26 August 2022
Over the last few years, most small business have seen some of their macro business conditions change. First it was digital. Now it is climate impact & sustainability.
With digital, the shifting behaviors of actual customers created much of the necessary momentum and guided new business strategies and solutions. With sustainability however, the drivers of change are less obvious. While the potential long-term impact of not being aligned to sustainability goals is far greater, the short-term business impact of doing nothing is much harder to see.
However, it's clear to us that the momentum driving sustainability is strong, whether you look at state policy action, investor attention or the zeitgeist of today for what it means to be responsible member of the community.
While working with some small to medium sized businesses, we have seen different approaches to this idea of businesses who want to be "doing sustainability". In this month’s Converging over Coffee series, we talk about 4 of these strategies and look at how they align with different business goals.
4 Ways for Small Businesses to “Do Sustainability”
#1 Minimize Cost
Similar to other similar shifts in business conditions such as digital, the sustainability movement started off by triggering instinctive reactions to potential increase in overall operating costs. Hence this 1st strategy - minimize cost.
The approach for this is pretty simple and relatively direct. Understand the near term cost impact such as increased cost of goods and services, or loss of revenue from opportunities that contain these new-fangled requirements. Mitigate these by diversifying supply chain or shifting the costs to downstream customers to avoid or reduce the actual impact.
By staying in front of near term cost impact, the busines model becomes more agile in learning about and responding to both threats and opportunities created by the evolving sustainability momentum. While this might seem somewhat reactionary, it still takes on the changes directly and still allows a business to transition gradually towards a more sustainable operation.
#2 Minimize Risk
Once the potential cost impact from the changing market conditions becomes visible, it is possible to do better than just dealing with the current situation.
The next best thing you can do when trying to make a business sustainable is to stretch the strategies for managing cost impact into the future. To do that, the practice is to develop a rich understanding of the changes that created the cost impact in the first place, and then build an expanded picture of the longer term risk. If digital technology or consumer preferences have resulted in new preferences for different solution approaches, worrying about current costs will not be enough. Evolving the approach and helping people learn how to adapt is more useful for mitigating longer term risks.
Minimizing risk means taking a longer term view of what is likely change. It provides the impetus to adopt strategies that don’t just deal with needs on the surface. Strategies that address risk can be used to drive an ecosystem view of challenges & solutions, and help evolve important areas of the operations to become a sustainable business.
#3 Maximize Opportunity
The first 2 strategies for small businesses “doing sustainability” were really low-hanging-fruit, no-regrets type approaches focusing on Minimizing Cost and Minimizing Risk. The subsequent evolution of strategies for “doing sustainability” is where things get more interesting. This is when we make a switch from defense to offense.
Although confronting new requirements and new needs from customers & business partners is a challenging exercise that may require painful changes, therein lies great opportunity as well. Maximizing potential opportunity from these new requirements & needs is the 3rd strategy.
With new requirements, we may discover that it is time to challenge some old requirements, optimize them and perhaps even completely disrupt them. With new needs, we must see them as opportunity to serve our customers in new ways, or even serve completely new customers.
With strategic intent and some creativity, small businesses can tap opportunities created from the sustainability momentum to rethink business costs or create new offerings and business lines. A “maximize opportunity” strategy moves us from a protective cost-focused play into a forward-thinking revenue play… one that creates a transformed and sustainable business.
#4 Maximize Growth
Our growing need for infrastructure resilience & adaptation, and the urgency for decarbonisation & sustainable practices create a variety of opportunities for a wide spectrum of businesses. Rethinking business costs and creating new offerings & business lines to capture these opportunities will be a major strategic and operational endeavor. In short, the business needs to focus on Growth.
To build a strategy to maximize growth, it will not be enough to just expand the volume & range of work based on immediate opportunities. The short term gains from those opportunities will be sustainable when we also transform the business internally. First, in where we choose to play, by adopting a strategic approach that combines curiosity and a clear-eyed examination of opportunities. And then in how we choose to play, by transitioning the operating model to enable that.
Driving a stronger, more sustainable business that is actually “doing sustainability” requires Growth. And growth necessitates change… Change that uncovers new ways for the business to be profitable while making real contributions to sustainability. And change that advances internal systems & team competencies to handle growth & deliver expanded customer value.