Value is at the heart of Create and Connect. So if someone writes a book about the future of value, we are of course the first to want to read it. We were lucky to be able to interview Eric Lowitt about his great new book which releases September 27th.
Eric Lowitt is a student and teacher of strategy and sustainability – how companies grow, innovate, and become more agile by embracing sustainability.
His first book on the topic, The Future of Value: How Sustainability Creates Value Through Competitive Differentiation reveals what it takes for companies to grow and outperform the competition in today’s growth-constrained, sustainability conscious world.
Eric Lowitt shows leaders how to use sustainability as a powerful, pragmatic lens to enhance business performance. He also explores how to craft and oversee a portfolio of effective tools, develop competitive strategies, and adjust value chain activities, talent management practices, and corporate policies to help organizations execute powerful sustainability strategies.
In a nutshell: what is value?
Value is the difference between where a person or organization is before some action and after taking some action. For example, a hungry person receives value from a well cooked, delicious meal. A company receives value in the form of reliability and good ideas when it hires a talented employee. And a parent experiences value in the form of good feelings every time he or she kisses their child when tucking them in at night.
Why is it important – or more important than other benefits?
Value is important because giving and receiving value are the reasons why consumers purchase goods, why companies make these goods, and why people become employees.
What major elements make one company better at sustainability than another?
Companies that are best in class at embracing sustainability – companies I call Sustainable Market Leaders – do five things better than their peers:
- They take a fresh approach to sustainability. Many companies view sustainability as a series of risks to be managed. At best, this approach increases the likelihood of ‘status quo’ performance. More and more Sustainable Market Leaders, on the other hand, view sustainability as opportunity.
- They change direction to pursue sustainability related opportunities.
- They get their hands dirty. Sustainable Market Leaders accept that embracing sustainability is prickly and hard. As a result, these companies employ small, smart changes to what they already do to create value.
- They seek collaboration. Stakeholders have become adamant about being involved in the way companies create value.
- They put their money where their mouth is. Often sustainability initiatives are sparked by grass roots efforts. But these efforts just as often run out of steam. The culprit? Companies tend not to compensate employees for time they spend on sustainability grass roots efforts.
How do you create value? And is it created with the same basic ‘rules’ or steps no matter what industry?
The type of value I focus on these days is created by companies. More precisely, I concentrate on two things: for whom are companies providing value and how are they providing value. There was a time when the answer was straightforward – companies provide value to consumers by making things people want to buy. Sustainability has made this answer more complicated…for a good reason. Sustainability considers a wider range of stakeholders – citizens, activists, the environment, etc. – when evaluating how and how much value a company provides. It’s not enough for a company to make a pair of sneakers at an affordable price; today we must also consider whether either the environment and/or society gained value as result of the manufacture of the sneakers.
My book is called The Future if Value because it argues that companies can benefit by changing how they think about the value they provide. I want companies to realize that by considering the value they provide or extract from our planet is just as important a pillar of their profitability as the value they provide to consumers.
Where do you start to create a strategy from scratch?
In companies where sustainability is integrated with strategy (a place I want all companies to reach) the creation of strategy relies in a common approach. That approach is a ‘two-by-two’ box where companies place all things important to them (profits, talented employees, access to water) in a box on the lower right marked ‘high’ (there’s also a box in the lower left marked ‘low’) and then follow the same exercise with stakeholders in mind. This approach is called a “materiality assessment” because it shows all of the issues that are highly important to both companies and their stakeholders.
Companies then set goals to accomplish within each of these ‘high importance’ or ‘material’ issues. The steps needed to achieve these goals form the sustainability driven competitive strategies that Sustainable Market Leaders use.
Companies and organizations of all sizes can follow a similar approach to create a strategy from scratch. This is an area in which I frequently help clients.
How do you measure (and hence sell) value (as a company, but especially as an NGO/charity)?
Depends on the kind of value you want to measure. For companies, value can be measured in terms of employment (10,000 jobs added to region XYZ), in terms of financial performance (10% return on the investment made by investors), and customer satisfaction (99% of customers are so happy with our products that they would recommend us to their friends).
As an NGO/charity, the easy value measure is monies donated. The problem with such a measure is that it doesn’t convey the impact of the donation. So a better measure would be number of people who now can access clean drinking water as a result of your organization’s efforts.
To sum up, the way to measure value is by showing the impact your organization’s efforts had. Then you look for other organizations or people who want/need the kind of value you can prove (via measures) you provide.
How do you move from “doing what is expected” to “Sustainability Market Leader”?
Doing what’s expected is the easy way out. Becoming a Sustainable Market Leader – that is a company the embraces sustainability for profitability today and tomorrow – requires companies to connect their sustainability efforts and aspirations to their competitive strategies.
One way to do this is to go through the materiality assessment exercise I described in question 5. Once the company had identified the issues which are of high importance to both their stakeholders and themselves, it then connects these issues to relevant parts of it’s competitive strategy. These connections will help ensure that the company is both becoming sustainable and differentiating itself from the competition.
If you work for a company without a sustainability strategy, how do you convince them that they need to move in that direction?
This can be tough. The trick is to show how embracing sustainability can lead to increased profitability. The key is for an employee with a sustainability related idea – no matter her level within the company – to talk about the idea in business terms, not sustainability terms.
What could employees at any level in the organisation do to create value and work towards sustainability (I am not talking about switching off lights and computers every day…)?
Think about the things your company does well and then think about the environmental and social challenges our world faces. Look for problems your company can help solve – either on it’s own or in unison with other organizations (companies, NGOs, etc.).
Co-creation of value and crowd-sourcing: how will these change the face of CSR in the future?
Great question. In short, co-creation (with crowd-sourcing serving as an approach) efforts will separate Sustainable Market Leaders from their laggard peers.
I say this because sustainability is best thought of as a prism through which companies tackle the thorniest, most complex problems imaginable. Should we elect to drill in the Arctic, especially if people living in the Arctic want us to (because they stand to receive annual royalty checks from the oil, serving to lift entire communities out of near poverty)? How do we bring to life the fabled ‘Smart Grid’ which is estimated to cost several hundreds of billion dollars USD, when our company “only” has USD $1BN in cash? How can we entice consumers to care about Eco-friendly products when we will lose money on these products, per unit sold, if we don’t charge a premium price?
Ultimately sustainability boils down to this truism – we’re all in this same bubbling pot together. And the only way we’re going to get out is by working together. The companies that get this – Sustainable Market Leaders – are shifting their mantra from ‘maximize shareholder value’ to ‘maximize stakeholder value.’ The only way to get there is by working in concert with ‘the crowd’, not in opposition to the crowd.
Let’s say you’re a satellite operator: what areas would you focus your CSR efforts on?
Can I say this question is ‘out there?’ ha ha – pardon my poor attempt at humor 
.
I’d start at level one – how can I design my satellites to be as sustainable as possible. Fewest virgin materials and conflict materials needed, wholly reliant on solar energy, etc. Then I’d make my satellites in as sustainable a way possible. So focus on materials, supply chain components and worker conditions. With the environment well considered, I’d next shift my focus to the social side of the equation. What social problem (e.g., equal access to high speed internet) can I solve via my satellites. Finally, to the best of my ability, I’d be as transparent as possible about exactly what my satellites are being used for.
How do NGO’s/charities need to change to reap the benefits from this evolution towards value creation?
Raise their level of business savvy while not being afraid to challenge conventional thinking. Business is looking for partners and guides to navigate sustainability’s difficult waters. In return, they are willing (and eager, in some cases) to work with stakeholders, such as NGOs, to ensure that their stakeholders’ needs are met along the way. So demonstrate your ability to provide business with value and then figure out ways you’re organization can ideally receive value in return. The Sierra Club took this approach with their Clorox partnership. In return for providing Clorox with much needed know-how and reputation enhancement, The Sierra Club received a portion of the proceeds from the sale of Clorox’s environmentally friendly line of cleaning products. Clorox wins because it accesses much needed know-how; and at The Sierra Club wins by receiving additional funding…
What role does creativity play in the future of sustainability?
Creativity takes many forms. Thinking about new ways to gain access to resources to bring the Smart Grid to life – something bigger than your company. Finding ways to compensate and motivate employees for sustainable behaviors adopted. And means to solve environmental and social challenges simultaneously.
But the real role creativity plays in the future of sustainability will come in the form of how to stretch our minimal (and dwindling) set of natural and human resources to meet the needs of an ever growing population. Companies like Unilever are committing themselves to this challenge by setting goals to double in size and halve their footprint at the same time. That’s like saying I can eat double the chocolate I usually eat and lose half my body mass in the process. The twin goals seem impossible on their face. But here’s why creativity plays full boor. The company will need to fashion unique relationships with partners and competitors alike to achieve it’s set of twin goals. In the process, it will need to develop new solutions, new processes, new products, and new policies. The company’s likelihood of success will be determined by it’s ability to be creative.
If you could ask all companies in the world to change ONE thing with regard to sustainability, what would that be?
Their view on competition with peers. Sustainability is bigger than any one person, company, or country. By remaining locked in fierce competition with peers, companies are neither capable nor willing to unlock the value that can only be develed by putting differences aside and working together with their peers to solve common, larger than life issues. Until companies find a way to better collaborate with and out-compete their peers at the same time, we’re less likely to solve our most vexing environmental and social challenges.
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Thank you Eric for taking the time to answering our questions. We hope that companies, but also individuals will take your advice and turn it into value in thei environment.
Because money does not make the world go around anymore, value does!