Leading Sustainable Change: An Organizational Perspective PDF
Preview Leading Sustainable Change: An Organizational Perspective
Leading Sustainable Change Leading Sustainable Change An Organizational Perspective Edited by Rebecca Henderson, Ranjay Gulati, and Michael Tushman 1 3 GreatClarendonStreet,Oxford,OX26DP, UnitedKingdom OxfordUniversityPressisadepartmentoftheUniversityofOxford. ItfurtherstheUniversity’sobjectiveofexcellenceinresearch,scholarship, andeducationbypublishingworldwide.Oxfordisaregisteredtrademarkof OxfordUniversityPressintheUKandincertainothercountries #OxfordUniversityPress2015 Themoralrightsoftheauthorshavebeenasserted FirstEditionpublishedin2015 Impression:1 Allrightsreserved.Nopartofthispublicationmaybereproduced,storedin aretrievalsystem,ortransmitted,inanyformorbyanymeans,withoutthe priorpermissioninwritingofOxfordUniversityPress,orasexpresslypermitted bylaw,bylicenceorundertermsagreedwiththeappropriatereprographics rightsorganization.Enquiriesconcerningreproductionoutsidethescopeofthe aboveshouldbesenttotheRightsDepartment,OxfordUniversityPress,atthe addressabove Youmustnotcirculatethisworkinanyotherform andyoumustimposethissameconditiononanyacquirer PublishedintheUnitedStatesofAmericabyOxfordUniversityPress 198MadisonAvenue,NewYork,NY10016,UnitedStatesofAmerica BritishLibraryCataloguinginPublicationData Dataavailable LibraryofCongressControlNumber:2014948251 ISBN 978–0–19–870407–2 PrintedandboundinGreatBritainby CPIGroup(UK)Ltd,Croydon,CR04YY LinkstothirdpartywebsitesareprovidedbyOxfordingoodfaithand forinformationonly.Oxforddisclaimsanyresponsibilityforthematerials containedinanythirdpartywebsitereferencedinthiswork. n FOREWORD David Jones The world often changes suddenly and dramatically under our noses almost withoutusbeingawareofitandquitequicklythingsareseenasnormalthat upuntilthenwerenot. When I was CEO of an advertising agency in Australia in the 1990s, we launchedadigitalagencyinsidetheadvertisingagency.Thereactionofmost peopleatthetimewas,“Whyareyoudoingthat?You’renotanITorsoftware business.”Today,noonewouldeveradmittohavingsaidthat.Itwasasimilar thingfiveorsixyearsagowithsocialmedia,whichalotofpeopledismissedas a childish fad. And I’d argue that for many people it’s the same today with socialresponsibilityinbusiness. Now,I’mnotclaimingtohavesomemagiccrystalballthatseesthefuture (I freely admit that in 2008 I told the person who was teaching me about TwitterthatIwasonlydoingitbecauseIhadtoandthatitwouldnevercatch on),butthemovementtowardssociallyresponsiblebusinessisirrevocable.It isstartingtotrulygainmomentumandwecannomoreturnitbackorslowit downthanKingCanutecouldholdbackthetide. Formany businesses,thepathtobeingmoresociallyresponsibleisnotan easy one and it is important to understand the reasons behind why it has becometoday’sbusinessimperative. The new world of business We are at an inflection point in the world, in the wake of a financial crisis duringwhichtheworldsawalltooclearlythattheruthlesspursuitofprofitat allcostsledustothebrinkofthetotalcollapseoftheglobalfinancialsystem. And in my opinion, we are in the midst of a revolution that is every bit as significant as the Industrial Revolution; but while the Industrial Revolution empowered corporations, the digital and social revolution is empowering people. Through the power of social media, they can and do reward those whoactresponsiblyandpunishthosewhodon’t. Two key groups are driving the movement to more responsible business, thefirstofwhichare‘prosumers.’‘Prosumer’isatermoriginallycoinedbythe futurologistAlvinTofflerin1980todescribetheproducer-consumerbuthas vi FOREWORD now evolved to define people who are more proactive, more influential, and morecynicalofmarketingandwhonow,duetosocialmedia,holdthepower. Thesecondandmostimportantgrouparethebrilliantyoungergeneration, often called millennials. From my work with One Young World—the global youth organization and charity that I co-founded with Kate Robertson, described by CNN as “the young Davos”—I know that this generation is different from any that have gone before. Technology has made them the most informed, the most responsible, and the most powerful generation of youngadultsthathaseverexisted.Theyunderstandbetterthananyonehowto useandleveragethepowerofdigitalandsocialmediatoeffectpositivechange. They will not buy products from companies that don’t behave to the standards they set, nor will they work for them. Just ask the banks today how hard it is to recruit the best young talent. This generation isn’t a generation of naïve idealists. They understand that business has to make money—there is a hugeunemployment problem facing them in many coun- triesandtheyclearlyseethebenefitsofgrowth—buttheybelievebusinesscan and should make money in the right way. Not only that, they are the ones creatingthenewtoolsthatareenablinganddrivingchange. And business dramatically needs to change. Havas’s recent Meaningful Brands global study of 130,000 people found that only 20 percent of brands areseentomeaningfully,positivelyimpactpeople’slivesandthatthemajority of people worldwide wouldn’t care if 73 percent of brands disappeared tomorrow. Just think about that for a moment; the vast majority of brands intheworldcoulddisappeartomorrowandpeoplewouldn’tcare. The Edelman Trust Barometer 2014 found that just one in five people (21 percent) trust business leaders to make ethical and moral decisions, and a similarly low number (20 percent) trust them to tell the truth regardless of howcomplexorunpopularitis. Notagreatpositiontobein,andthefactthesamestudyshowspeopleare evenlessfavorableaboutgovernmentsonlytingestheissuewithirony,given thatitisthegovernmentsthattheyexpecttoregulatebusinesses. The age of damage We have now entered headlong into what I call the Age of Damage, an era where businesses that are not socially responsible will suffer damage as a result. The most successful businesses will increasingly be those that demon- stratetheabilitytoaddvalueinasociallyresponsibleway. Itisaworldofradicaltransparency.FromBPtoNewsInternational,from bankers’bonusestotaxevasion,peoplewillsanctionyouifyoubehaveinthe wrong way. There is a new example almost every day of a company that is being held to account by ordinary people using the power of social media— just ask JP Morgan, Starbucks, Barilla, Abercrombie & Fitch, Benetton, or FOREWORD vii Fedex. Business can’t avoid this: social media has taken corporate social responsibilityoutofthesiloandputitfirmlyintheP&Lstatement. It’snottheolddefinitionof“businessasusual,”thengivingsomethingaway attheendoftheyearoutofguilt,norisitaboutsomenice,siloed“Corporate SocialResponsibility”activity.Itmeansputtingsocialresponsibilityatthevery heart of business strategy as the Unilevers, Wholefoods, TOMS, and Patago- niasoftheworldhave. In this era, the most successful businesses will increasingly be those that demonstratetheabilitytoleadandaddvalueinasociallyresponsibleway.The newpriceofdoingwellwillbedoinggood. Wealreadyknowwhatdoingthewrongthingcanleadto,fromBP,which inthewakeof theDeepwaterHorizondisasterwasfinedarecord amountof US $4.5bn, charged with 14 criminal offences, and two employees with manslaughter, to News International forced to axe the News of the World and to a single disgruntled former Goldman Sachs employee publishing his resignation letter which promptly wiped US $2bn off the company’s market cap—and we will see many more examples of the cost of not doing the right thinginthisera. But therewillalsobe manywinners; those that canembracetheopen and collaborativeworldarewellplaced.OpenbusinessmodelssuchasWikipedia, Facebook,Instagram,andKickstarterhavealreadybeenhugelysuccessful.But thebigopportunityforthatsector,andkeytoavoidingitbeingseenasthenew WallStreet,isthat theydemonstrate thata techbusiness canhave apurpose andbesociallyresponsible. Power has changed Partofthechangeinbusinesshasbeendrivenbythefactthattheverynature ofpowerhaschangedandevolved.ThisissomethingHenryTimmstalksvery eloquentlyabout.Todaypeoplewhoarethemostinfluentialandpowerfulare theoneswhosharethemost,ratherthantheoneswhotrytokeepcontroland closedoors. Whetheryoulikethisnewworldornot,youcannotoptoutofit.Everything is now completely open; it’s “always on,” with no separation between public TableF.1 Oldpower Newpower Closed Open Top-down Bottom-up Offtherecord Radicaltransparency Nocomment Alwayson DiscretechannelreputationsCorporations OnereputationacrosseverythingPeople viii FOREWORD and private, between customers and shareholders, or between internal and external.The“top-down”worldofcommandandcontrolofthepastnolonger worksandweallhavetomovetoamorecollaborativeapproach. It’s not all bad news though—far from it. Businesses also get rewarded for their good behavior, and for those excited about the change there is a big opportunity to out-behave the competition. There are some real stars emer- ging whounderstand that success willcome from behavingdifferently in the future—thosethathaveplacedresponsibilityanddoingtherightthingatthe coreoftheirbusinessmodels. The new model: doing good and doing well Forexample,theclothingcompanyPatagoniahasanoverarchingmessageof using less and making things that last. Their Common Threads project involved creating a channel on eBay to sell second-hand Patagonia clothing. Patagoniaranacampaignstatingthatbuyingsecond-handclothingwasmuch more socially responsible than buying something new. Similarly, it has a refreshingly honest, transparent, and socially responsible way of openly talk- ingaboutthelevelsoftoxicchemicalsinitsproductsandwhattheyaredoing about it. For many businesses, the instinct would have been to hide or gloss overinformationlikethis,butwhatPatagoniaunderstandsisthatpeopleare notlookingforperfection,theyarelookingforhonesty.Anditisperhapsnot surprising that in their video describing this approach they talk about how “it added credibility to the company”—a company already probably seen as themostresponsibleclothingcompanyintheUSA. TOMS is another great example of a company that totally understands today’s world. Alongside the highly successful and pioneering one-for-one model—whereforeachpairofshoesboughttheygiveonetoapoorpersonin need—TOMS launched TOMS Marketplace, using the reach of its huge networktoshowcaseandselltheworkofsocialentrepreneursallaroundthe world.Anditslatestventureintocoffee,wherethepurchaseofabagofTOMS coffee pays for water for one person for a week, looks set to be equally successful. I was recently at the airport queuing for a flight and the young girl in the queueinfrontofmehadabatteredoldTOMSstickeronherlaptop—apretty clear sign that the badge brands of today’s young people are the ones doing good.BlakeMycoskie,theTOMSfounder,sumsthisphilosophyupnicelyin hisbookStartSomethingthatMatters. While Patagonia and TOMS are comparatively small and were both founded on the idea of social responsibility, huge and long-established busi- nessescantransformthemselvesaroundthevisionofsocialresponsibilityand doingtherightthing.Unileverisoneexampleofamassiveorganizationthat is, through its Sustainable Living Plan, actively putting socially responsible FOREWORD ix businesspracticesatthecoreofbusinessstrategy,movingfrommarketingto mattering—andinUnilever’scase,makingsomewhatofareturntoitsoriginal values—whileatthesametimeaimingtodoublethesizeofthebusiness.Paul Polman,Unilever’sCEO,isprobablydoingmorethananysingleindividualin business to drive change. But it’s not for charitable reasons, it’s because he understandsthatpeople—andespeciallyyoungpeople—willrewardyouforit. AndwhileUnileverareoutaheadontheirown,manyothermajorcompanies such as Google, Starbucks, Marks & Spencer, Estee Lauder, Nike, GE, Wal- mart,Anheuser–BuschInBev,andP&Ghaverealizedtoothatit’saboutsmart businessandensuringfuturesuccess,andhavemade,aremaking,oraretrying tomakesignificantchangestotheirbusinessestosucceedinthisnewworld. These companies all understand that we’re moving from image being all- importanttorealitybeingthekey,fromafocusthat’ssolelyonprofittoafocus on purpose, or perhaps more accurately to a world where purpose drives profit. I do oftenwonder howwe wouldview Microsofttodayand how well they wouldbedoingif,insteadofleavingMicrosofttocreatetheGatesfoundation anddosomuchgoodintheworld,BillGateshaddoneitthroughMicrosoft. The challenges for today’s leaders Let’sturnnowtosomeofthedifficultiesthatmaybeencounteredenroutefor those embarking on this journey. Social responsibility and sustainability are both inherently mid- to long-term propositions, with impacts sometimes taking years to be seen. Having run a listed company for several years, it often seems that for the financial markets, short-term is today, mid-term is thismonth,andlong-termthisquarter! It’s probably the hardest time in history to run a business. Leaders are increasinglycaughtinthemiddleofatugofwarbetweencustomerspushing the business to be more socially responsible on the one hand, and the board and shareholders pushing for greater and greater returns at any cost on the otherhand. Thisiscompoundedbythefactthatmanyboardstodayarestillcomposed ofpeoplewhogrewupinadifferenterawithdifferentvalues.Youonlyneedto look at the very low percentage of female executives on most boards to see that.IhavehadseveralconversationswithprogressiveCEOswhohaveadded sustainabilitytothebonuscriteriaoftheirkeydirectreports,butwhoseboard hadlittleornointerestinmakingitpartoftheirownCEO’scompensation. Furthercomplexityisaddedbythefactthatseveralofthequickwinsthatdo have an immediate impact on the business are one-offs. Major progress on reducing transport and fuel costs or on reducing packaging tends to have a significantimpactinyearone,butthebenefitofthatislostafterayear,when thenewcomparativeskickin.
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