Possibility, are you asking how or what?

Polarity, the idea of opposites, turns thoughts and possibilities around like  a pendulum  always moving from one extreme to the other. That is until the thought runs out of energy or momentum and stops. It rests until some force displaces it.

Recently, a client asked for help explaining the difference between planning for a transition and planning a transformation. Since Transformation seems to be one of the buzz words of the moment, I began to wonder what made the two thinking processes different, and what did they really mean. My polarity thinking friend suggested that transitions plan for certainty, or near certainty and transformation plan for uncertainty.  I disagreed.

I think of a transition as the pause between takes, what happens between two clearly defined states.  It’s when we assess, evaluate or figure out our position, how close or far. Transformation, that’s the feeling we have on arrival, we made it so now what.

In other words, if the client has a clear objective as in to take a specific distant hill, then transition plans incorporate the certainty that elevations will be changing on route and insures the team’s prepared for the journey. When it knows  what changes to expect along the way, then it’s transition ready. Transformation focuses on arrival, different conditions and challenges it doesn’t know, but can imagine arrival makes possible.  After all, isn’t that why the objective was to take the hill?  Wasn’t it about the advantage that being on top offers?

Put another way, imagine what you want to do is known, like traveling to another location.  Transitions focus on the journey, how long will it take, buying tickets or planning the route. Transformation planning asks how the change in location affects your current activities.  Transitions are more whole body time shifts, where as transformation puts your head in the future while the rest of your physical body remains grounded in the present.

November’s topic for the monthly strategy discussion focused on Transformation Readiness. Before I managed to summarize the conversation and post notes,news about the sale of Mariano’s to Kroger caught my eye. and then I also spotted  an interview with CEO, Bob Mariano on the Chicago Booth website.

If you are not familiar with Chicago, then let me explain that Mariano’s was a new entry into the grocery store business. By coincident, just as they had opened a few stores one of Chicago’s main competitors –Safeway decided to close all of its Dominick’s stores. This meant Mariano’s acquired 10 of the closed stores and their debt fueled expansion took off.  That’s when Kroger came calling.

Since I had already been thinking about  transformation questions , as in how do you get transformation ready, I thought it worth sharing these responses.  Take a peek, and let me know what you think, are the example transitions or evidence of transformation readiness?

Scenario A: I think that Mariano’s namesake, CEO and founder, Bob nailed it when he said:

“At Mariano’s, we tried to push further. We continue to push.  What I mean by push is to expose the customer to different and unique things and allow them the opportunity to tell you, ‘No, I don’t like that,’ or ‘Yes, I like that.’”

Scenario B: Or maybe you prefer the spin by CEO of Shazam when asked about the increasing gap between growth in the amount of information and its utilization. ” …How do you improve data intelligence?”

“That’s definitely the case [that there is a data knowledge gap] and for years we have been talking about data warehousing, or capturing that data, but turning information into data intelligence is a new journey for many companies…”

Or, how about the Gambling industry insiders view who characterizes difference between digitizing or converting your industry to the reality post conversion this way:

Advancements in technology has brought about a rapid digitization of gambling and almost every other industry. Some have managed to exploit these developments more than others and I think that the gambling industry is at the forefront of how well technology can be applied to a domain.

As an industry we must be open to change and pro-actively look at how we can exploit such technologies to provide a better and more entertaining experience to our customers. For example, the progress in Touch ID has enabled us to allow LeoVegas iPhone app customers to log in to the casino using only their fingerprint.

Are you wondering why distinguishing between transitions and transformations matter? Or, even better, how your business can take greater advantage of the widespread availability, access and flexibility that a fully digitized world creates?

Great, now you are thinking strategically.

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Changing Social Compact? Naa, just good sound long term strategic planning

On Shared ValueShared Value is neither new or an unusual a strategy as the media and popular press suggest.   Any company who has been deliberate and committed to strategic planning quickly discovers  the imperative  to invest  in their future and develop ancillary parts of their market. Deloitte’s global chairman and CEO-elect UK responded on the phenomenon in a letter to the editor of  the Economist that appeared in March.  (Note, our apologies for not noticing  and bringing it to discussant’s  attention earlier).  Deloitte’s position:

Society is more affected, for better or worse, by the core activity of a business than by its community investment projects, social initiatives and other peripheral activities…Good businesses recognise and understand the contribution they make, alongside government and non-governmental organisations, to economic, environmental and social progress. According to our analysis, over a fifth of Fortune Global 500 companies already have a clear, society-focused purpose underpinning their activities.

These views appear somewhat consistent to other reports such as the Global Reporting Initiative (see earlier post).  Questions circulating in the Friday discussion did not challenge the value of the activity.  Comments focused on complexities and organizational thinking that prevent more than a few companies from pursuing these strategies.

The search for Profits

Fundamentally, profitable growth comes from one of three sources:

1. Expanding your customer base–more customers

2.  Higher profits per customer–which means expanding the margin by either shrinking costs or raising prices; and

3. Increasing the number of things you sell, or sell the same things more often, or create more products to sell to existing customers-

Throughout history, the intersection of  supply and demand, creates value. Companies who effectively overcome logistics that separate the two, and with efficiency, naturally  benefit.  Business practices that optimize  costs, resource use or adopt solutions that minimize risk however,  are not always synonymous with ethical practices.  Add  cultural differences and attitudes into the wider system of decision variables  and it’s  easy to see why history is full of stories about companies who failed to share their economic benefits with local  workers or communities.

In 2011,  sustainability or persistent business operating practices depend on a wider decision frame that encompasses local good will and good behavior.  The repercussions of bad or exploitative behavior may upset the strongest of a company’s standing in the marketplace, especially because of the speed in which any number of stakeholders can usurp social media to exact revenge.

The global, wired world is only one reason we increasingly learn of companies behaving more responsibly globally. It turns out behaving responsibly is also cheaper.   Averting the damage, by doing a little more upfront, or taking on some upfront risk may in fact limit if not eliminate back-end risks. Perceptions are important to keep up, but equally important are relationships.

Numerous global companies seeking to expand their presence in alternative markets are finding NGOs reliable partners, thus earning the project the shared value label. Knowledge of local custom, culture and conditions, when integrated into investment decisions, mitigates possible failure and offers added security from future liabilities.

Is  it really a surprise to see corporations increasing their reliance on NGOs local knowledge to help penetrate new markets?  To the assembly of strategy minded Chicago Booth MBAs and professionals, leveraging ability to enter a market indicates a prudent well thought out, long-term strategic initiative.  The rising number and prominence of news  stories that expressed the value of pursuing long-term strategy initiatives, that was a surprise.  Maybe these are examples of capitalism at the extreme.  Is there anything inherently wrong with a company creating downstream demand for its products and services?   More cynically, the stories and highlighted attention around shared value merely reaffirms the reality that there’s no pure charity going on.  Both business and NGOs are no longer distracted by taking adversarial positions, and instead both are more productively realizing their aims.

In modern times, new market expansions up the stakes considerably, made evident by the lessons from earlier experiences.  Recall the disaster in Bhopal.  This accident continues to haunt DOW, no matter how much money, support or distance they attempt to create.  The  clear lesson for business today, is that its best to know your way around the market where you are trying to set up a toehold.  The easy pickings in most market are gone or governments and other organizations more hesitant to roll out the red carpet.  The increased risk  of crossing cultural divides is something that NGOs have felt more viscerally, as when their failure to deliver puts peoples’s lives at risk, not just the loss of investment capital.

What does maximizing value look like? 

Value , as earlier stated is not just a measure of profit; and as such doing good to more of your stakeholders, regardless of your tax or operating mission, may indeed create value.  It’s simple to believe that shareholders are only interested in returns near or short term.  Ample evidence exists that investors consistently pay more for companies who derive direct and indirect value from multiple sources.  [Anyone have a reference or citation for this? ]

Another cautionary tale

Nicholas Negroponte’s vision for accelerating learning in impoverished communities, widely shared with other luminaries in technology has fallen short of collective expectations.    In establishing the onelaptop per child foundation, the mission was simply

  to empower the world’s poorest children through education.

One laptop in Africa

Nobility aside, ample data and analysis correlates education level with higher income making this a logical path to empowerment, sufficiency, economic independence etc.  The founders, rather than deal with the complex system of resource coördination in locations short on infrastructure,  seized upon the silver bullet in the form of a simple laptop. The private foundation and their very sophisticated, resourceful founders and network  encountered more than one bump in their path to distributing the 1 million laptops across the globe.  A recent evaluation  contrasted  reality with the dream by acknowledging the  foundation “failed to achieve its ambitious goals when it met its intended market.”

In short, the answer that emerges when sitting in a resource rich environment failed to fully consider the ancillary factors that were key to realizing the project.  With the best of human intuitions and insights, they  tried to think of everything. The impressive self-contained laptop with software especially designed  toward natural learning, included a crank battery and internet access via satellite.  But the technology was simply too big a leap for populations who struggle to support basic necessities for their survival.  Click here for  More of the story. 

We welcome other thoughts or comments, and invite you to share them here.

Changing Social Compact–shifts in stakeholder accountability

Stakeholders for some time have been raising the bar for accountability on a variety of non-financial indicators.  In partnership with the UNEP (United Nations Environment Program) Finance Initiative and the UN Global Compact and investor initiative created the Principles for Responsible Investment (PRI).  The 2010 annual report (for FY April 2009-March 2010) noted that in just under four years, approximately 22 $trillion US of assets globally have signed on to the PRI, or 10% of total global capital markets. They count over 800 signatories and seeing concrete progress in how mainstream investors integrate ESG, Environmental Social Governance into their investment practices.

In case you weren’t aware of how significant this practice is, I happened to pick up a Tweet from a recent global conference hosted by Global Reporting Initiative (GRI). I thought it worth sharing a few of my notes.

Who and What is GRI? 
Global Reporting Initiative

Vision: A sustainably global economy where organizations manage their economic,environmental, social and governance performance and impacts responsibly and report transparently.

Mission: To make sustainability reporting standard practice by providing guidance and support to organizations. © GRI 2011

GRI provides the world’s most comprehensive framework for producing sustainability reports.  These guidelines offer standardized assessment and comparability of performance and disclosure that is similar to financial reporting.  The latest annual report was issued on the 11th of May 2011; however the accumulation of  company stats reported Calendar year 2010.  Only 16% (180) of US companies  are being assured by GRI guidelines, though they produce more sustainability reports than any other country. (this is also an increase by 28% up from 140 in 2009).

Based on Sector, Financial services, Energy and Food and Beverage product companies top the list of reporting companies.

Interestingly,though more current GRI data is available,  the last year KPMG did a survey of KPMG Fortune 250 Survey October 2008 , In 2008

      •  79% (197) of Global Fortune 250 companies now release CR data, up from 62% in 2007
      •  Doubled since 2005 – up from 37% p
      •  Increasingly driven by economic concerns
      •  74% of top 100 US companies published corporate responsibility (CR) information in 2008 either as part of their annual financial report or as a separate document.  The Reasons cited:
        •  70% cited ethical considerations as primary driver for CR disclosures
        •  50% cited economic concerns as the leading reason

In 2008,   77% of G250 (Global Fortune 250)   and  69% of N100 (100 largest companies by revenue) in 22 countries used GRI.

Alternatively, BSR -Business for Social Responsibility , works with its global network of 250 member companies to develop sustainable business strategies and solutions including cross-sector collaborations.

Many US companies are obviously involved and engaged in a variety of Corporate Social Responsible (CSR) initiatives that are at this stage primarily voluntary.  BSR, a member organization, provides research and support and comparative reporting to its members, but the data is not available publicly.

Additional organizations, such as the World Business council for sustainable Development , a CEO-led global association of 200 companies is another sharing platform focused primarily on environmental issues.

American Companies, however continue to show a reticence to engage at the rigor of PRI, or GRI reporting and have the data checked by a third party.  At least that was among the recent sentiments shared by GRI’s Focal Point USA Director, Mike Wallace 

In April the monthly Booth alum discussion considered how these ideas play out, who benefits and what might be the risks of engaging in going down this path.  We’d love to get further feedback and reaction.  Any thoughts?  or further data are welcome!