Sustainable Business Communiqué: Navigating the Best Practice Jungle - When best practice isn’t the best strategy

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Sustainable Business Communiqué: Navigating the Best Practice Jungle - When best practice isn’t the best strategy

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Sustainable #Business Communiqué from @TheNaturalStep - Are best practices the best strategy? http://bit.ly/o90DPi #sustainability

Summary

As more and more businesses turn to the sustainability lens to help solve problems—such as creating shareholder value (and shared value), attracting and retaining top talent, issues of speed to market, and so forth—there is a growing collective agreement that a sound sustainability strategy can embed sustainability and its associated value into the DNA of a business. However, with confusion remaining around how to do this best, many organizations often turn to others’ best practices to define their own sustainability strategy. The question is: Are best practices the best strategy?  http://bit.ly/o90DPi

Tuesday, October 18, 2011 - 3:30pm

In the 1980s, the Brundtland Commission sent the idea of sustainable development ricocheting through the annals of history and organizations around the world. Since then, there has been an astonishing amount of work completed by organizations in the public and private sector alike, each endeavoring in different ways to work such that they do not “…compromise the ability of future generations to meet their own needs.” 

As increasing numbers of businesses recognize the inherent value proposition of sustainability there is a concurrent rise in the confusion around the best ways to address the sustainability challenge. Everyone is doing their own thing and we’re all learning from each other. The results are multiple best practices in everything from governance and leadership to carbon management and HR policies.

As more and more businesses turn to the sustainability lens to help solve problems—such as creating shareholder value (and shared value), attracting and retaining top talent, issues of speed to market, and so forth—there is a growing collective agreement that a sound sustainability strategy can embed sustainability and its associated value into the DNA of a business. However, with confusion remaining around how to do this best, many organizations often turn to others’ best practices to define their own sustainability strategy. The question is: Are best practices the best strategy?

The August 2011 Chart Focus Newsletter from McKinsey Quarterly helps to answer this question. “Spurious frameworks and torrents of data often obscure the basic principles of good strategy,” the authors state. “To beat the market, companies must exploit imperfections that stop (or at least slow) its workings. Such competitive advantages are scarce and fleeting because markets drive a reversion to mean performance, as middling companies emulate the best, and the worst exit or undergo significant reform. Good strategies therefore emphasize difference… not industry-wide best practices.”

In another McKinsey Quarterly from January of this year, Phil Rosenzweig, a professor at IMD, writes: “There’s always new stuff out there, and most of it’s not very good. Rather than looking for the next musing, it’s probably better to be thorough about what we know is true and make sure we do that well.” In other words, copying what others are doing will not differentiate ourselves in the market, so focus is better put on building a robust understanding of ourselves and acting from this sense of clarity. 

But does that really mean that best practices suck?

Of course not. Best practices spark ideas. They are helpful in identifying good actions. When mimicked, they are a soft entry into sustainability for those who are not keen on or ready for leadership yet. And they demonstrate the baseline of where leadership currently lies when it comes to operationalizing sustainability strategy.

But here’s the thing about best practices: they are only best practices in the absence of anything better. The pace of change in today’s world means that what is best practice now, quickly becomes status quo, and then passé. Given the urgency of the sustainability challenge, this is a good thing. From a perspective of sustainability leadership, though, we may be better served to look to the idea of ‘next practices.’

Next practices are the best practices of tomorrow. They are the disruptive technologies, processes, communications, and relationships that will create the fabric of the sustainable enterprise. They help to ensure the market for the company’s products and services in the future and represent the manners by which the company gets there.

So how do we build a sustainability strategy that leverages the value of current best practices and identifies the next practices that will leapfrog the company to where it wants to go?

Herein lies the value of a framework. We at The Natural Step are big fans of planning that incorporates backcasting—beginning with the end in mind. When a company knows what the end game looks like, it can cut out a lot of the confusion around whether certain current best practices are relevant for it. From a sustainability perspective, this looks like the company defining what success looks like, constrained by fundamental socio-ecological principles of sustainability—or having eliminated its contribution to root causes of unsustainability. When considering an initiative already in practice in other organizations or industries, one can screen its applicability by determining whether it will move the organization toward its long-term vision of success, whether it can act as a flexible platform, and whether it will provide sufficient return on investment for the company.

This is echoed by Richard Rumelt in his June 2011 McKinsey Quarterly report, The Perils of Bad Strategy, where he notes that good strategy—strategies that work—have a basic underlying structure which includes:

  1. A diagnosis: an explanation of the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as being the critical ones.
  2. A guiding policy: an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.
  3. Coherent actions: steps that are coordinated with one another to support the accomplishment of the guiding policy.

This approach, informed by a definition of the end game—which itself clarifies the challenge/diagnosis—helps to weed the applicable best practices from the so-called ‘best practice jungle.’ It also sets the company up to develop its own new practices—the next practices of its industry—which may in turn become the best practices of tomorrow, then status quo, and then passé. And that’s a good thing, too. We need evolution. It’s how we—and our companies—develop to survive and thrive.

Best practices have their place. They provide inspiration and proof of possibility. After all, they are not called best for nothing. To take a leadership position, however, best practices need to be complimented by a bolder narrative for sustainability guided by a strong framework. Then we can focus on what Rosenzweig calls, “what we know is true.” This will include knowledge of the company’s key sustainability challenges, strengths, and a clear sense of where the organization is heading for the future—a defined end game. With a clear sense of the gap to close, companies can then look to current best practices for inspiration and starting pads. These, in turn, can be utilized to spark development of the organization’s next practices, which will provide the stepping stones off of which it can leap to the sustainable future.

Happy planning!

Sarah Brooks is a Principal Advisor and the Senior Manager of Sustainable Business with The Natural Step Canada. Find out more about The Natural Step Canada’s service offerings for business or contact Sarah at sbrooks(at)naturalstep.ca to organize a free webinar for your team. To receive quarterly communiqués on sustainable business topics from The Natural Step Canada, please click here.

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