Vital to Business Survival: Reading the Signs of Change

By Brandi McManus
January 26, 2009

In this era of heightened environmental awareness, the ability to
recognize the transformational power of the green movement -- and act on it --
can be the difference between life and death for a business. Brandi McManus'
four-part series "Growing a Green Corporation: Meeting the Next Great Disruptive
Challenge of the 21st Century" begins today with a look at the perils of failing
to recognize disruptive change.
Muskets, Crossbows and CEOs

In the 18th century, warfare was changed forever. Out were the romantic knights
with armor and lances, and in were muskets, artillery and infantrymen. Armies
now used gunpowder as an effective means to destroy an enemy from afar. Although
early muskets had a limited rate of fire, range and accuracy, firearms allowed
anyone to become an effective soldier with very little training. Previous
military units like bowman and knights needed years of practice to master their
skills. These disruptive changes created an entirely new approach to the art of war.

The prince or king -- the CEO of that era -- who recognized the disruptive force
and seized upon it early gained an overwhelming advantage.

Growing A Green Corporation
This four-part series covers ...
Reading the Signs of Change
Assessing the Impacts of Environmental Pressure
Investing in Sustainability: Shades of Green
Building Your Green Team

Disruptive change is present in every era. It shifts the underlying forces of
society, industry or business. In modern times, we have many examples of
industries undergoing a disruptive change -- computers, telecommunications,
pharmaceuticals, newspapers and music to name a few.

The question facing today's CEO may not be a matter of life and death, but it is
vital to business survival: What is the next great disruptive change, and when
should you act?

History is littered with the failures of companies that did not see disruptive
change or technology: Kodak and the digital camera, BMG and digital music, the
minicomputer industry and personal computers, and Dell's entrance into printing
and the threat it posed to HP. Fortunately, history reminds us of the success of
those who ride the wave of disruptive change: Apple with its iPod, General
Electric, SAP and Oracle.

There are huge rewards for recognizing the indicators of disruptive change. The
penalty for lack of response? Struggle, failure and an ignoble exit.

What in the world is the next disruptive force?

Business leaders in every industry have a powerful interest in figuring out what
the next big disruptive change will be. Will society move to e-books? Will
voiceover IP dominate the telecommunications industry? Will CD collections be
discarded in favor of digital?

Those are important issues, but they pale next to the real change that is
coming. The clues to this change are literally all around us -- in the air,
under our feet and in our water. The single most important issue of our
generation is not only threatening how we do business today, it is threatening
our society, economy and health.

This looming issue is the environment.

Once a concern only for hippies and extremists, the environment has become a
pressing issue for everyone living in our world today. In "Green to Gold: How
Smart Companies Use Environmental Strategy to Innovate, Create Value and Build
Competitive Advantage," authors Daniel Esty and Andrew Winston write: "In
today's world, no company, big or small, operating locally or globally, in
manufacturing or services can afford to ignore environmental issues."

Some may argue about the causes of climate change and the role that humans play.
But from a business perspective, there is no question that the environment is
fast becoming a driving force behind public, governmental and economic
activities around the world.

In short, the environment is the new musket.

As business leaders, we understand there are constraints on our growth. We can
be limited in revenue by our headcount. We can only sell as many products as we
can purchase parts for or build in a given time. There are only so many hours in
a day, people in the factory and dollars in the bank.

Natural systems have limitations too. Some experts estimate that $33 trillion
worth of "free" services are provided by the planet each year, including soil,
fresh water, breathable air, pest control and livable climate. These services
never appear on balance sheets, but they are beginning to impact businesses.

At worst, these free services -- or the lack of them -- can constrain business,
shape markets and threaten the planet. However, these impacts are not immediate.
We do not know the timeline for when a resource will become scarce, too
expensive or disappear. All we can do is watch for the indicators.

The looming issue is the environment.

Some simple indicators from environmental issues that you may already be aware
of are environmental laws and regulations, challenges from Non-Government
Organizations (NGOs), large customers putting pressure on suppliers to be green
and the speed of developing and holding market share in business today.

One of the fastest growing and most immediate business threats related to the
environment comes from investors and stakeholders, who in growing numbers are
watching the indicators and asking hard questions about environmental
responsibility. Business leaders who ignore these stakeholders can be subject to
a public relations scandal, a destroyed market, ended careers and millions to
billions of dollars lost.

Recently, a leading soft drink company learned this the hard way when its
bottled water was pulled from the British market for failing European Union
water quality tests, Esty and Winston noted in their book. The same company has
been targeted by activists in India for water consumption in drought-prone
areas. And in January 2006, a major U.S. university suspended the purchase of
this company's products, in part because of concerns over environmental issues.
While it is difficult to measure the full financial impact of these actions, the
company has suffered irreparable brand damage in the second most populated
country in the world. That is disruptive change.

Apple Computer has also received this message loud and clear, and responded
quickly. In 2006, Greenpeace targeted Apple "iWaste" with a "Green my Apple
campaign." Then in spring of 2007, Greenpeace issued a guide to electronics that
ranked major corporations on their reduction of toxic chemicals and electronic
waste, with Apple ranked last. This coincided with the release of the iPhone and
stockholders took notice. America's most innovative brand cannot afford an
environmental attack. Quickly Steve Jobs, the company's CEO, issued a letter
that promised a "greener Apple."

Further evidence of the importance of this issue was found in a more unlikely
spot the same year. Sports Illustrated published a cover story on climate change
that discussed its impact on sports. While many readers were irritated by
coverage of the highly charged environmental issue and the magazine's take on
the topic, the article made an interesting point about climate change -- it will
change the games that we play.

Many companies with well known brands and multinational operations are finding
that customers and shareholders have become vocal about business practices. Your
customers and your bottom line are what are driving climate initiatives and
business innovation. That's exactly what makes it so disruptive.


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