Are you using disruptive forces to your advantage?
Five transformational trends and the possibilities for your organization's marketing advantage
by Paul Pierroz
Strategy | Sustainability | Marketing
August 11, 2021 - With business life expectancy shrinking, leaders have become very aware of the gathering forces that can disrupt their market and demand for their product and service offering. The opposite is true as well. With an increasing churn in businesses, you can develop and expand your influence across an ecosystem as the key players are always on a unstable footing. There is opportunity, however it takes a great deal of insight and work to remain viable over the long run.
PROTECT YOUR LONG-TERM VIABILITY
Why have an organization's sustainability profile and purpose become so crucial? And why are leaders rushing to reset their organization's purpose as a result? It likely has as much to do with the risks around their long-term viability and performance as anything else.
And what are the core attributes of long-term performance? Let's turn to McKinsey & Company's well-regarded Organizational Health Index (OHI) for an indication. The index links organizational health and performance assessment to certain high-performance characteristics. (1) These consist of nine elements, including leadership, innovation, external orientation, and capability. However, these characteristics can be rolled up into three essentials – the ability to set direction, the ability to execute plans against that direction, and continuous organizational renewal. Their work demonstrates that organizations ranked in the top quartile of the OHI are twice as likely to outperform their peers (based on the EBITDA/sales percentage’s financial measure) than the bottom quartile of the OHI. The organizations likely to succeed over the long run experience negative disruption more sparingly, execute on their core strategies, and adapt and renew as change occurs.
So, if this is the path to long-term viability, can we use it as the primary definition for sustainability? What does this mean in terms of corporate social responsibility (CSR) and environmental, social, and governance (ESG), two terms we often use as a stand-in for sustainability?
This definition means that other factors related to an organization’s performance and attributes may supersede or carry equal weighting to ESG used in more conventional definitions of sustainability. Limiting ecological harm may be a prerequisite for sustainable operations in some cases; however, it encourages a much broader perspective than this.
Sustainability in this context and finding your purpose as an organization are linked; that the drivers for creating or challenging your organization’s purpose emanate from requirements, threats, and opportunities for long-term organizational health. And, if we consider the narrowing average lifespan of organizations due to the pace of disruption, you have greater urgency than ever to press on.
KNOW THE FORCES THAT TRANSFORM
So, let’s look at the factors involved in actually challenging your viability. Any one of these could be responsible for changing your business from beneath you. It stands to reason that a thoughtful exercise to establish or reset your purpose and role in the world must consider what is happening in a broader global context. Understanding the macro trends and determining the resultant threats and possibilities they create can form part of your marketing advantage; however, you must be aware of the pressure points.
Each sector, industry, and organization has a unique set of disruptive forces acting on it at any one time. It would be impossible to present a full menu here. However, let’s do a quick tour of some of the trends across five key areas.
1. Information management: We have seen advances in the development and proliferation of high-speed computing, data processing, user-friendly graphics and devices, and less expensive, more reliable connectivity, transmission, and storage solutions. Connectivity developments have moved us to real-time and predictive analytics, where meaningful information and options are provided directly to decision-makers. Innovative digital products, processes, and digital solutions often enhance or replace their traditional counterparts.
2. Industrial technology: With robotics, drones and automated operations, remote process and condition monitoring, machine learning, and artificial intelligence, we have improved production and service efficiency as well as worker safety. Technology has made renewable power, long-life batteries and fuel cells, lightweight and recycled materials, packaging, and 3-D printing available on a scale not previously seen. We have experienced the benefits of intelligent networks, high-speed infrastructure, and efficient land and air transportation systems.
3. Environmental management: Progress has been made in resource conservation, recycling and composting, waste elimination, and pollution controls. Our energy demands are increasingly being addressed by wind and solar renewables, biofuels, nuclear energy, electrification, hydrogen development, natural gas, and LNG. Carbon capture and transport, industrial and residential energy efficiency, and effective heating and cooling systems have also helped to reduce our impact. Developments in desalination, as well as water treatment, storage, and transport, have supported increased supply and access to clean water.
4. Social development: Social outcomes have been improved by rapid urbanization, migration and mobility, medical treatments and designer pharmaceuticals, virtual health and diagnostics, and remote education. We have also moved aging populations, inclusion and diversity, freedom and human rights, data and privacy protections, and social media to the forefront of political conversations and policymaking. Our aspirations in this regard have influenced social norms and preferences, legislation and regulation, consumption patterns, and buying behaviors.
5. Economic development: Some of the trends in this area are higher degrees of competition, trade agreements and tariffs, fair trade, industry regulation, national and regional security, economic sanctions, living wages and standards, alternative currencies, taxation policy, and micro-financing. The expansion of the middle class, large-scale retail, e-commerce, and logistics developments have reshaped where and how business is done.
As you read through these descriptions, I expect that you recognized a few that have already impacted your organization and may even challenge its potential viability over the long run.
A final comment on these macro trends as they relate to purpose. Your effort to establish or reset your purpose is a clear signal to stakeholders that you are serious about communicating your reason for operating and your contribution to society. If you are serious about sustainability, you should take the time to understand and address your disruptive forces.
(1) This information comes from the McKinsey & Company website, McKinsey Quarterly, Chris Gagnon, Elizabeth John and Rob Theunissen, "Organizational health: A fast track to performance improvement," September 7, 2017, https://www.mckinsey.com/business-functions/organization/our-insights/organizational-health-a-fast-track-to-performance