Design Thinking + Sustainability = Enduring Success

Is this the new winning formula for business?

A recent post by Kevin Keohane led me to revisit Bruce Nussbaum’s fantastic piece on design thinking in Business Week from a couple of years ago.

In it, he made a powerful argument for design thinking as the new management methodology, taking design out of the narrow realm of aesthetics and into the realm of business process. As he rightly says…

“Innovation is no longer just about new technology per se. It is about new models of organization. Design is no longer just about form anymore but is a method of thinking that can let you to see around corners.”

Surprisingly, what I hadn’t latched on to before was the critical importance he attached to designing for sustainability…

“What are the biggest social trends that will have an impact on design in the future? I’ll give you the obvious first—sustainability. Sustainability will be a prime driver of economic growth in the years ahead. Green will move from the realm of corporate responsibility to the space of revenue expansion and profit generation.”

Amen to that!

What’s really interesting is how this convergence of ideas – the emergence of sustainability as a (the?) critical dimension of business value and design thinking as the methodology to achieve it – is rapidly gathering momentum.

Just this morning, I was directed to an interesting post by Mark Dziersk on the Fast Company blog, which likewise asserts that the combination of design thinking and sustainability will be the key to creating enduring business success.

And it’s the word “enduring” that’s critical to that sentence and the title of this post, because it points to a different way of looking at sustainability, beyond simply “green” and the peripheral philanthropy of CSR.

Rather conveniently, that just happens to be the core thought behind my new book, Live Long and Prosper (to be published shortly). What makes the equation work is a much broader definition of sustainability as longevity – the capacity to survive and prosper over generations.

The business logic of sustainability

It’s been a while since I visited TED and its Greener Future talks. Nice, then, to return and find a recently posted presentation by Ray Anderson, Chairman and CEO of Interface Inc.

Regular readers will know that I’ve referred to the Interface story many times as a powerful example of the commercial value of sustainability when adopted as a fundamental design value.

If you’re not familiar with the story, if you think that CR is all fluffy stuff and PR, or you’re convinced that sustainability and profitability are mutually exclusive, then you really need to check this out. It’s thought provoking and inspiring stuff…

CR, culture and corporate strategy – joining the dots

A recent discussion thread on LinkedIn has really helped to crystallise a few thoughts on the links between approaches to corporate strategy and a business’ predisposition to manage CR and sustainability in a certain way. 

All the pieces have been there but, until now, I hadn’t really brought them all together in one place or been able to properly articulate the apparent connections. Here goes…

A company’s attitude and approach to CR ultimately depends on their approach to corporate strategy and their perceived basis of competitive advantage.

If you derive competitive advantage through cost leadership/operational efficiency, a measurement mindset is likely to dominate your thinking on CR. At the lower end of the spectrum (since your customers are motivated by the lowest cost solution) your approach is about cost avoidance – doing the minimum to respond to social pressures, e.g. through voluntary codes and compliance with regulations. At the higher end, companies may actively pursue greater energy efficiency as a means to realise significant cost savings. Either way, you’re living in the world of CR 1.0, somewhere between Levels 1 and 3 on the CR Continuum.

It is only likely to be companies that derive advantage through the value disciplines of product leadership or customer intimacy (the ‘differentiation’ half of Porter’s generic strategies) that are naturally open to adopting a CR 2.0 view – i.e. a more ’systemic’ approach, where CR and sustainability is used as a fundamental design value to challenge the business model and identify opportunities for product and process innovations.

What matters to product leaders is design, innovation and brand marketing, supported by a flexible culture. For customer intimate companies, it’s about personal service, consistently exceeding expectations and developing lifetime value, supported by a culture that devolves decision authority to those closest to the customer. Either way, it’s a mindset focused on how to create new value for customers through maximising the value of the business’ human and intellectual capital.

As with all theories, I’m sure there’ll be exceptions. But as a general rule, I reckon there’s definitely something in this. What do you think?

Authenticity, fairness and customer loyalty

Sure, profits may be down 26% as it strives to maintain cost competitiveness, but John Lewis is still outperforming most of the high street. Profits were still a very respectable £279.6m in 2008, and sales were even up 3% on last year to £6.79bn.

Equally significant, though, is that it’s been able to pay its staff a 13% bonus, and there can’t be too many companies able to do that right now.

Of course, the main reason for that is the John Lewis partnership philosophy – all its employees (or ‘partners’) are co-owners of the business, with profits being shared among them.

Picking up on my previous post, what’s really interesting about this is how the internal culture of the organisation has so indelibly imprinted itself on the minds of consumers.

A more textbook example of an authentic brand you couldn’t hope to find – the employer brand (‘A different sort of job’) and the corporate/consumer brand (‘Never knowingly undersold’) evidently united by a core thought of ‘fairness’.

The absence of shareholders is undoubtedly a major proof-point behind this brand story – the principle that, without the need to play to their demands, John Lewis is free to focus all its attention on looking after its customers, its suppliers and its staff.

Again, that idea has clearly implanted itself in consumers’ consciousness. Indeed, watching reports on Newsnight the other night, it was remarkable that, even in this downturn, the thought of shopping anywhere else simply didn’t enter John Lewis customers’ minds.

They eschew trading down because they perceive shopping with the costermongers inevitably involves some sort of compromise – either on quality, on service or on ethics. For other retailers to cut prices, whilst maintaining profits and shareholder returns, someone else must be taking the hit – if not them, then someone else in the supply chain.

The essence of the value proposition? John Lewis may not be the cheapest, but ‘you get what you pay for’ and no-one gets screwed in the process. And judging by the results, it’s one that appeals to a lot of people.

So should John Lewis’ partnership model be seen as the prototype for a different, more responsible form of capitalism? I don’t know.

Regardless, what I do know is that many other businesses could learn a lot from them – about what it means to be authentic, to be responsible, and how both can make a huge difference to a company’s competitiveness.

It’s the culture, stupid!

Remember, “It’s the economy, stupid,” the phrase coined by political strategist, James Carville, back in 1992? Well, the more I think about my sphere of interest, the more the title of this post rings true.

The more I think about how companies can create brand and competitive advantage, the more I am convinced that it needs to be generated from the inside out.

Whether we’re talking about the specifics of establishing CR and sustainability as a key source of advantage, or brands’ more general search for the ‘authentic voice’, it’s clear to me at least that all roads lead back to organisational culture.

It’s the point at which CR becomes fully integrated into strategy and culture (rather than just a self-contained box for all the ‘good stuff’) that companies begin to interrogate the way they conduct business and identify opportunities to create new value through product and process innovations. Culture is the key to delivering on CR 2.0.

It’s the proper branding of internal culture that begets authenticity. Culture is the common glue that holds together the whole ‘system’ of corporate brand, employer brand and employee/stakeholder engagement.

Look through the lens of organisational culture and you’re offered up some interesting perspectives on branding – in particular why authenticity (to bastardise another phrase) is ultimately in the eye of the beholder, and why companies don’t actually own their brands.

Take Edgar Schein’s theory, for example, that culture exists on three levels:

1. Surface manifestations – the culture’s most visible and accessible forms (touchpoints such as stories, symbols, language and physical environment)
2. Values – beliefs underpinning surface manifestations (shaped by shared learning or by views of the original founder/current senior management team)
3. Basic assumptions – invisible, preconscious beliefs held about the organisation and how it functions (relating to human behaviour, organisational relationships and the nature of reality)

The point? The real culture (and by extension, brand) exists at the level of tacit assumptions, which cannot be accessed or managed directly; it’s a perceived reality that exists only in the minds of customers, employees and other key stakeholders.

The levers that businesses can actually pull will only work indirectly and over time, as the results of interventions (positively and consistently experienced by stakeholders) gradually filter down to reshape those basic assumptions.