Fourth International Seville Conference on Future-Oriented Technology Analysis (FTA)
FTA and Grand Societal Challenges – Shaping and Driving Structural and Systemic Transformations
Seville, 12-13 May 2011
A business framework for building anticipatory capacity to manage disruptive and transformative change and lead business networks towards sustainable development
Cristiano Cagnin
DG Joint Research Centre Institute for Prospective and Technological Studies,
Denis Loveridge
Manchester Institute of Innovation Research,
Summary
The paper suggests a dynamic framework of continual learning to enable a business to develop a capacity to anticipate and address change within the networks in which it is embedded, using FTA thinking to shape a business's path towards sustainable development.
The proposed framework has been devised to enable firms to become a participant who helps shaping the path to a common vision within its network being flexible enough to adapt to the changing circumstances of the environment and of its relationships.
The research uses a qualitative approach, the elements of which are described from the perspective of the intended case studies. The latter used, as a main tool, structured interviews with key actors inside the chosen companies.
Both an individual and a common ‘map’ linking the identified business activities and the information flow among them were developed for the two case study organisations: this was done using the IDEF_0 method supported by interviews with key actors inside the organisations to validate all the information.
The Delphi Technique was also used to validate the case studies results by submitting a questionnaire to a number of experts to ensure that all the important variables were included on the final model.
The research results produced enough information to develop a critical path to help businesses to progress in the direction of sustainable development (i.e. maturity model): this was developed using the CMM methodology. Through the identification of different levels of responsibility/sustainability it was possible to design the proposed management framework to help businesses to develop, together with partners in their networks of relationships, their path to sustainable development and ways to move in that direction.
The management framework is a dynamic tool that evolves together with the learning process within the network in which the organisation is embedded and seeks to enable an alignment of social-environmental-economic strategies with the core business strategy across the network, clarifying the connections among the network value activities. The objective is to help organisations to create a tailored, as well as a common strategy in its network of relationships, with support of FTA, achieving influence among its partners to progress towards higher levels of sustainable development, in order to achieve the desired common vision of sustainability.
1 Introduction
The paper puts forward an explanation and a model of how companies embark on the long term, successful continuity needed by sustainable development[1]. It suggests a dynamic framework of continual learning, based on lessons from improvement cycles, to enable businesses to anticipate and address change in the networks within which they are embedded, using FTA thinking to shape their path to sustainable development.
The definition of sustainable development of a business used here differs from the triple bottom line approach[2]. Instead, it is shown to depend on the integration of sustainable development into mainstream decision making and core operational processes.
Sustainability can be defined as the capability of continuance into the long term future: sustainable development would then be the processes needed to move towards sustainability (SIGMA, 2001). Continuance of all life on the Earth is an emergent property needing a mindset that recognises the interdependence of all life and that predator-prey relationships are endemic in living systems. Therefore, policy makers' responses to the situations faced by humanity are multifaceted choices that must consider the interdependencies between the many dimensions of sustainable development.
Research developments build on a critical view of the creation of value and competitive advantage in both supply chain management and Corporate Social Responsibility (CSR). Currently, both have adopted the financial rhetoric (e.g., social, ethical and environmental) embedded in economic shareholder logic. Here value is redefined (Cagnin, 2005) to be represented by a triple bottom line balance, as the creation of economic, environmental and social value to and by all actors within a businesses network. Value is then based on universal principles[3] shaped by all seven dimensions of sustainability namely social (S), spatial (Sp), technological (T), economic (E); ecological (Ec); political (P) and values/norms (V) (acronym SSTEEPV). In this way, the activities to be managed across a business network to build value, are defined and linked to the ability of a network to self-organise: it must also be able to anticipate and respond to transformative and disruptive change.
The paper describes field work, with case studies and a Delphi exercise, to demonstrate the principles described and draws some conclusions that describe the proposed path a business can take toward sustainable development.
2 Maturity model: a path towards networks' sustainable development
2.1 Evolution from a linear to a networked model
Bearing the above new definition of business sustainability in mind, an evolution is undertaken of the concept of a value chain introduced by Porter (1985) until the current paradigm of supply chain management, or value nets (Bovet & Martha, 2000 a-e). Here the analysis of value within a firm (Porter, 1980; 1985a-b; 1991; 1997), through the integration of customers in the chain (MacStravic, 1999) and later the incorporation of suppliers/deliverers (as well as customers) (Bovet & Martha, 2000) leads into a network of value creation; value is still translated by an ‘economic’ bottom line. Value, in this context, is decoded in financial returns to shareholders based on operations efficiency and/or customers and/or suppliers/deliverers engagement, with the ultimate goal of satisfying customers’ needs.
However, to deliver wealth aligned with social and environmental benefits to shareholders and also to stakeholders within society, value has to be redefined. Thus, a new concept of networked sustainability (Cagnin, 2005) is introduced as an evolution of the value net. It involves a network where different stakeholders interrelate with one another seeking the delivery of economic, environmental and social value for and by all nodes of the network[4].
The concept of a value chain became a fundamental instrument for strategic planning since Porter described how a firm can use it to identify sources of differentiation, choose the breadth of its competitive scope, improve its organisational design, perform cost and efficiency analysis, and identify sources of interrelationships between business units (O’Sullivan & Geringer, 1993). Developments in this approach, such as the natural value chain and value nets, bring into the scenario the requirement of aligning customers and also suppliers in the decision making process, and on the operational procedures needed to carry out the necessary value activities to achieve the ultimate goal of satisfying the end-customer.
All these approaches focus mainly on the operational processes or value activities and their necessary supporting procedures to transform basic inputs into final goods or services, which can and should be triggered by customers to enable the process to be effective, with optimised costs, and able to deliver the expected value.
A common weakness of the models responsible for moulding a business’s competitive advantage sustainably is the nature of stakeholders’ involvement in strategic partnerships. According to Hoffman (2000), given the number of businesses involved in network relationships, there is a rising importance in comprehending the advantages firms can gain from network relationships and, therefore, in understanding how networks operate and how a network environment can enhance the core competencies of a firm: these also lead to sustainable competitive advantages. Therefore, there is still latent the need to understand how other stakeholders can bring value to a firm – and vice versa – and help it in shaping different sustainable competitive advantages.
Hence, networked sustainability goes one step beyond the value net which incorporates in one network the firm, its suppliers and customers. Instead, it takes into consideration the global system within which a firm is embedded, including nature and different stakeholders within society in one interconnected system. In this context, value has also to be created for and by all nodes of such a network, which has to operate as a cyclical system. Here value is redefined and is represented by a triple bottom line balance or the creation of economic, environmental and social value to and by all actors within the network, which is based on universal principles and shaped by the other four pillars of sustainable development: spatial, technological, institutional-political and cultural-values.
2.2 Value creation
Aligning the seven dimensions of sustainability and shareholders with key customers and suppliers is a major preoccupation. To add employees, communities, NGOs, governments and society as a whole adds to the magnitude of the situation. To create partnerships of this kind to bring value for all actors involved brings the promise of delivering customised products and services to meet the specific demands of end-customers efficiently, at low cost and sustainably. Value in this context should thus be redefined.
Business sustainability requires that economic, environmental and social values are built in alignment with one another. Porter’s strategies (cost leadership and differentiation) are able to bring about economic value and to some extent social and environmental value. However, businesses must also be proactive in delivering social and environmental values if they are to play their part in shaping sustainable development. The next stage in this process is the integration of all seven dimensions (SSTEEPV) of sustainability into a firm’s strategy and core operations.
Joining forces through cooperation and partnerships is necessary to meet the major challenges faced by society. Partnerships founded on active participation of all the actors involved and based on effective communication, rooted in close dialogue among all participants within the network, is critical to aligning all seven dimensions of sustainability into a business's core strategy through a management system involving all the network participants. Conservation of the global ecosystem, where apparently isolated actions with no immediate consequences provoke reactions that are still unknown globally, depends on communication between its inhabitants, governments and enterprises. Businesses, civil society and governments are often considered to be the three pillars of society. Sustainable development needs all three to advance more or less at the same speed and in the same direction. Sustainable development then depends on building dynamic partnerships among these three pillars (Holliday; Schmidheiny & Watts, 2002).
Cooperation and partnerships are the cornerstones of networked sustainability. Value is thus redefined as a balance among economic, environmental and social assets or positive ‘incomes' aligned with the other four dimensions of sustainability based on the belief that one leverages and depends on the other, instead of on economic optimised performance only as is currently the main measure. Moreover, the value activities in the network must align and integrate operational processes, as in a traditional value chain, but also be able to build an approach in which actors in the network participate in the definition of a common vision and strategy. The latter needs to include the operational processes necessary to bring value to and by all the network's partners. The question is, which activities play a key role in enabling businesses to access new sources of competitive advantage and should be considered as value activities of a network?
2.3 Network value activities
The value activities in a network are the building blocks by which a firm creates products and services valuable to its stakeholders. In a traditional value chain these activities are divided into primary activities (physical creation of a product) and support activities (support the interrelationships among primary activities). Instead, in a non-traditional network value activities remain undivided since they all leverage and support each other and, as a consequence, need to be integrated so as to be considered as ‘primary’ for the development and delivery of responsible products and services across the network.
Instead of focusing on the activities needed for the creation of a product within a firm (and sometimes including its suppliers/deliverers and/or customers), as in a traditional value chain, the heart of a network becomes the interaction among all its actors. The activities are those necessary to develop responsible products and services throughout their life cycle. By aligning and integrating all operations, and their supporting activities across products and services, would that be enough to achieve this life cycle objective?
To ensure that the seven dimensions of sustainability are embedded in a firm’s core operations (including those which compose a traditional value chain), its operational activities must be integrated throughout the network. They must also be in alignment with a common strategy among the actors in the network to enable value to be created for and by all nodes in the network. The development of a common strategy depends on creating an interactive dialogue through active participation and mutual understanding among the actors involved in order to enable the whole network to pursue the same vision of sustainable development.
The accomplishment of such a vision depends on how each firm and its network of relationships interacts and aligns value creating activities across the network. The common and complementary elements between the needs of value creation within a firm's network and the intangible assets underlying sustainable development of the business are: partnerships, strategy, communication, competences, motivation, technology, and operations. These common elements are the networks' activities needed for the creation of value in sustainable development.
For an in-depth understanding about the connections between the value activities of networks (i.e. how each one influences and is influenced by one another), and also how these activities influence the sustainable development of businesses, both individually and as a group, see Cagnin (2005). Such an understanding took place through case studies (i.e. section 4) by exploring how companies deal with the daily demands to build responsible competitive advantages. Based on this understanding a possible path to sustainable development can be developed with the aim of enabling companies to assess how they are maturing towards sustainable development. Ultimately, this may allow firms to develop their own individual evolutionary pathways to achieve the common vision of sustainable development within the network.