At Yale School of Management Integrated Leadership Case Competition, 60 emerging leaders from 15 business schools in 11 countries across 4 continents came together to discuss the future of business strategy.
Recently, I spent a week at Yale University attending the prestigious Yale School of Management Integrated Leadership Case Competition (ILCC). A challenging yet intellectually gratifying experience, the ILCC encouraged me to think long and hard about the effective way to create business strategies. The ILCC was created by Yale to convene students from global universities to develop creative solutions to business challenges that require the integration of multiple disciplines. Yale School of Management encourages students to take into account different vantage points (finance, marketing, ethics, etc.) and multiple stakeholders (customers, investors, employees, etc.) when formulating their strategy for resolving multi-faceted and complex problems.
At Yale, we were given an existing global challenge to solve: How to make the Indonesian Palm Oil industry profitable and sustainable from the perspective of Wilmar International, a major player in the industry. The Indonesian Palm Oil industry caused the Indonesian fire and haze crisis in 2015, which has been described by many in the international community as an environmental disaster.
The Work Bank estimates of the total economic costs of the fires in 2015 in Indonesia alone exceed US $16 billion. This is more than double the damage and losses from the 2004 tsunami (which affected provinces in Indonesia and other countries), and equal to about 1.8% of Indonesia’s GDP. To make matters worse, this crisis created social costs and human suffering. Air quality during high burning periods in villages near the fires regularly exceed the maximum level of 1000 on the international Pollutant Standard Index (PSI) – this is more than three times the amount considered “hazardous.” In terms of global impact, the forest fires are a major source of greenhouse gas emissions. Daily emissions from Indonesia’s fires in 2015 exceeded the emissions from the entire US economy – that is more than 15.95 million tons of CO2 emissions per day.
It is evident that this complex problem requires an integrated approach to developing a business strategy. The experience of understanding the problem, evaluating the environment and creating a business strategy, has allowed me to arrive at four guiding steps that are detailed below:
1. Begin by Asking the Right Questions: Creating a successful business strategy lies not in having all the right answers, but rather in asking the right questions. When faced with a complex and wide business problem, managers are at loss as to where to begin. Even worse, many start trying to solve the problem without obtaining right and complete information. Successful managers begin by asking questions to both internal and external stakeholders. Here are some questions we asked ourselves while drafting our integrated business strategy:
- Who is our primary customer?
- What are our core values?
- How do we prioritize shareholders, customers, stakeholders and employees?
- What performance – economic, environmental and social – goals are we tracking?
- What can we do to change the playing field?
- What business, social and political uncertainties will keep us awake at night?
2. Move Beyond “Reputation” to the “Triple Bottom Line”: To be truly sustainable and forward-looking, companies have to move beyond the superficial business need for reputation management. Many companies are actively integrating sustainability principles into their businesses, and they are doing so by pursuing goals that go far beyond earlier concern for reputation management—for example, saving energy, developing green products, and retaining and motivating employees, all of which help companies capture value through growth and return on capital.
An interesting concept that came up was “The Triple Bottom Line”. The phrase was first coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. His argument was that companies should be preparing three different (and quite separate) bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account. The second is the bottom line of a company’s “people account”—a measure in some shape or form of how socially responsible an organization has been throughout its operations. The third is the bottom line of the company’s “planet” account—a measure of how environmentally responsible it has been. The triple bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time. Only a company that produces a TBL is taking account of the full cost involved in doing business.
To be truly successful and sustainable, organizations need to evaluate themselves on the triple bottom line or at least consider the holistic aspects of profits, people and planet.
3. Value Different Thinking: In a flatter world, if managers don’t value different thinking, they will fail to build their businesses in different regions in the world. Asia is totally different from Europe, and Europe is totally different from Latin America. Even within Asia, there are myriad differences between China, India and Indonesia. It gets more complicated, as even within countries there are differences in cultures, consumers, languages and ways of doing business. How can emerging business leaders deepen their understanding of differences and commonalities in global economies and increase their effectiveness?
The good news is that organizations and business schools are collaborating to understand and address the challenges posed by increasingly interconnected and complex global markets. For example, in 2012, under Yale’s stewardship, the Global Network for Advanced Management (GNAM) was launched with 28 leading business schools in 25 countries across 5 continents. The distinguishing aspect of GNAM is that these schools are from diverse regions, countries, cultures and economies in different phases of development. As a student of the National University of Singapore, a member school, I am in a position to leverage network efficiencies and build strong relationships to be an effective business leader in the years to come.
4. Connect and Collaborate: Just because everyone is connected around the world, doesn’t mean that everyone is sharing knowledge or collaborating. To truly be connected, businesses and managers around the world require a mindset change. An effective way of overcoming challenges is through collaboration with the private, public and non-profit sector. Today’s fast-paced marketplace requires mutually beneficial partnerships to leverage creativity, experience and resources, that can help you arrive at a sustainable solution in less time. Collaborating can help companies to innovate quickly and sometimes even create solutions to problems that may not be prevalent issues yet.
As an example, let’s consider how these guiding steps can be applied to the Indonesian Palm Oil industry’s future strategy. One can begin by asking who are the relevant stakeholders – customers such as Unilever and Nestlé, the Indonesian government, the local community and international non-profit organizations such as Greenpeace. Additionally, one has to determine the objectives for the short-term and long-term and accordingly manage the relationships with the stakeholders. Keeping in mind the global pressure on the industry after the 2015 environmental crisis, there is a critical need to focus on the triple bottom line in the future. As the Palm Oil industry has economic impact all over the world, one has to consider multiple perspectives and value different thinking. How can the Palm Oil industry successfully diversify in a new market such as Africa? How can the industry embrace an integrated business perspective that considers Finance, Technology and Marketing? Lastly, how can the industry collaborate with other organizations, industries and governments to maintain its competitive edge? Read the business strategy the NUS MBA team (Aparna Mahadevan, Mehak Chadha, Michael Chang and Vinai Gopalakrishnan) created using these guiding principles here.
In conclusion, crafting a sustainable integrated business strategy that considers multiple perspectives and values collaboration is the key to long-term business success and competitiveness. Managers that realize this sooner than later will be the ones who drive their organizations to succeed and create an impact in the new global economy.