Introduction to Strategic Management and Business Policy
Similarly, for a very long time, many established companies viewed innovation as the domain of the new entrant. The efficiencies that came with size were considered to be the core competitive advantage of the large organization. That view has proven to be a recipe for failure. The ability to create unique value and grow an organization organi- cally requires innovation skills. A strategic management approach suggests that if an organization stands still, it will be run over by the competition. What was extraordinary last year is the standard expectation of customers this year. We have watched many large corporations succumb to the lack of innovation in their organization. Sears was the dominant retailer in the United States for more than 70 years. Today, it is struggling to find an approach that will give it a competitive advantage. IBM was a company that dominated mainframe computing and was fortunate enough to find a visionary CEO when the mainframe market was crushed by the advent of the PC. That CEO (Louis V. Gerstner, Jr.) transformed the organization with innovation that was cultural, structural, and painful for the company employees. Innovation is rarely easy and it is almost never painless. Nonetheless, it is a core element of successful strategic management.
Lastly, until the later part of the 20th century, a business firm could be very success- ful without considering sustainable business practices. Companies dumped their waste products in nearby streams or lakes and freely polluted the air with smoke containing noxious gases. Responding to complaints, governments eventually passed laws restrict- ing the freedom to pollute the environment. Lawsuits forced companies to stop old practices. Nevertheless, until the dawn of the 21st century, most executives considered pollution abatement measures to be a cost of business that should be either minimized or avoided. Rather than clean up a polluting manufacturing site, they often closed the plant and moved manufacturing offshore to a developing nation with fewer environ- mental restrictions. The issues of recycling and refurbishing, as well as a company’s responsibility to both the local inhabitants and the environment where it operated, were not considered mainstream business approaches, because it was felt these concerns did not help maximize shareholder value. In those days, the word sustainability was used to describe competitive advantage, not the environment.
Today, the term used to describe a business’s sustainability is the triple bottom line. This phrase was first used by John Elkington in 1994 to suggest that companies prepare three different bottom lines in their annual report.16
■■ Traditional Profit/Loss ■■ People Account—The social responsibility of the organization ■■ Planet Account—The environmental responsibility of the organization
This triple bottom line has become increasingly important to business today. Com- panies seek Leadership in Energy and Environmental Design (LEED) certification for their buildings and mold a reputation for being a business that is friendly to the world. LEED certification is available for all structures and includes a number of levels depending upon the efforts made to have a building be self-sustaining or to have as little impact (the smallest footprint) on the environment as possible.17
IMPACT OF GLOBALIzATION Today, everything has changed. Globalization, the integrated internationalization of markets and corporations, has changed the way modern corporations do business. As Thomas Friedman points out in The World Is Flat, jobs, knowledge, and capital are now able to move across borders with far greater speed and far less friction than was possible only a few years ago.18