If you wanted your business to still be operational in 100 years, would you make different decisions today?
When discussing with business owners and senior managers, their sense of the state of their business, most can provide a very clear and concise answer. As the conversation continues, invariably the discussion progresses to risks… and interestingly, but not surprisingly, the majority of discussions around risk are centred on more immediate risks, (present day to 2 years typically). But when the question is then posed, “What is your sense of the ‘sustainability’ of the business?”, the immediate return question is most often, “…sustainable over what time period?” And that is exactly the point.
What time frame do you actually envisage your business being around for?… 2 years, 5 years, 10, 50, 100 years? And when you do identify that time frame, does it change your view of how you plan your strategy, or assess risk? Does it change your view of how you plan and run your business every day? Does it change your view on the outcomes and impacts your business generates?… And ultimately, is your business strategy and operating model contributing to the sustainability of the business over the expected time period, or is it only sustainable for the next few years?
Questioning whether a business model is appropriately sustainable, forces a much deeper consideration of a number of critical factors, so often left on the periphery of strategic planning discussions.
Factors such as health and safety, environmental impact, human resource stress, home and work balance, pressure and workloads, partnering arrangements, capability requirements, and community impacts are all examples of critical elements that must be considered as part of strategic planning in the context of the expected time period the business model is to be sustained. Too often these factors are ignored during initial business planning, and overlayed later onto the pre-determined business strategy that has been developed with a focus on maximising profit, growth, market share and productivity. The subsequent introduction of additional and peripheral human, societal and environmental elements, then leads to clunky or ineffective processes and unsustainable impacts that require continual remediation and reactive responses to resolve. The consistently high failure rate of small businesses can, in part, be attributed to these impacts. And at the other end of the scale, these impacts have brought down large corporate entities once considered too large to fail. There are also countless examples of large companies forced to reshape flagship product lines due to lack of sustainability and entire industries forced to bow to external pressure to reinvent due to the impacts of their outputs, practises and business models.
“…whilst you must make money, your strategy and business model must also protect the resources on which your prosperity depends…”
As examples, many times I’ve heard, “…We need to do something about our Workplace Health and Safety culture.”, or, “…We need to be more flexible and promote work-life balance.” Problem is, these proclamations are made as though they can simply be ‘turned on’ in isolation. These organisations don’t have a health and safety or a life-balance problem, they have a business model problem. Workplace Health and Safety and Work-Life Balance are products of the operating model in which they exist. If not seamlessly woven into the business strategy and business model planning, they cannot exist independently as effective and harmonious cultures without conflicting with profit, growth and productivity-based plans, targets and priorities. And history tells us it is rare for financial incentives and results to be deprioritised unless catastrophic or tragic events force such an outcome… usually after it is too late.
Business partners, customers, the wider community, and least of all, your staff have an increasingly low tolerance for unsustainability, especially where the impacts have a detrimental environmental and human effect. Finding out too late that your profitable and growing business is causing harm is an awful place to be, as rectification and remediation of the issues usually demands that you accept and implement changes that will have a detrimental and longer term impact on profit and growth… a situation that for many, can be very hard to reconcile. And whether it be social media backlash, a product recall, negative news coverage, the findings of a Royal Commission, lack of quality family time, or the fallout from an injury or a death, the longer term reputational damage can be extremely difficult to recover from.
Continually planning and strategising with a view to sustainability forces you to look further out and review the longer term implications of your operation and its impacts. You will make more considered decisions, and ensure that the critical elements that can bring your business to its knees, are appropriately considered, designed, planned and incorporated into the very fabric of the business.
So, the question remains, “…How sustainable is your business?” Are you in it for today, or for the long haul? Whatever the time horizon for your business, your strategy and operating model must enable the operation to remain sustainable for that period… and whilst you must make money, your strategy and business model must also protect the resources on which your prosperity depends.
That which is tolerable in the short term, is rarely sustainable over the long term.