Sustainable profit

Tim Cook told climate-change denying investors to sell their Apple stock

In the same week that Apple CEO Tim Cook told climate-change denying investors to sell their Apple stock, strategic advisors lavery/pennell publish an interesting, and challenging, report.  They suggest that a new, sustainable profit model for industry has emerged.  The report estimates it to be worth €100bn in additional profits for European companies. This approach also has the potential benefit of creating 168,000 new jobs and, most importantly, a 14.6% reduction in greenhouse gas emissions.

Sustainable profit model

The new model is a response to today’s business challenges involving three stages:

1) Improve non-labour resource efficiency.
2) Reinvest some of these efficiency savings in sustainable inputs (materials & renewable energy).
3) Develop innovative new products and grow market share.

The report cites a carpet tile manufacturer (Interface) as evidence of the success of this approach. The company has cut its energy use by 40 percent since 1996. They also recycle 43 percent of their raw materials.  It has reduced its emissions of carbon dioxide by 90 percent, sends zero waste to landfill, and recycles all its water. As a result, Interface is now the largest carpet tile company in the world, with revenues of $1 billion.

Strategic implications

Large corporations, such as Unilever, are also pursuing a goal of delivering sustainable profit, but there seems to be a long way to go.  Our strategy courses explore Richard Rumelt’s contention that ‘bad strategy’ is often no more than a set of, what he describes as, vaporous goals.  Our strategy consulting practice builds on his ideas to help organisations focus and coordinate their policies and actions on their biggest challenge, which is a good way of developing ‘good strategy’.  Organisations that are serious about achieving sustainable profit must put this goal above all others if they want to succeed.

Intuitively, this kind of approach makes sense, but intuition is a bad guide when faced with important decisions.  This report is a valuable contribution to building an evidence base.  It helps demonstrate the value that well-planned and executed ‘green’ initiatives can have.  The benefits will be felt by people and the environment.  The interesting incentive is that they might also build business models that can deliver sustainable profit.  This is an area that needs more evidence to help inform public policy as governments struggle to reconcile the need for long-term investments with demands for immediate fixes.

strategy science - promising new journal

consultancy

Context

As a consultancy practice that uses Management Sciences methods we have an interest in the more specific area of strategy science.  We, therefore, like the section in the book Good Strategy/Bad Strategy: The difference and why it matters by Richard Rumelt that describes how we naturally adopt a scientific approach to strategy.  This doesn’t appear to be a widely held view, although we use it in our practice.  So, it is interesting to see that the Institute for Operations Research and Management Science (INFORMS) Board of Directors has approved the creation of a new journal called Strategy Science.

Strategy Science: the journal

This new publication is being launched under the leadership of Daniel Levinthal from The Wharton School. It will publish outstanding research directed to the challenges of strategic management in both business and non-business organisations.

The subjects will range from relatively macro-level concerns of industry dynamics and the institutional context in which organisations operate to more organizational-level focused work, such as processes of organizational change, and work that links the organization to its external context, such as questions of firm boundaries and strategic positioning.

The journal will be open to a variety of disciplinary approaches including economics, operations research, political science, psychology, and sociology providing the work enhances meaningful understanding of substantive issues in the strategy domain. The journal encourages authors to take chances to produce work that pushes the field forward.

This is encouraging.  Strategy and Management Science are broad disciplines.  They are also relatively young areas for academic study, so a broad scope is helpful in finding what works as academia in conjunction with practitioners develop the body of knowledge.

The first issue is scheduled to be published in 2015. For more information see the submission guidelines at http://pubsonline.informs.org/page/stsc/submission-guidelines.

We welcome this new journal and look forward to finding out what insights it will give.

Lazy Management development

Lazy Management development

Body language is often included as part of management development programmes.  It’s easy to see why.  Telling people that crossed arms indicate resistance to what you are saying seem reasonable based on ‘common sense’.  However, as with many favourite topics on training courses, the evidence to support a lot of this stuff is either flimsy or non-existent.

The problem for management development

An excellent April 2013 New Scientist article “Lost in translation: Body language myths and reality“, by Caroline Williams, highlights a number of myths about “reading” body language.  Sadly, many of these myths are presented as ‘facts’ in management training and development programmes.  The giveaway is that they are presented with no evidence to support them. This lazy repetition of assertions that make the trainer sound insightful or that are simply attractive sound bites is bad practice and could cause damage by perpetuating myths that are either untrue or,at best, half-truths.

An example

For example, how many trainers involved in management development will admit to repeating one of the canards cited in the article rather than checking the evidence first.  Maybe you have heard it or used it yourself.  The assertion is that 93 per cent of our communication is non-verbal, and only 7 per cent is based on what we actually say. This figure came from research conducted over 40 years ago by Albert Mehrabian, a social psychologist at the University of California, Los Angeles. He found that if the unspoken message conveyed by tone of voice and facial expression differed from the word being used (for example, saying the word “brute” in a positive tone and with a smile), people tended to believe the non-verbal cues over the word itself. From these experiments Mehrabian calculated that perhaps only 7 per cent of the emotional message comes from the words we use, with 38 per cent coming from tone of voice, and 55 per cent from other non-verbal cues.

The source of the myth

The article explains that Mehrabian has spent much of his time in the past forty years explaining that he never meant this formula to be generalised, and that it only applies to very specific circumstances — when someone is talking about their likes and dislikes. Mehrabian claims that “unless a communicator is talking about their feelings or attitudes, these equations are not applicable” and so the oldest stat in the body language book isn’t quite what it seems. As Williams points out, if we really can understand 93 per cent of what people mean without using words, we don’t need to learn foreign languages and we would never get away with telling a lie.

Needless to say, we believe this is another reason to support the value of evidence-based training as part of management development.