The right approach to strategy and innovation is critical for the competitiveness of any business. This obvious statement became particularly evident to well-established companies two decades ago with the emergence of transformative business models enabled by technology, data and customer empowerment. Since then, most companies have developed internal strategy and innovation capabilities.
Internalization of the Strategy and Innovation functions was particularly active in the 2000s and 2010s respectively. Both functions now enjoy a good organizational visibility in most sizable organizations, although their contribution to financial and ESG performance differs among companies. In some cases, these areas provide differential intelligence and drive change, while in others they act as mere consolidators of information and are disconnected from business dynamics. Therefore, the way in which these functions have been designed and implemented is driving their impact in value.
Through the 2020s, companies will deal with the internalization of Sustainability. A material improvement in decarbonization and societal wellbeing will only be possible if business models radically improve their sustainability performance. This journey can be much more efficient and effective if it leverages the learnings from the implementation of internal strategy and innovation capabilities.
In the case of Sustainability, many companies are transitioning from the Awareness stage to the Management one. They must navigate through these first stages to ensure that the whole organization understands, lives and integrates the sustainability component into their day-to-day activity. The objective is to enter the Integration stage in the shortest possible time. Experience from the Strategy and Innovation journeys says that some levers are particularly effective to achieve this objective:
- Strong positioning of Sustainability as a strategic imperative by the Board of Directors, CEO and senior executives.
- Clear narrative of what Sustainability means to the company, articulated through bold and tangible transformative courses of action to address several priorities. If the company’s stakeholders perceive sustainability initiatives as a “greenwashing” program, the loss of credibility and engagement will prevent meaningful progress for a long time.
- Empowered organizational network, integrating technical and business profiles and focusing central resources on responsibilities in which they are truly differential, such as capital allocation and ecosystem management.
- Initial diagnostic and multi-year plans to evolve towards dynamic road maps embedded in the company’s strategic objectives.
- Tools to measure the financial and ESG contribution of sustainability-driven initiatives.
Once the decision to internalize the Sustainability function has been taken, its design and speed of implementation will be a driver of competitive advantage. There is no single “right” solution; each company must shape its journey according to its aspiration, organizational model, culture and experience from previous internalization developments. Companies that achieve a seamless integration of strategy, innovation, sustainability and operations will be unbeatable.