Re-imagining value disciplines

Kevin Keohane’s written a great post suggesting it’s time to revisit the strategy model that, for several years now, has topped our unofficial Gray-Keohane index of “management models most likely to uncover meaningful insights” when it comes to identifying a brand’s centre of gravity – Treacy & Wiersema’s concept of value disciplines.

He’s absolutely right that the model is ripe for re-evaluation, given the seismic shifts that have taken place in the (almost 20) years since the model first started doing the rounds; and he’s also right to pinpoint sustainability’s move from the fringes to the mainstream of business thinking as a key driver.

As I argue in the soon-to-be-published second edition of my book, the combined forces of population growth, climate change, diminishing resources and increased public scrutiny represent a fundamentally different set of frame conditions in which business must now operate – not only necessitating a rethink of how businesses create value, but what constitutes value in the first place.

Picking up on a previous post, Seven signs that the “Age of Sustainability” is truly upon us, it seems obvious (to me at least) that we are inexorably shifting towards a world where “for-purpose” trumps “for-profit” – where the single-minded pursuit of profit will produce significantly less of it than if it’s viewed as the by-product of reconnecting business strategy to a sense of social progress; where people’s decisions about who to buy from, and where to work, will be increasingly be determined by the resonance of that purpose.

What’s always held that back, it seems to me, is that old Achilles’ Heel of green marketing – the trade-off. Sure, you can have a more socially responsible and/or eco-friendly product (but you’re going to have to pay a premium for the privilege!). Sure, you can come and work for us extraordinarily nice and worthy types (but, sorry, we can’t pay you as much as the mercenary bastards across the road!).

But what if profitability and social purpose weren’t mutually exclusive? What if, to use the late, great Ray Anderson’s adage, the climb to the top of Mount Sustainability was actually the route to bigger, more legitimate profits?

For me, the squaring of that circle points to how Treacy & Wiersema’s value disciplines need to be re-imagined.

Taking the discipline of operational excellence as an example – of competitive advantage being derived by delivering dependable quality at a lower cost that than the competition – the economics of low-cost 20 years ago bear very little relation to how they look now when ever scarcer, ever more expensive natural resources mean that cheap can no longer go hand-in-hand with disposable, and when shipping costs could soon outstrip costs of labour (putting a bit of a kibosh on that lovely outsourcing strategy).

I venture to suggest that the secret to operational excellence in the future lies not in economies of scale, but in economies of cycle, wherein smart choices about material inputs and modular, cradle-to-cradle design will enable materials to be brought perpetually “back to life” in closed loop systems. Indeed, Interface’s Re-Entry 2.0 process and Patagonia’s Common Threads programme already provide great examples of this updated value discipline in action.

So what makes this updated value discipline so… erm… valuable?

Well, consider that the average cost of your materials drops with every cycle, ultimately to zero. Also that you’re effectively amortising the fixed costs of production. That takes the value proposition into completely new territory – a world in which sustainable performance is offered at a price equivalent to, or even lower than, the unsustainable alternative.

You might even get an added bonus too…

Customers have always indicated a preference for more sustainable products and services. That that hasn’t been seen to translate into real-life buying behaviours (at least not in mass-market terms) is undoubtedly a function of the trade-offs described above. Take those out of the equation, and you could argue that another value discipline – that of customer intimacy (competitive advantage derived by earning customers’ lifelong loyalty) – comes along for the ride.

As you’ve probably already guessed, I’ve got a lot more to say on the subject of sustainability and the re-imagining of value disciplines. But for that, you’ll just have to wait until the book comes out!

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