VUCA and Sustainability Strategy

• VUCA stands for Vulnerability/Volatility, Uncertainty, Complexity, and Ambiguity.
• Vulnerability/Volatility refers to frequent and unpredictable changes, even when their causes are understood.
• Nokia failed to recognize the smartphone revolution.
• Uncertainty refers to a lack of knowledge about future events, possible outcomes, and their impact.
• Nokia had a weak software and OS strategy.
• Complexity refers to the interconnected and unpredictable relationships between different factors in a system.
• Slow decision-making and bureaucracy negatively impacted Nokia
• Ambiguity refers to uncertainty about fundamental rules and cause-and-effect relationships.
• Nokia failed to recognize the VUCA world.

Sustainability Strategy

• Adaptability involves handling market shifts; sustainable businesses are flexible and can quickly adjust to changes in the market, new regulations, and shifting customer preferences.
• Innovation and Differentiation means staying ahead, focusing on sustainability, and encouraging businesses to create new and improved products, services, and processes.
• Brand Strength and Market Perception involves winning customer trust, building trust, and attracting loyal customers.
• Regulatory Advantage means staying ahead of policies.
• Risk Management means future proofing the business.

Competitive Advantage vs. Viability Advantage

• Competitive Advantage is about outperforming rivals by creating economic value through efficiency or unique positioning.
• Competitive Advantage's focus is limited to industry-specific competition and customer needs.
• Viability is the ability to survive and sustain operations and goes beyond gaining a competitive edge.

Key Elements of Viability

• Operative Management: efficiency and execution to ensure smooth operation.
• Competitive Advantage: cost leadership, productivity, and operational excellence.
• Business Management: assessing customer needs and industry needs.
• Competitive Advantage means outperforming competitors.
• Strategic Management involves dynamic capabilities and the ability to adapt and integrate.
• Competitive Advantage means building core competencies.
• Institutional Management means complying with influence regulation.
• Competitive Advantage means adapting to existing market conditions.

Viability Advantages of Sustainable Business

• Long-Term Strategic Vision Successful businesses focus on long-term goals rather than short-term market changes.
• Resilience to Change means viable businesses can handle disruptions like market shifts, economic downturns, or new regulations; they adapt quickly and keep operating smoothly despite challenges.
• Sustainable Business Practices involves Companies that use eco-friendly and ethical practices protect resources, the environment, and society, and are better prepared for the future and stay strong even as conditions change.
• Strategic Innovation means successful businesses continuously improve their products, services, and processes to stay competitive and relevant, and by embracing innovation, they can adjust to new trends and customer needs.
• Long-Term Resource Management means Businesses must carefully manage materials, talent, and finances to ensure they have what they need to operate in the future; being efficient and prepared for resource shortages helps them survive in unpredictable times.
• Open strategizing is a modern way of creating business strategies that emphasize collaboration, transparency, and inclusiveness; this approach involves employees, customers, partners, and even competitors in shaping a company's future.

Examples of Open Strategizing

• Philips' Transformation: Philips changed its business by selling off old divisions (like TVs and lighting) and focusing on healthcare technology

• Philips invested in research and development, positioning itself as a leader in healthcare solutions, ensuring its long-term success.

• Platform-Based Business Models: Companies like Uber and Airbnb shifted from simply selling a product to creating a platform that connects people.

• Crowd-Based Innovation means some businesses invite customers and fans to contribute ideas and shape their products.

• Lego allows users to design custom sets, and the best ideas get produced, strengthening the relationship between a company and its customers.

• Strong leadership is crucial for maintaining long-term success.

• Adaptability and openness to change help leaders navigate uncertainty.

• Strategic thinking allows organizations to stay ahead of market shifts.

• Sustainable Strategic Management (SSM): This approach challenges traditional economic assumptions and integrates flexible structures and processes that evolve with stakeholder input and environmental changes.

• The Circular Economy is emerging as a transformative approach to sustainability.

• Scientists have identified nine planetary boundaries that define the safe operating limits for humanity, including climate change, ocean acidification, ozone depletion, freshwater use, and biodiversity loss.

• Four boundaries have already been crossed—climate change, biosphere integrity loss, land-system changes, and biogeochemical cycles—putting human survival at risk.

• Climate change and biosphere integrity are considered core boundaries as their disruption could push the Earth into a new, unstable state.

• Strategic Management Paradigm is fundamentally based on neoclassical economic assumptions.

• Solutions like cap-and-trade and pollution quotas aim to internalize environmental costs but fall short of integrating ecological limits into economic planning

• Macroeconomics fails to recognize an optimal economic size.

• Microeconomics considers the diminishing returns of growth, whereas macroeconomics assumes growth is always beneficial.

Limitations of the Five Forces Model:

• It provides a static view of competition within rigid industry boundaries.
• It focuses on firm-centric competition, ignoring broader social and ecological factors.
• Views stakeholder relationships narrowly, including only suppliers and customers, while excluding NGOs, networks, and social entrepreneurs who are key to modern value creation.

Limitations of the Value Chain Model:

• Extends competitive analysis across a firm's activities but remains within a closed economic system.
• It focuses on short-term financial gains and overlooks long-term societal and environmental sustainability.

Creating Shared Value (CSV)

• Porter and Kramer (2011) expanded the value chain concept with Creating Shared Value (CSV), which integrates economic and social value creation.

• CSV still assumes a closed economic system, treating environmental and social factors as externalities rather than core business considerations.

• Critics argue that CSV is corporate-centric, focusing on firm profitability rather than systemic, industry-wide solutions to social and environmental issues.

• Ecological economics presents a more accurate framework for understanding businesses as interconnected subsystems within the economy, society, and ecosystem, rather than as independent entities operating in a closed system.

• Law of entropy states that energy transformations result in waste and irreversible degradation.

• A dynamic and holistic view of the economy, society, and nature as interconnected subsystems.

• Consideration of both short-term economic decisions and long-term ecological processes.

• Recognition that humans are part of nature, not separate from it.

• A macroeconomic focus on sustainability rather than infinite growth.

• Acknowledgment that technology is helpful but not a standalone solution for sustainability.

• The need for interdisciplinary approaches to solving ecological and economic challenges.

New Tools for Value Creation

• Life Cycle Analysis expands value chain analysis by accounting for ecosystem services and natural capital.
• Footprint Analysis assesses social value creation alongside economic impacts.
• Cradle-to-Cradle Approach evaluates an organization's true environmental and social footprint beyond financial performance.
• Triple Bottom Line (TBL) Accounting incorporates economic, environmental, and social factors into decision-making.