Exploring business strategy and sustainability from a traditional strategic management lens. Lecture delivered to Edinburgh Napier Business School students in 2013.

1. Embedding Sustainability into Strategy I:
A source of business opportunity
underpinning competitive advantage?
Dr. Miles Weaver,
School of Management,
Edinburgh Napier University
m.weaver@napier.ac.uk
@DrMilesWeaver

2. Learning outcomes
After this lecture and independent study you should
be able to:-
– Describe the context of why organisations are pursuing (or not) an
agenda for sustainability
– Discuss some of the significant contributions, issues and
implications for researching business strategy and the natural
environment plus social responsibility
– Explain what is meant by the „natural resource-based view‟ of
the firm (one key emerging theoretical perspective)
– Evaluate the generic strategic responses to sustainability

3. Strategic aspects in context (I)
• Evidence that increasing number of firms • There are various models of
now accept that environmental protection „corporate greening‟ and
and social responsibility is normal part of „social responsibility‟ - based
doing business (the „why‟ – still a hot topic on different types of firm-level
for debate and views vary widely) response (next week)
• Research efforts are now moving towards • We shall look at the key
seeking to address „what‟ and „how‟ aspects involved in developing
organisations can embed sustainability into environmental and social
competitive advantage (i.e. incorporate the strategies/policies in detail
natural environment and deliver social (next week)
aims
• At the core of our thinking is
that environmental and social
• There are several ways of gathering
strategies or policies can be
information on environmental and social
used „strategically‟ (e.g. to
impact to facilitate business decision-
gain competitive advantage
making (i.e. Environmental assessments, audits and
reviews, social accounting) and/or to compete on cost)

4. Strategic aspects in context (II)
To incorporate a „sustainable‟ response from an organisational
perspective:
• Welford and Gouldson (1993) • Management of organisation
argue that from the outset there seen as critical in developing
needs to be real commitment not only environmental
on part of whole organisation objectives/policies/strategies
(i.e. all departments involved) but also appropriate corporate
culture

5. Drivers and facilitators for change
Laszlo and Zhexembayeva • Increasing
(2011) described three big expectations
trends:
– The customer rising
– The employee
• Declining resources engaging
• Radical transparency – The investor calling
– First: The power of
numbers (civil society)
– The regulator acting
– Second: The magic of low-
cost communication Threat or opportunity?
– Third: The culture of
connectivity

6. At the core of this debate is understanding what is
meant by „value‟
“the business of business is Q. Shareholder value
to create shareholder value” perspective been the most
dominant view? Still?
• In terms of “solutions” – to solve
internal or external client problems
• In terms of a set of “end benefits
and outcomes” for customers,
consumers, employees, and other
key constituencies (i.e. airlines sell
an „emotion‟ such as opportunity to
see family/friends as well as a
„seat‟)

7. Understanding value (II)
• Emerging view – the
relationship between business An historical perspective
and the rest of society requires:
• Better understanding of
„capitalism‟ today (not
explicitly in our scope)
• Forces currently driving the
sustainability agenda in the
private sector and indication
of where this debate is going
Today’s starting point ….

8. Sustainable Value = both + to shareholder & stakeholder
(Laszlo and Zhexembayeva, 2011)
• Creating on-going value
for an organisation
shareholders and
stakeholders
• This is a natural outcome
of the new external
environment
• Responding positively to
a range of „stake‟ holder
needs
• Indispensable to future
competitive advantage

9. Laszlo and Zhexembayeva (2011) thesis:
“doing well by doing good”
“no longer necessary to create a painful compromise
between delivering value to shareholders and creating
value for the stakeholders”
• “Pursuing both – shareholder and stakeholder needs – creates
sustainable value beyond the expected images of compromise,
balance and trade-off”
If this is the new frontier, then the questions should include:
1. How do you get this done?
2. How do you respond to the new pressures of social and
environmental performance?
3. What is business to do?

10. Las Meninas

11. Just a thought ….
Between August and December 1957, Pablo Picasso painted a
series of 58 interpretations of Las Meninas. These paintings
currently fill the Las Meninas room of the Picasso Museo in
Barcelona, Spain. Though Picasso did not vary the
characters during the series, and largely retained the
naturalness of the scene, his works comprise, according to
the Picasso Museo, an "exhaustive study of form, rhythm,
colour and movement".

12. Refresh: “What‟s in a name? ……
That which we call a „strategy‟
Core logic of strategy:
• Strategy must be a trade-off
between internal strengths and
weaknesses and external
opportunities and threats.
• The purpose of strategy is to
achieve a sustainable
competitive advantage
• Strategy must emerge fully
formulated before it can be
implemented
• Strategy must be unique
• A strategy will protect and utilise
unique resources
• Strategies are long-term, and so
must use forecasting techniques
Johnson, Scholes & Whittington (2012)

13. Question for the „design‟ view on strategy: Where and what weight
is placed on the natural and social environment in traditional
strategy thinking?
Threats and Creation
Strength &
External Opportunities Of
Weakness
Appraisal In Environment Strategy
Of Org. Internal
Appraisal
(identifies (identifies
key success distinctive
factors) competences)
Evaluation &
Choice of
Strategy
Social Managerial
Responsibility Values
Implementation of Strategy
Mintzberg, (1990) p 174

14. Question for the „positioning‟ view on strategy: Where and what
weight is placed on the natural and social environment in
traditional strategy thinking?
Competitive strategy
• The bases for achieving
competitive advantage
• The bases for providing best
value
L&Z (2011) provide insights into:
• Sustainability as a source of
cost leadership
• Sustainability as a source of
differentiation
• Utilising sustainability for market Porter (1990)
segmentation (focus)

15. Sustainability and strategic positioning
• L&Z (2011) argue that • Sustainability-driven
pursuing social and initiatives to:
environmental – Reduce costs
performance can – Differentiate products
– Enter new markets
strengthen (or
– Enhance reputation
weaken if done (should be seen in the
inappropriately) context of reinforcing the
company‟s existing
strategic positioning. strategy and business
priorities)

16. Question for the „resource-based‟ view on strategy:
Where and what weight is placed on the natural and
social environment in traditional strategy thinking?
• Competitive advantage • Value of resource-based
derives from the view:
distinctiveness of an – Search for strengths (and
organisation‟s capabilities weaknesses) and articulating
these more effectively
– Some businesses achieve – Understand how firms have
extraordinary profits resources that distinguish
compared with others in the them from others
same industry – Understand how firms do stuff
– Their resources or (capabilities) differently
competences permit – Understand how firms have core
• production at lower cost activities (competencies) that
or drive their competitive
advantage
• generation of superior
product or service at See Prahalad and Hamel (1999)
standard cost

17. Resource-based view of strategy (II)
 Threshold resource capabilities: • Core competences are activities
those essential to compete in a and processes through which
given market (Required to be “in
the game”) resources are deployed such as
to achieve competitive
 Threshold levels change over advantages in ways which others
time cannot imitate or obtain
 changes in critical success
factors
 new entrants
 competitor activity
• Unique resources critically
underpin competitive advantage
and cannot be imitated or
obtained by others
Source: Johnson, Scholes and Whittington (2011)

18. Just for fun ….
Resource-based view of strategy (III)
Clear
Differentiation

Add
Value

Reduce
Costs

Proprietary


19. Implications for research in business
strategy and the natural environment (I)
Generally:
• In 1998, Aragon-Correa reported little attention
had been received in the literature on
business strategy and the natural environment
• Even in „organisational theory‟ concerning the
needs for firms to adapt their contexts have
consistently ignored the importance of the
natural environment (e.g. Purser, Park &
Montuori, 1995; 1962; Shirivastava, 1994)
• Traditional focus is a need to adjust
organisational capabilities to the surrounding
situation (e.g. Andrews, 1971; Hofer & Schendel,
1978)

20. Implications for research in business
strategy and the natural environment (II)
For strategic management as a discipline:
• Traditional strategic management views have focused
upon a narrow concept of the environment that
emphasises political, economic, social and
technological to the virtual exclusion (Hart, 1995;
Shirivastava, 1994; Shrivastava & Hart, 1992; Stead &
Stead, 1992)
• RBV systematically ignores the constraints imposed
by the natural environment (e.g. Brown et al., 1994;
Hart, 1995; Meadows et al., 1992)
• CSR is an important element in strategic management;
in terms of how „strategy formulation‟ is shaped but this
is no substitute, as there is much debate on what CSR
includes and the level of firm response

21. Going forward …
• RBV and the positioning school of strategy does provide
sophisticated language and concepts to explain how an organisation
seeks to be different, the essence of „competitive strategy‟
– This means deliberately choosing to perform activities differently or to
perform different activities than rivals to deliver a unique mix of value
(Porter, 1985)
– Posits that firms must raise “barriers to imitation” (Rumelt, 1984) by
underpinning capabilities with resources that are not easily
duplicated by competitors
– Explicitly highlights the threshold resources and competences that
offer “the level playing field” (e.g. Is „Being Green‟ a normal part of
doing business, or part of? How is this shaped by external and
competitive forces? – to be debated in next week tutorial)

22. Natural based view of the firm
(Hart, 2005)
• Competitive advantage, is to
• Hart (2005) proposed a basis for integrating be rooted in capabilities that
firms‟ relationship to the natural facilitate environmentally
environment into resource-based theory (a sustainable activity
dominant view) and indirectly into strategic
management
• It appears inevitable that
business (markets) will be
• Central to Hart‟s proposition is that one of the constrained by and dependent
most important drivers of new resources upon ecosystems (nature).
and capability development for firms will be
the constraints and challenges posed by the
natural environment

23. Generic strategy responses to
sustainability – next week starting point
(Laszlo and Zhexembayeva, 2011)
• Field of strategy offers
advice and input into the
best strategic response
to the new market reality
• Value destruction:
adding cost and making
trade-offs
Since added:
• Radical innovation
underpins all responses
(guest lecture to follow)

24. Summary of key points (II)
• “doing well by being good” is increasingly being accepted as a normal part
of doing business (the „why‟?). Debate has centred on an ever changing
view of the role of business in society
• A review of different strategy schools of thought offer some insight into
strategic responses on sustainability. New thinking emerging to address the
limitations in organisational theory and strategic management by
incorporating the „natural environment‟ (i.e. Natural-based view of the
firm)
• The debate in practice is evolving; the tools and academic discussion are
advancing! A turtle only makes progress when it sticks it neck out! – few
organisations do; many follow, perhaps slowly as competitive and external
forces change over time? (debateable?)

25. Summary of key points (II)
„fit‟ or „stretch‟ to external
environment / effect of Are we nearly there yet?
„strategic drift‟
• Mañana?
– Radical (!!!) vs. Incremental (???)
• Source of competitive advantage
– All (umm but?) or some (but „how‟?)?
• Normal part of doing business?
– [Differentiation and/or cost
advantage] and/or level playing field
leads to raising the standard
• Understanding our resources and
competences critical
– Unique / threshold
Johnson, Scholes & Whittington (2012) – Barriers to imitation