Sustainability as the New Business Paradigm

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Sustainability as the New Business Paradigm ...

Sustainability as the New Business Paradigm

Speech by Ulrich Golüke, San Francisco, March 20, 2002

    Successful Scenario Planning Conference.

Embargoed until March 20, 2002, 10 am Pacific Time

Slide 1

    Dear Chairperson, dear participants, I am pleased, though jetlagged, to be here and to have an

    hour or so to talk to you. I‘ll leave some time at the end for questions, and I will be here

    today and tomorrow if you‘d like to seek me out and talk some more and you can always

    reach me via e-mail.

So let‘s start.

    Slide 2

    First, let me applaud your courage to come to a speech with the word ‗paradigm‘ in its title.

    And on a Wednesday morning, no less. I am sure, many of you hope that I am joking I think I would if I were sitting in your place.

    Slide 3

    Unfortunately, I am not. In one way it is actually worse: I‘ll be talking about a new class of paradigm.

    But in another way, it is much better because I will talk to you about forgive the jargon a meta-paradigm. Not a run of the mill Theory X or Theory Y, or Re-engineering, or Sigma

    Six, but a big and powerful change, one that can organize our lives for some time to come and certainly longer than our current CEOs term of office.

    Slide 4

    The paradigms we know and suffer from are all cost reduction efforts: how to do more

    with less: Less inputs, less raw materials, less capital, less and here it hurts the most people. It‘s become a mantra, and once a round of cost cutting is successfully done, the

    ‗reward‘ is usually another one for the next budget cycle.

And while it may be mathematically true that you can cut X percent from something

    indefinitely, in the real world you cannot and all you get is burn-out.

So why keep on doing it? You know the answers: because the others do it, and because we

    are leaders!

    Sustainability as the New Business Paradigm page 1 of 11 ? 2002, Ulrich Golüke, All Rights Reserved,

Slide 5

    Beyond the jargon, why is it really that all we do is cut costs?

    Because essentially, we look at the world in this way. All our products, services even portfolios of offerings are judged, by us, by others, by four attributes: availability, price,

    quality and, lately, mass customization.

You have probably seen, even used, these spider diagrams yourself. They are great for

    benchmarking, for summaries, for justifying the next round of cost cutting. What they mask

    is that you allow yourself to be part of a game of ―Hare and Tortoise‖. No matter how fast

    you run, by the time you get there, someone else has already won the race.

    Slide 6

    That is because we live in a very tightly networked worked, in real-time (as the Economist put

    in a recent survey of manufacturing). We are all global players, and if we aren‘t, our

    competitors are.

If this is our view of the world, then all we can do is compete in the end on price. Any gain

    on availability, quality and mass customization is instantly matched (just ask Compaq, Dell

    and Gateway), so the end is that we, as customers, get high quality products and services,

    instantly available. And all I ask is ‗who has the better deal‘?

    The consequence is that cost cutting becomes not a ‗one-time cleaning out the stables‘ affair, it is a never ending story. Round and round it goes.

    Slide 7

    What if we changed our view of the world?

What if we introduced a fifth attribute, besides availability, price, quality and mass-

    customization, on which our products and services are judged and selected!

If happened before. If you think back 50, 60 years, our products and services were judged

    on merely two attributes, availability and price. It was the Japanese after World War II,

    when they had no raw materials, no markets, no friends and customers who changed

    everyone‘s view by introducing quality as an attribute to be used for selection.

Personally, I am old enough to remember that ‗made in Japan‘ was in the beginning cause for

    laughter. Some of us never stopped laughing and have been spending quite a bit of time

    with their families ever since.

    The advantage of a fifth, differentiating, attribute is obvious it allows us to have a much more nuanced conversation with our customers, suppliers, employees, you name it. Because

    Sustainability as the New Business Paradigm page 2 of 11 ? 2002, Ulrich Golüke, All Rights Reserved,

the conversation about how cheap your product is and how much you have cut inventory

    down is, after a very short while, actually quite boring.

    Slide 8

    In fact, we in business have already started the search for the new differentiating attribute that

    lets us break away from the pack. The usual gurus peddle their favorite wares:

    th Reputation: look at you can attend its 6 conference

    in May in Boston!

     Attention: You‘ve probably all read or heard about the attention economy:

     Corporate Social Responsibility, increasingly part of reputation, but also taking on a

    life of its own; see the UN Global Compact

     Simplicity, Edward de Bono wrote a very thick (!) book on this


     High Tech, High Touch the latest from Mr. ‗Megatrend‘ John Naisbitt


     Fashion, it is amazing what gets sold these days on its fashion attribute alone: cars,

    computers, network time, you name it.

But before we put our money down on any one, let‘s look at two very deep trends, because

    for the attribute to be lasting, to have a strong organizing capacity, it needs to connect to

    something deep and important.

    Slide 9

    The first deep ‗trend‘ I want to look at is our impact. What is it? And I am thinking big here: The impact of humans on the planet.

This is not a scientific meeting, so I tried to visualize what I am taking about by this slide.

    The big circle is the ‗planet‘ or ‗nature‘. The little dot on the left of the drawing is the sum

    total of human impact. Any impact, of whatever kind and size is absorbed by the buffers,

    the built-in resilience of the ‗planet‘.

    That is how things were. Our impact was nothing. And in such a world, certain things could and were being taken for granted. Most notably, I believe, the ‗truths‘ that events

    were independent, that they were self limiting in time and that they were self limiting in space.

Those ‗truths‘ gave rise to two things: the insurance industry as we know it today and our

    habit of learning from trial and error. Whatever happened, enough of us were left over after

    any disastrous event that we could spread the costs and learn our lesson.

    Sustainability as the New Business Paradigm page 3 of 11

    ? 2002, Ulrich Golüke, All Rights Reserved,

Slide 10

    Since the last few generations, the picture has changed. Our impact, relative to the ‗planet‘

    or ‗nature‘ we are part of has become significant. We matter on geophysical scales. I am

    not sure whether the picture on the top or the one on the bottom is a better visualization of

    where we are.

But that it is huge, I have no doubt and that with it the built-in resilience is something we

    can no longer from granted, I am also sure of.

    Slide 11

    To give you only two examples of how we matter, consider that 20 % - one fifth of all

    human lives lived on this planet were lived in the last century.

Not surprisingly, in those last 100 years we humans used as much energy as in all the roughly

    4 million years before that put together.

We matter and relying on built-in buffers to bail us (or at least enough of us) out, becomes

    an ever more risky proposition.

    Slide 12

    The second deep ‗trend‘ I want to look at is how we spend our time.

The slide on the screen is a stylized version of some data from Lebergott and Grübler. The

    sources are at the bottom of the slide. It simply asks how we have spent, over the last few

    hundred years, our time. Initially, it was farming as the red line depicts. That is now down

    to 3 to 5 percent in all developed countries. A development that any farmer a few hundred

    years ago would have absolutely disbelieved. Yet it is true.

Next came manufacturing that we spent our time on. But even that is way below 50 percent

    in all the OECD countries.

The rest is what? Certainly service takes up a lot of our time, but even that is declining,

    leaving room for those question marks again. It is the shaded white space in the top right

    corner we will increasingly spend our time in.

Why is that?

    Slide 13

    Lebergott‘s data is a result of what I call ‗the triumph of technology‘ combined with

    Maslow‘s hierarchy of needs.

In one form or another, you are all familiar with this hierarchy that he first postulated in 1943.

    In essence, it says that at the bottom are basic needs of food, shelter and security. As you

    Sustainability as the New Business Paradigm page 4 of 11

    ? 2002, Ulrich Golüke, All Rights Reserved,

    move up, you eventually reach self-actualization and some of us even transcendence. Maslow meant this hierarchy applied to individuals and their lives. I believe, it equally

    applies to societies. And as societies, we correctly used our attention on the bottom, basic,

    needs: food, shelter, security.

But it is in the nature of things that applying oneself diligently, consistently and continually to

    a task, that effort alone will eventually transform whatever it was that one worked to

    overcome: water carves riverbeds through granite; a flower breaks through the asphalt and

    one cell becomes a living person. We find ourselves in a new world simply and disarmingly

    because we have applied ourselves at least since we have left the caves of our ancestors to

    meeting our subsistence needs. Quite relentlessly and obsessively so that Bertolt Brecht, a

    German playwright tried to summarize human nature once by saying ―Erst kommt das Fressen, und dann die Moral‖ – ‗First comes food and only then morality‘.

I firmly believe that waking up in the new world is simply the result of the triumph of

    technology, nothing more, nothing less. It is the free time a washing machine provides (and

    which costs a minute fraction of our lifetime earnings) that allows us to put our feet up and

    begin to ponder: who am I, how do I behave, what am I here for, what will I leave behind? In

    the old days, there was only time, in a backbreaking manner, to wash the clothes. The

    washing machine, the supermarket, the mail order business, the transportation

    infrastructure… the list is endless because it is the list of technological progress throughout

    the ages.

Contrary to Mae West, however, it is possible to have too much of a good thing: namely