What is a sustainable business? The traditional business thought process has centered on the value creation for the shareholder and company as the primary “product” of the business. This mentality has emphasized metrics that are externally focused and investor driven, which has lead to a flow-down of internal metrics that are purely “financial” in nature. In addition to the financial market perspective, businesses have also been conditioned to look first at the products they wish to develop and sell to the markets and the customers, then to go seeking customers for those products.
Build the Product, Find the Customer
For decades, businesses have essentially had the paradigm of building businesses—gathering resources, constructing buildings, putting in capacity, designing products, and making them—then to search for someone to buy what they are selling. In other words, businesses have engaged in “pushing” the product to the market, seeking to establish relationships by knocking on the doors. Businesses traditionally have said, “Here is our product and you should buy it because we are selling.” In many instances, this works. You aren’t making a new market. You aren’t doing anything differently than any other person knocking on the customer’s door. You are there with a “me too” product, an alternative to what they are already doing, a substitute product for what they have been buying, or a product that has the same form and function only with a different price.
And there’s the problem. It only works to a degree, so far as you can keep knocking on those doors and compete on price or possibly on quality, relationships, location, and/or delivery. You may be able to win on a given day, but you have to keep going back to win again and again. You have to keep knocking on the customers doors, over and over. You are no different than your competitors. You are providing the same value to the customer at slightly different prices.
Find the Customer Need, Develop the Product
For the SUSTAINABLE business, we need to have a slightly different perspective. The business has its resources and processes and people as a foundation to build upon. Everyone is part of the value creation and is directed toward creating operations that are efficient, effective, and customer driven. The organization is about value creation for the customer and aligned to drive activities at all levels in all areas toward a customer focus. Customers are internal and external to the organization. Customers require delivery of products and services that are differentiated from what everyone else is offering. The customer expects what you are doing for them to help them create value for THEIR customers (value creation for your customer is about making them better off than before they entered into a transaction with you). The exchange of money for your “product” will only take place when they believe the value they receive will exceed the price you asking for your product, including services from first contact to paying the final bill.
Your business creates value for itself and financial results through the value creation for the customer and finding the price that the customer is willing to pay and capable of paying. (Also consider this: not only are your customers willing and capable, but do they actually pay, and do it on time?)
Financial returns are no longer an external focus of the business; instead, your financial results are internalized into all aspects of the business. Thus, sustainability is integrated into all aspects of what the business is and does, at all levels and in all activities. It is part of what everyone does:
- Acquiring resources
- Paying for those resources
- Using resources
- Converting resources
- Selling to customers
- Collecting on sales made
- Setting credit terms
- Negotiating credit terms with vendors.
All things impact the sustainability of the business.
So, the sustainable business is:
Viable—A business that has a product, service, or technology that answers a market need. It can be positioned to create value for the customer. The customer is willing an able to pay for that value. The price the customer pays includes a profit. Profitability is long term, not a one-shot or short-term perspective, but something that can be maintained through product features, business capability, processes, or market advantage.
Visible—The marketplace, including customers and prospects, is aware of the business and its product portfolio. It has an image, a brand, and differentiation from the competition. The business offers something that the market values beyond the product features: quality, delivery, community involvement. The business is an entity, a “personality” that attracts the customer to the products and to the message.
Capable—The business can execute on the business of being in business, of delivering the product, of standing behind its message, of being a responsible business. The business does what it says it will do and is responsible. The business knows its business, products, marketing, and all aspects of who, what, when, where, and how it does what it does.
Credible—The business says what it does, does what it says, and when things go right reaps the rewards. When things go wrong, the business steps up and takes action and holds itself accountable—BEFORE the customer does. The business keeps its promises and when it can’t, hasn’t, or has a failure, moves to make things right and accepts responsibility. Think: “Put the customer first, profits second,” so that profits are a long-term commitment (no short-term gains at the expense of the customer). The best example of long-term thinking for credibility was the Tylenol tampering case. The company pulled EVERY bottle of Tylenol from the shelf. That action saved the brand and the company. It cost immediate profitability, but saved the company’s credibility and put the customer first!
The sustainable business is about the customer and about being in business for the long term.
The Sustainable Business is characterized by:
- Depth of understanding of internal business operations
- Cost structures
- Core competencies
- Operational constraints (bottlenecks)
- Resource needs and opportunities
- Strategic objectives
- Performance targets
- Financial results
- Activities and processes and associated costs
- Broad industry and market knowledge
- Detailed customer decision criteria and motivations
- Ability to create differentiation in the eyes of the customer
- Focus and capability for value creation for the customer
- Capability to price strategically creating congruence between customer values and business objectives
- Integration of all levels of the organization in the customer value creation process and profitability equation
Today is about making decisions that keep the business in business and moving toward profitability, growth, and customer value in the long term. We thrive instead of just survive. Sustaining the business is about focusing on the customer by creating customer value and delivering to the customer solutions, products, services, and technology the customer is looking for, not developing what we as businesses want to sell and then going out to find customers. Sustainability is about customers: first, last, and always. It is about being efficient and effective in our operations in providing solutions to the customer. Revenues and profits: two things every sustainable business needs.
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