An unprecedented change is unfolding visibly in our world and our lives. We can no longer ignore extreme events like heat waves, floods and hurricanes that are tipping the balance of nature with unprecedented ferocity and have irreversible impact on nature and biodiversity.
We need a new mindset; we can’t solve these problems with the same attitudes that created them. A more sustainable approach will unearth new competitive advantages that balance purpose and profit.
We are now in a spiral of devastation from which our lonely planet cannot recover by itself as human consumption outstripped the Earth’s biocapacity several decades ago. What seemed an efficient way to produce energy led to huge climate change. Dogmatic beliefs in the innate efficiency of supply chains created inequality, fueled discontent and triggered protectionist policies and populism. Premature celebrations of economic progress gave way to disturbing evidence of biodegradation that threaten a catastrophe for a million species. Traditional economic theories of efficient markets are being tested as our world is consumed by our enormous capacity for production.
We have discovered our economy is profoundly uncircular, and we are facing a backlash against excess that few predicted as the post-second world production boom and the Efficient Market Hypothesis became unquestioned dogma. Consumption based on non-renewable resources is driving climate change which disrupt ecosystems and food chains, creating fertile conditions for new diseases. Poor air and a lack of potable water are already sources of geopolitical instability. Airborne toxins are the fourth-biggest killers as nine out of 10 people breath air that’s below WHO’s safe limits. Every day, almost 700 children under the age of five die from diarrhea, and by 2050 some three billion people will live with severe water-scarcity.
It is heartening that more people are heeding the warnings. Awareness of climate change and the need for a new approach is accelerating, but this has not yet reached the critical mass needed to make a sustained difference.
I am not proposing to reduce consumption as this will prompt an economic crisis. We must create renewable resource capacity to reverse the ecological damage. Smart solutions are evolving quickly, and carbon neutrality and biodiversity are new focus areas for businesses. A concerted focus on sustainability and technology will together build a platform for success. The financial world is already supporting technology that speeds up solutions and turns sustainability challenges into opportunities.
Smart solutions are evolving very fast and carbon neutrality and biodiversity are becoming new focus areas for businesses to address. The sustainability and technology together will help build new platforms for success. Technology will speed up these solutions and can turn this challenge into an opportunity and the world is gearing up to support and finance such activities.
Business models that use fewer materials and are focused more on consumer experience will be increasingly important, especially those which leverage technology and human creativity and are guided by circularity. New revenue and competitive advantages will emerge as we embrace innovation to fulfil our social and environmental responsibilities.
Several countries and leading companies have committed to carbon neutrality. However, governments, society and businesses need to collaborate globally to be GHG negative. Circularity is increasingly accepted as a solution to conserving natural resources. The balance of nature itself is the essence of circularity and we must align to its natural laws to find elegant solutions. Business models be designed for “next life” instead of “end-of-life”.
Consumers are already looking for experiences that are based on the new business model. Companies can turn this into a valuable advantage by knowing their minds and exploring where it may lead. Technology will play an important role in turning this into reality, especially for those who understand data and how to leverage it.
Our teams should be as diverse as our society, able to design and create solutions that mirror consumers across geographies, religions, race, education, gender, age, values, and preferences.
Humans have an enormous cognitive surplus – a trillion hours a year of free time that can be deployed for creative ways to boost productivity. Eric Schmidt, the former executive chairman of Alphabet, said the next 100 billion company will likely result from wisdom of many. We have all done crossword puzzles and the like in our free time. If businesses can capture this resource by engaging people in a creative process aligned with their passions and interests, we can unlock huge value. Businesses can encourage employees to consume, share and create and turn their cognitive surplus into a competitive advantage.
A shared economy optimizes resources and monetizes underused assets to create new revenue streams. Shared platforms increase collaboration between stakeholders and become a competitive advantage. The shared economy is forecast to reach $1 trillion by 2030.
Similarly, the gig economy offers more flexibility, lower liability, and lower costs compared to full-time employees. This creates more autonomy, diversity and replaces traditional full-time employment into part time work which helps more efficient use of resources. The Gig economy is forecast to reach $ 1 trillion by 2028.
Globalization moved the production of labor-intensive businesses to low-cost regions, but this left behind a generation who lost opportunities and who now face rising inequality and serious disruption. The existing offshoring model is being challenged amid stretched supply chains and waste. For example, nearly one third of clothes shipped from Asia to North America are never sold. Another business model is emerging in countries like Bulgaria, Morocco, and El Salvador, among others, in which smaller, specialized and build made-to-order products.
A newer business model is emerging that is near the consumer, smart, multiproduct, customized, and built around new materials, circularity, nature positive. In this smart model, robots work alongside humans in more flexible workplaces that are located closer to consumers. Automation combined with artificial intelligence reduces the wage and skills gap and provides a competitive advantage and balances environmental and economic costs. The Covid-19 pandemic, in which supply bottlenecks squeezed the entire value chain, underscored the need for this new business model. The new economy must be able to supply “on demand”.
A widening digital gap is worsening fractures in society and undermining an inclusive recovery. Governments and social institutions must retrain the work force and strictly regulate for green end-to-end value chains. We need a more responsible, eco-friendly, and inclusive world to stave mass discontent, populism, and protectionism.
So, who will be the winners in this unprecedented era of change?
- Visionaries think decades or even centuries into the future and lay foundations today for future.
- Those who compete with new business models that are nature positive, deploy smart manufacturing and are inclusive.
- Those who have the capacity and will generate new competitive advantages that balance purpose and profit.
- Those who are obsessed about the customer experience, innovate, and stretch the boundaries of influence.
- Leaders who use open-source business models to tap the cognitive surplus of human creativity.
- We must break our attachment to the past and recognize that competition can come from outside our industry.
- Successful managers will organize diverse teams that mirror society and harness their combined creativity to design more useful solutions.
- Those who believe sustainable success comes from habit forming transformation.
- True leaders are mindful of disruptions and sense early symptoms to turn the challenges into opportunities.
The winning “new” business models will confront environmental degradation, inequality, and social discontent, and be inclusive of all interest groups. They will do this by leveraging digital technology, embracing the diversity of minds, harnessing the cognitive surplus in our society, and looking for circularity in every opportunity to drive new revenue and competitive advantages.
Chief Strategy Officer - IVL Group
Indorama Ventures PCL