How can you apply sustainable market transformation theory to your own practice?
Applying the theory to real life
The beginning of this book came with a warning about two important risks. First, understanding the theories and models presented here will make you look at the world and read the newspapers in a different way. Second, once you start to understand the theories and models, you will become a change-maker. Is that happening already? We hope so. In Part V of this book, we give you additional guidance on how to become that change-maker, and we want to give you reassurance instead of another warning. Because being a change-maker doesn’t mean that you must stand up for all sustainability challenges in the world. Nor does it mean you have to change everything yourself. On the contrary, it means that you develop the confidence to choose a specific challenge that is relevant to you, a challenge that has momentum in your specific market. It means that you use the strategies described in this book to identify the current phase of the market or sector regarding this challenge and determine what you can do to advance the solution. Being a change-maker means that you must know who should be doing what and when they should do it. Not that you must do everything yourself. The models can also be used to determine what actions are premature. Knowing what not to do is just as important as knowing what to do.
In recent years we have used the theory and models presented in this book in many workshops, lectures and change processes. The theory and models have subsequently been used in many real-life programs, which has resulted in recognition and follow-up questions. In Part V we discuss the questions that have often emerged when change-makers apply the lessons of this book to their own practices.
But what are your questions when you reflect on what you have read so far and how to apply it in your setting? We suggest that you write them down now. After reading Part V, then check whether you have found answers to your questions. If you have found answers to most of them, then you are ready to start using this theory in your practice and become a change-maker yourself. If you have not found answers, then we suggest that you go to the website www.leadsustainablechange.org. There you will find courses to follow on this matter (both in class as well as in company), additional case studies, tools and possibilities to continue the discussion.
Now we start with an analysis of the myths and frequently asked questions about applying the model for sustainable market transformation in practice. And for each question we included our advice on how to apply this to your own practice.
Myths and frequently asked questions
One of the best ways to sharpen our reasoning about market transformation is to discuss certain myths. These myths are erroneous assumptions that inform our beliefs. We have discussed them in many sessions, and collected our favorites in a top 12 Frequently Asked Questions (FAQs). We placed the FAQs in the following clusters: defining markets, the phase model, creating momentum and the role of change-makers.
Here they come!
Cluster 1: FAQs about defining markets
What is the difference between sustainable market transformation and normal innovations by the market?
Are you still buying audio cassette tapes to record your favorite music? Do you know many people who are self-sufficient and grow all their own food? These days, virtually everyone has a mobile phone with a range of apps that make our lives much more convenient. The markets for music, food and communication have transformed over time and will continue to do so, although sustainability challenges have hardly played a role. So, do the system loops, the four-phase model and stakeholder matrix also apply to these market transformations? No, not really, although some aspects are similar. But there is something peculiar going on when it comes to sustainability. Let’s take a closer look.
In the automotive sector, until the 1960s companies were winning if they could produce cars as efficiently as possible. That era began with the successful Model T Ford, which could be delivered “in any color as long as it is black”. Horizontal integration was crucial to control the entire value chain and make it as efficient as possible. But in the 1970s, several Japanese car manufacturing companies entered the market, showing they could not only produce cars efficiently, but also improve the quality of the car. For most consumers the choice was obvious: if you can buy a car that is both lower in cost and higher in quality, why would you still buy a car only because it is manufactured and marketed efficiently? In the 1980s flexibility became a new buzzword. Without sacrificing manufacturing efficiency and quality, buyers could order cars while choosing from many more options. This required a whole new range of flexible production systems and factories. In the 1990s, innovation became the new game- changer. To be a winner in the automotive sector, manufacturers had to integrate innovative components such as navigation systems and advanced safety features in their designs.1 Today, sustainability has become a new market demand in the automotive sector, as exemplified by the introduction of eco-friendly models, hybrid and electric engines, reuse of materials and fair labor conditions in the value chain.
What is the essential difference between market transformations based on efficiency, quality, flexibility and innovation and transformation based on sustainability? The first market transformations are all focused on the interests of the client — cheaper, fit for purpose, own choice and more features — while market transformations aiming toward higher levels of sustainability are focused on common interests. As individuals, we are interested in features that benefit us here and now. For this situation, the standard marketing and business strategies found in any business school textbook and MBA program are effective. However, as environmentally and socially engaged citizens we are interested in cars that are less polluting, save resources for future generations and don’t harm employees in their production. But how can these common interests become the new normal in a market? This is explained by our model on market transformations toward higher levels of sustainability.
This model also informs us why Phase 3 (the pre-competitive collaboration phase) and Phase 4 (the institutionalization phase) are essential in market transformations toward higher levels of sustainability. We need all of the four phases to address the common good, scale the solution, institutionalize it and make it the new normal. The model described in this book therefore specifically addresses the market dynamics related to sustainability challenges.
How to apply this to your own practice: this insight helps us to see the differences with other types of market transformation. If your colleagues resist the idea of working together with competitors because they assume that the market will solve all problems, you can explain that Phase 3 and Phase 4 are essential to market transformations toward higher levels of sustainability, and that competition and projects alone will simply not tip the market and deliver the structural change that is required. This is different from market transformations focusing on the interests and needs of clients. In that approach, the transformation will remain in Phase 2, with different value propositions competing with each other and improving through incremental change. This process can continue until a new disruptive innovation enters the market. But the problem with the competition-only mindset is that no company can solve the sustainability challenges alone. Market actors need to join forces — even with their competitors — to work together toward a more sustainable future. That is why Phase 3 is crucial for market transformations toward higher levels of sustainability. The ultimate aim is to raise the sustainability paradigm to a higher level for the entire market, so Phase 4 is also essential. This is why we believe we need to go through four phases of market transformation and why the market itself will not be able to deal with the big and complex sustainability challenges.
What is a market or a sector? How can I define it?
This book focuses on transformation of markets to higher levels of sustainability. But where does a market begin and where does it end? For example, construction can be seen as one market. But there are huge differences between the construction markets in countries such as Malawi and Singapore. Within the industry, infrastructural projects involving roads and railways differ greatly from those involving waterways, and projects involving the built environment differ as well. All these submarkets have different market actors. So where do markets begin and end, and how do you define that?
In Part IV we described market transformations in various sectors on a global scale. We focused especially on initiatives anywhere in the world that have played a role in the market transformation of the corresponding sector. For example, the gold industry has a global value chain: gold is mined in South Africa, smelted in Switzerland, traded and manufactured into jewelry in Belgium, and the jewelry is sold in India. Tourism, on the other hand, can be both local and global. At some destinations, most of the tourists are from the same region, while at other destinations the tourists (if they have enough money) can travel from almost anywhere in the world. In comparison, the construction market is much more localized: the market actors and the context of the construction are very dependent on the local situation. So how do we define a market? Basically, all the above examples can be defined as a market.
How to apply this to your own practice: start with the market you are interested in! Then it will be clear which market actors are involved in the market transactions and which market actors influence these transactions. By including all these actors, you can delineate the market that you want to analyze. For example, if you want to analyze how citizens in a certain village do their grocery shopping, then you not only include the local shops, but also their suppliers, the municipalities giving permits, the online shops delivering at home and other actors. And if you are interested in transactions like the investments in solar parks in Africa, then you have to include the international banks, global suppliers of solar panels, the adjacent landowners, the clients buying the solar electricity and other actors. Based on these transactions, you can ask the following questions: what behavior is rewarded in this market? What is the influence of the government? Who feels the consequences of the sustainability challenges? What are the alternatives? When you have the answers to these questions, you can determine the current phase of this market and identify the initiatives being taken by these market actors to influence the market transformation process.
Is this theory applicable all over the world and for all types of sustainability issues?
Every theory is applicable only within a certain set of preconditions. What are the preconditions for this theory? We previously emphasized that it does not apply to every market transformation. One precondition is that it aims to explain market transformation in relation to sustainability challenges. But is it applicable all over the world?
We are often asked whether market transformation processes are different in economies such as China, which are more government-directed, than in economies such as Europe, which have a stronger free-market orientation. The underlying assumption is often that it might be possible to skip phases and jump straight to Phase 4 if the government has a strong role in the economy. But we challenge this assumption. In government- led economies it is still relevant to know whether any alternatives are present, who bears the consequences of the current behavior or what is rewarded in the current market. The details might be different, but we still think it is important to understand the status quo before we discuss solutions to sustainability challenges for that situation. On the other hand, if there is no electoral process, the government might be able to focus more on the long term; the enabling environment might therefore be different, which could accelerate the process. Nevertheless, the same overall patterns will probably be apparent in these states, although the solutions to the corresponding challenges may differ.
We believe that these debates are often used as an excuse to maintain the status quo. Shouldn’t governments just solve the sustainability challenges by taking the lead in dealing with them? This is a typical question that is asked when a market is still in Phase 0: before the crisis. The issue is apparent, but it doesn’t harm the market actors yet. To avoid responsibility, they say “Let the government solve it” Followed by another favorite, “We lack political leadership. If only we were organized wore like China.” But if we continue the discussion and ask if they would really like to be organized like China, then they see the negative side as well. This debate is often just an excuse for them to disregard their own actions. And we know that systems are stalled when everybody is blaming someone else instead of looking at what they can do themselves. So instead of blaming others, you should think about what you can do within your sphere of influence. For example, what can you do to create momentum toward the next phase?
How to apply this to your own practice: so the simple answer is yes, this theory is applicable all over the world, as long as we apply it to markets. To explain this last point, you should realize that in every country, regardless of the region or the political system, changes in certain systems may have nothing to do with markets. For example, changes in the social security system of a country can have huge consequences for its citizens and can even influence the sustainability challenges. But a social security system is not a market, so this theory cannot be applied to such a system change. A market is always characterized by transactions of goods or services between at least two actors within an environment enabling these transactions. This is the core. Markets can be local, regional, international or global, but if these transactions are absent, then it is not a market and this theory does not apply.