My approach to integrating sustainability into strategy can be summed up in a single phrase: Profit-Enabled Impact. It’s another word for Shared Value (see Porter and Kramer, 2011). I opted for Profit-Enabled Impact because I got tired of people calling it ‘Shared Values’ and heading down avenues that were important but helped teams skirt the business model. Many people use the term Shared Value describe initiatives that are far from what its originators had in mind. A couple of months ago, I encountered an organisation – they even had ‘Shared Value’ in their name – touting philanthropy as an example of Shared Value. It was inappropriate to argue at the time but it pushed me into making the difference explicit. If we do strategic sustainability without engaging the business model directly, we are not yet in the starting blocks.
So, Profit-Enabled Impact it was. A bit in your face, but it makes a tactical point. I use the abbreviation PEI and I often talk about PEI patterns. I pronounce this ‘pay patterns’ to remind people that we’re talking about money, or more generously the idea of ‘pay it forward’. The concept is quite simple and it’s best explained using a typology of sustainability initiatives. When we are clear what it is not, we are probably also clear what it is.
This is a technical post and focuses on the process of PEI pattern analysis. By following these steps, you should be able to develop your own set of PEI patterns, if you’re the adventurous type.
Step 1. Context. First, ask why you want a set of PEI patterns. For example, you may want to:
- Identify relevant PEI patterns to help focus your strategic framework
- Identify PEI patterns to guide your ideation in respect of a particular challenge (e.g. supply chain localisation)
- Compare how your local peers are faring in the profit-enabled space
- Explore how global leaders are innovating to deliver profit-enabled impact
- Develop a leading indicator to supplement the ESG ratings of the companies in your investment portfolio, etc.
Your answer to the ‘why’ question will help you determine:
- The peer companies to include in your analysis – this is your ‘territory’; and
- How granular you may need to get.
Let’s imagine you’re in the ICT sector and you want to identify a broad set of PEI patterns that will help you progress strategic integration of Sustainability in your decisions and actions.
Step 2. Internal review. Start with your own company. Where are examples of PEI already emerging? They won’t be called that in your report. The people you speak to probably won’t even see them as ‘sustainability’. That’s why you’re doing this! Order a set of generic Ideator cards to help you and the team if you’re struggling.
A quick review of your Integrated and Sustainability Report, together with a range of conversations, may reveal that your colleagues across the business are already:
- Using a digital platform to sell micro-products like loans and health insurance. You might name this pattern ‘Micro-products‘.
- Selling data via informal spaza shops in the township areas. ‘Micro-entrepreneurs‘.
- Investing in ‘last mile’ connectivity in rural areas. You might name this pattern ‘Underserved areas‘.
- Finding ways to offer freemium services as a way to grow market share. You might name this ‘Freemium‘ or ‘Differential pricing‘.
- Training young black sales agents. ‘Skills development‘ or ‘Inclusive sales team‘.
Identify as many patterns as possible, with as many examples you can find of each pattern. Names are important, but don’t sweat over what you call the patterns at this stage.
Step 3. Peer analysis. Do the same thing using the disclosure reports of your identified peer companies. You’ve already been naming patterns, so it will get faster and you can improve the names as you go along. The number of patterns will increase. If you end up with too many (for the purposes of your process), you may want to scale back the level of granularity you’re working at. Iterate and improve. If you intend to compare yourself against peers, keep track of who is exploring what. It’s messy, but that’s the way of things in complex systems.
Step 4. BM receptors. Identify where the patterns might find traction within your existing business model. Think of these as possible connections like receptors in a cell or within your neural network. Here, they offer an opportunity to test a given pattern in your business. You can use Incite’s PEI Canvas to help you. If someone on the team can’t put into words how a given pattern might increase your revenues, reduce your costs and/or enhance the surrounding ecosystem, then put it aside and go on to the next pattern. Don’t worry about silly-sounding ideas – someone else might not think them so silly. And don’t throw away the ones you put aside: keep them for the next time you do the analysis. Where you actually decide to place the pattern on the PEI canvas is not that important. Different people will see different receptor sites. This is a good thing.
Step 5. Working PEI pattern set. Aim to identify up to 15 PEI patterns that have potential to deliver profit-enabled impact for your business. Clean up your list, write short (one sentence) descriptors for each pattern and think about how best to present them. A name, a photo/image and one example for each pattern is useful. Too many examples and you risk getting too messy again. Highlight those you are already exploring. Run a comparative analysis to see which of your peers are exploring more broadly and position your own company. (If they are not leaning in already, this will generally do the trick.)
A few tips from the frontline:
- Doing is knowing. The team doing the analysis is going to get very familiar with these patterns (all humans have an innate pattern recognition capability). But the team you may share them with has not activated this capability in the same way as you. I learnt that the hard way several years ago when I shared what I thought was a break-through set of patterns that Incite had generated for an ICT client: an uncomfortable silence was followed by a pointed query about where this lay in the terms of reference. I quickly learnt how to make the analytical process more inclusive and focused on bridging anyone not directly involved in the process. Since that time, I have steadfastly refused to accept any TOR that required me to follow a set process.
- Potential is not the same as actual. We are using patterns to get one step closer to better allocation of effort. This might simply be the leaning in of executives. The next step might be to train them how to use this tool themselves and to engage a lot more people in the process. To deliver the actual impact at scale, we need to ideate and prototype, which is another thing entirely. The point of PEI patterns is to make small safe-to-fail investments that are a little more likely to succeed. Small victories matter if we are honest about what they are.
- Be creative in how you use them. A basic set of patterns can be used in many ways to support strategic integration of Sustainability in your company. I learn something every time I do this analysis. Please share your experience.