To do this, it is important to ask “heretical questions” regarding operational, manufacturing and/or economic growth.
Valuation: Not only should companies look at what will maximize their earnings by calculating what will create value. Winston points out that there are things that are much harder to assign a value to such as pollution or job creation. Valuation has to also include natural capital (things in the natural environment).
Partners: This is another area that Winston calls for radical differences. The partners seem like the natural go-to’s…governments, competitors and customers. The radical differences could be teaming up with competitors to lobby for certain environmental policies or partnering with suppliers and consumers to change potential or real systemic problems.
There are changes in the environment
There are still concerns about certain resources decreasing and natural disasters affecting business resilience. It is likely that most companies would say they desire sustainability. However, there is still a mindset that profit and making stockholders happy are more important. There may even be resistance from companies following through on the “Big Pivot” because it may seem too costly or counter-intuitive to source materials differently or advocate for certain environmental policies. Many countries look to their governments to make the necessary changes and individuals (companies or people) do not see how they can be part of that process.
What do you think? Is Andrew Winston advocating some kind of “pie in the sky” behavior or is his “Big Pivot” actually necessary for long term resilience and sustainability? Join us on the Twitter chat #KaizenBiz Friday, April 11, 2014 at 5pm GMT/12pm ET/9am PT and add your insights, opinions and expertise to the conversation.
To what degree have organizations had to change how they evaluate environmental events/storms?
Winston states that incremental changes are not enough. How would an organization make the radical thinking/behavioral leaps he is advocates?
If commodities are increasing in price and certain resources are dwindling, how would a manufacturer change consumer behavior?
Some of what Winston advocates seem high cost changes. How would you make the business case that the “Big Pivot” is smart move?