U.S. Competitiveness Project – A Need for Systems Thinking

(Post by Andrew McKeon, Founder of BusinessClimate and writer for the BusinessClimate blog, from which this post is re-posted. See the bottom of athe post for Mr. McKeon’s bio.)

The current state of U.S. competitiveness is in a sense not the problem.  It is a symptom of a larger systemic problem.  Management is learning that the threats to U.S. competitiveness are multi-faceted, interrelated, and long term and how the strategies to address them must be multidimensional, holistic, and sustained.  As they press business leaders to stop actions that simply benefit their own firms while collectively weakening America’s business environment, Porter and Rivkin are describing the real problem.  Fixing U.S. competitiveness will require a broader systems perspective – much broader and more holistic than American management has practiced in the last 40 years.

For decades U.S. management has had very little appreciation for seeing businesses from a systems perspective.  Hugely popular management approaches like MBO (management by objective) created “the whole is equal to the sum of the parts” and “manage what you measure and measure what you manage” mind-sets.  Consequently there was little attention paid to the interconnections and interdependencies within a business operation or between businesses – these weren’t seen as important in building great enterprises or fostering strong economies.  Harvard’s U.S. Competitiveness Project needs to change that thinking and hopefully will.

Yet, if we are to really address U.S. competitiveness we must stop looking at issues, businesses and markets as isolated, and instead understand that the future of U.S. competitiveness lies in how well we address the systems issues facing the global economy and the planet over the next 20-40 years.

The risks are clear.  Huge increases in global demand for raw materials, industrial and agricultural commodities, energy and water, will put greater claims on resources, stress supply chains, apply enormous pressure to profit margins and deepen the planet’s most serious environmental challenges.  Yet, these same risks point to tremendous opportunities.  An estimated three billion new additions to the world’s middle-class before mid-century will improve more people’s lives than ever in history and triple the size of the global economy.  For companies to turn these risks into opportunities they must take advantage of growth while mitigating resource disruptions and global environmental degradation.  Clearly, business as usual will not get the job done.  The fate of U.S. competiveness in the years and decades ahead will be determined by how effectively we mitigate the most urgent risks and develop the greatest opportunities that will drive the global economy and the planet.  Sustainability must be the organizing principle of U.S. competitiveness if we are to lead in the 21st century.

Many ask about the meaning of the term sustainability.  Here sustainability refers to a process and a way of thinking which begins with an appreciation for businesses as systems, embedded in larger systems such as markets, and all part of even larger systems of economies.  Ultimately, the earth itself is a system made up of highly interconnected and interdependent groupings of natural and man-made systems, one of the most powerful being the global economy.  In a well organized system, every subsystem supports and aligns with the aim, operations and workings of the overall system.  Lack of alignment leads to sub-optimization, decay and the potential destruction of the system.  Simply put, sustainability is about getting the alignment right between how the global economy works and how the planet works.  To the extent business operations support that alignment, business is sustainable and will prosper; to the extent business operations are out of alignment, business is unsustainable and will deteriorate. The key to U.S. competiveness lies in how well we plan and organize for that alignment.

Next month in New York City there will be a major gathering of C-level business leaders, entrepreneurs, NGO activists, and at least two former Heads-of-State (Costa Rica’s Jose Maria Figueres and U.S. President Bill Clinton) to discuss U.S. competitiveness in the context of the risks and opportunities of the 21st century.  The event – The Sustainable Operations Summit – is not unique – it takes place the very same week as Fortune Brainstorm Green, a CEO-level event in San Diego focused on the newest ideas shaping the future of business.  Both events and others like them signal an important trend in the business community – putting sustainability at the center of the discussion around risk, opportunity and U.S. competitiveness in the coming years.

At The Sustainable Operations Summit I will be moderating a panel that was originally entitled “Environmental Strategy and Business Strategy.”  I spoke with the conference organizer about changing the name – replacing “and” with “as” – and he agreed.  The “Environmental Strategy as Business Strategy” panel will discuss how new business strategies for American competitiveness in the 21st century must not make environmental strategy vestigial, or incorporate it because it is noble or even socially responsible.  Instead environmental strategy must be seen as the key to global competiveness. Understanding natural systems is much more than simply tell us what we’re doing wrong to the planet – it can provide unique insights into how to build resilient businesses systems.  As detailed in the book Profit Beyond Measure by H. Thomas Johnson and Andres Bröms, natural system characteristics such as self-organization, interdependence and diversity have been used to build some of the most efficient and robust manufacturing systems of the 20th century.  In the 21st century only by understanding these principles will companies be able to address the daunting challenges and unprecedented opportunities that are unfolding.

One of the panelists on “Environmental Strategy as Business Strategy” will be Col. Mark Mykleby (U.S.M.C. Ret.).  After serving in combat in Iraq and developing strategy for U.S. Special Ops Command, Colonel Mykleby served as special assistant to the chairman of the Joint Chiefs of Staff, where he developed a new National Strategic Narrative for the United States in the 21st Century.  The U.S. has been without a national strategy since the end of the Cold War when the strategy of “containment” of global communism became obsolete.  Col. Mykleby’s narrative replaces “containment” with “sustainment”, making sustainability a core principle for America’s next 50 years.  The narrative is not just about green energy and resource efficiency, although these are important components.  It is about something larger – a view of America’s challenges and opportunities from a systems perspective.  There are powerful and influential people both inside and outside Washington who are quietly working to see this strategy transformed into policy in the next administration, which would go far to mainstream the idea that U.S. competitiveness in this century as a matter of national policy must and will be driven by sustainability and systems thinking.

Andrew McKeon is founder of BusinessClimate, a provider of consulting services that help clients increase their global competitiveness and profitability through sustainable business strategies, and the host of the annual conference on sustainability and global competitiveness.  Clients include PwC, Bank of America Merrill Lynch, Intel, and Johnson Controls.  Andrew holds an MS in Mechanical Engineering and an MBA, both from Columbia University.  His writings have appeared in such publications as Greenbiz, Reuters and strategy+business magazine.  He has been invited to speak at NASA, the United Nations, the Deming Biennial, PICMET, and the Agrion Energy Conference.  He is an advisor to the UN-GAID and is a member of the Board of Directors of TransitCenter. Andrew maintains a blog at www.businessclimate2012.blogspot.com.

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