If you own a small or mid-size business, you are probably focused on the important factors that make your business run: cash, materials, people, cash, equipment, cash! Your strategy may be lengthy or broad. Your giving and sustainability practices may be at a "what-we-are-able-to-do" phase. It takes a lot to manage a business.
One of the things that we try to continually prove is how important corporate social responsibility (CSR) is in business and how it NEEDS to be incorporated into your strategy. We have ways that we can help you with this, but we also need to show you why this is vital.
In approaching your business's strategy from an academic angle, we are going to take one of the most referenced articles on business strategy and apply it to CSR. "What is Strategy?" is written by Harvard Business School professor Michael E. Porter. The article is organized into five different parts to define what is and is not strategy, citing several different examples of each.
One of the things that we try to continually prove is how important corporate social responsibility (CSR) is in business and how it NEEDS to be incorporated into your strategy. We have ways that we can help you with this, but we also need to show you why this is vital.
In approaching your business's strategy from an academic angle, we are going to take one of the most referenced articles on business strategy and apply it to CSR. "What is Strategy?" is written by Harvard Business School professor Michael E. Porter. The article is organized into five different parts to define what is and is not strategy, citing several different examples of each.
In this five-part series, we will apply corporate social responsibility (CSR) to one of the top modern business strategy articles, "What is Strategy?" by Michael E. Porter, to determine CSR's role and what needs to be done to make CSR an effective component of your strategy.
An Overview: Where are you at?
How will this help you? This series of blog posts will be able to help you organize your own corporate strategy, learn the importance of CSR being more than just a donation, and understand the leadership and decision-making that is necessary to executing your strategy.
Over five different posts, we will examine CSR's fit into Porter's definition of strategy using his five sections as a framework:
Over five different posts, we will examine CSR's fit into Porter's definition of strategy using his five sections as a framework:
- "Operational Effectiveness is Not Strategy" - Below
- "Strategy Rests on Unique Activities" - Click here.
- "A Sustainable Strategic Position Requires Trade-offs" - Click here.
- "Fit Drives Both Competitive Advantage and Sustainability" - Click here.
- "Rediscovering Strategy" - Click here.
In the opening piece of Porter's "What is Strategy?" he makes two distinctive points:
Porter makes the distinct differentiation between having highly efficient operations and strategy. Having a more effective operation will reduce unit costs, but this is not sustainable as competitors can copy your techniques and additional value is not provided. Adding value can increase your prices and margins further.
However, if a business can do several of these operational efficiencies together or do them differently from the rest of the industry, then that business can build a strong competitive position that becomes tougher to imitate.
- "[Operational effectiveness] refers to any number of practices that allow a company to better utilize its inputs... Strategic positioning means performing different activities from rivals' or performing similar activities in different ways" (3).
Porter makes the distinct differentiation between having highly efficient operations and strategy. Having a more effective operation will reduce unit costs, but this is not sustainable as competitors can copy your techniques and additional value is not provided. Adding value can increase your prices and margins further.
However, if a business can do several of these operational efficiencies together or do them differently from the rest of the industry, then that business can build a strong competitive position that becomes tougher to imitate.
| 2. The Productivity Frontier The graphic to the right is the Productivity Frontier which shows "the maximum value that a company delivering a particular product or service can create at a given cost, using the best available technologies, skills, management techniques, and purchased inputs" (3). For all companies, they are placed underneath the Productivity Frontier arc. As they incorporate more practices that increase their effectiveness they move closer to the Productivity Frontier line. |  |
Due to constant advancements in technologies and business practices (factors that improve operational effectiveness), makes the Productivity Frontier arc always moving outwards. Competition uses these advancements as benchmarks. When one company makes an improvement because a competitor did, they do move towards the Productivity Frontier but lose their competitive position because they have made themselves more similar to their competitors.
CSR: Operational Effectiveness v. Competitive Strategy
Sustainability practices are a key piece to CSR that many companies promote. Many companies can purchase new energy-efficient machines or use solar power for all their energy needs. However, these are just improvements to their operational effectiveness and moving closer towards the Productivity Frontier.
The key to making this a strategy is doing many of these activities at once in a capacity that is different from competitors. For example, when New Belgium Brewery in Fort Collins in 1999 became the first brewery to purchase 100% of its electricity from a wind farm, in which employees chose instead of bonuses, this was a strategic move as this was a similar activity compared to competition but done in a different way. Since, New Belgium has continued to incorporate several other energy saving practices including, more recently, implementing an internal energy tax and becoming a certified B Corp. Other breweries may match one or a few of the practices New Belgium does, but because New Belgium has done it for so long and incorporated sustainability with many other facets of their organization, they have established a competitive advantage and position that is unlike any other in the Colorado and National craft brewing industries.
New Belgium started giving in 1995, its company culture is well-known and respected, and they are very successful as they are the third largest craft brewer in the US. For small and mid-size businesses, the time to take advantage of CSR is now.
CSR: Operational Effectiveness v. Competitive Strategy
Sustainability practices are a key piece to CSR that many companies promote. Many companies can purchase new energy-efficient machines or use solar power for all their energy needs. However, these are just improvements to their operational effectiveness and moving closer towards the Productivity Frontier.
The key to making this a strategy is doing many of these activities at once in a capacity that is different from competitors. For example, when New Belgium Brewery in Fort Collins in 1999 became the first brewery to purchase 100% of its electricity from a wind farm, in which employees chose instead of bonuses, this was a strategic move as this was a similar activity compared to competition but done in a different way. Since, New Belgium has continued to incorporate several other energy saving practices including, more recently, implementing an internal energy tax and becoming a certified B Corp. Other breweries may match one or a few of the practices New Belgium does, but because New Belgium has done it for so long and incorporated sustainability with many other facets of their organization, they have established a competitive advantage and position that is unlike any other in the Colorado and National craft brewing industries.
New Belgium started giving in 1995, its company culture is well-known and respected, and they are very successful as they are the third largest craft brewer in the US. For small and mid-size businesses, the time to take advantage of CSR is now.
  |   |
About the Author
Brian Phipps is the Founder and a Strategist at Confluence in Denver, Colorado that consults small and mid-size businesses to increase their positive impacts and community connections in their corporate giving and social responsibility practices. To find out more go to www.ConfluenceLLC.com.
Brian Phipps is the Founder and a Strategist at Confluence in Denver, Colorado that consults small and mid-size businesses to increase their positive impacts and community connections in their corporate giving and social responsibility practices. To find out more go to www.ConfluenceLLC.com.
RSS Feed
