All learning is from trying to build in sustainability as core in the strategy is to try to build it on something that already exists. We have, as a company, done a journey regarding lean for the last 25-30 years. What we found was a strong connection between lean and sustainability. Lean is resourcefulness and there's a lot of principles within the lean journey that you can bring automatically over to sustainability. That's how we built the bridge and by doing that, people recognize themselves that this is something that is Scania. This is actually we recognize ourself. This is sustainability, it taste, it smells, it sounds like Scania. We have just not put a label on it. We try to build it on values, on principles of how we work already to get the momentum of all our 52,000 people to join us on this journey. In previous lessons, we've discussed the reasons why companies pay attention to the increasing demand for a more sustainable development. We have also highlighted how rapid the digitalization of processes and business models can be. We have also argued that it is crucial for a company to understand and manage the changes driven by these two trends. Now, let's take a look at how this can be done in the context of business strategy. I rely here on the presentation of business strategy, which you can also find in the book, Modern Industrial Management, written by researchers here at KTH. Every company should have a business idea. In other words, an overall long-term goal. The business idea should explain why the company exists and elaborate on the intentions of the owners. A good business idea is short, clear, and widely known within the company. This way, it can indicate a clear direction and express what employees should and should not do. A good business idea also answers questions such as, why does this company exist? In what areas should a company operate? What direction in philosophy does the company have? Part of the business idea is usually formulated as a mission, that is, the role of the company. A vision can also be attached to the mission, stating what position the company wants to hold, or what future state it wants to contribute to. This can also be referred to as the purpose of the company. It is increasingly common for larger companies to define a purpose that is not only about making money, it usually now also includes how the company can contribute to the sustainable development of society. In August 2019, the CEOs of the 181 largest American corporations announced that they would back their business roundtable's renewed statement of purpose of cooperation. Darren Walker, President of the Ford Foundation stated, "It is more critical than ever that business in the 21st century are focused on generating long-term value for all stakeholders and addressing the challenges we face, which will result in shared prosperity and sustainability, both for business and society." It is the change agent, that's for sure. Sustainability has been the driving force for change now for the last 30 years and that will continue. We don't have a sustainable world so far. This reflects a historic change in line with what we discussed in lessons 3 and 5. Missions and visions are usually then linked to a strategy which includes the business focus and long-term plan for the required measurements to be taken. Of course, there are some popular generic business strategies and strategy models. These include the models of Ansoff and Porter, as well as the popular SWOT analysis. Some of these models have been modified to clearly include sustainability aspects. One of them is the Sustainable Business Model Canvas. However, the generic strategies have been criticized for overemphasizing existing business conditions. They've used strategy development as something revolving around the stable competitive situation with well-define markets and products. This is not the situation we are focusing on here, as it is influenced by the trends of sustainable development and digital disruption. The concept of a Blue Ocean Strategy can instead be more relevant for our discussion. Sometimes it is described as companies acting like battleships in an ongoing naval battle, where they constantly fight for dominion over the same part of the sea, which is then colored red by all the blood that is spilled in these battles. According to this approach, it is a preferred strategic alternative to move to another part of the sea where no competitors are active yet and the water is still not a battlefield, to move to the blue ocean, metaphorically speaking. Innovation is often fundamental for this kind of value creation, especially when we adopt or lead transformations as the ones we argue will become necessary for most companies. There are different degrees of innovation and we usually classify them into three categories based on how ambitious they are regarding the systems they address. The first category is the optimization of the existing system. The second, is the accelerated uptake of best available solutions and practices, to help modify the current system. Finally, the third includes transformational changes, that are delivering on customer needs in entirely new ways. This requires simultaneous changes on multiple levels, in technology, business models, and infrastructure. Many current models and theories, however, favor the optimization of existing systems over transformation. Efficiency, in the most important processes here and now, is what makes us succeed, or at least in the short term. With the new challenges related to disruption, business strategies, and innovation increasingly need to handle transformations effectively. If you want to improve the ways we work, we need to look further and go beyond our immediate context. Successful product and strategy development, therefore, need to consider the bigger picture, not only the daily processes. We also need to consider value creation based on immaterial inputs. If we fail to do so, we can easily end up with so-called stranded assets. In other words, an asset that was once created or represented value, gradually, or suddenly becomes incompatible with the new value creating system. What is the value of a coal mine? If a carbon tax makes it much more expensive to run a coal-fired power plant, than another system based on solar, wind, or hydro. To develop effective business strategies, we need to understand the systems that we are a part of, and the ways they are likely to change over time. Changing business conditions are inevitable. Sometimes we know what the likely changes are, but not how quickly they will effect our business. Of course, this makes it's very interesting to bet on future fits solutions, and then rally others for securing that this future happens rather sooner than later and in ways that they will benefit the company. But how bigger picture do we need to consider? We know, that ultimately all businesses rely on the biological and physical environment of the planet. We understand that in order to develop over time, we need to maintain and enhance the social and other environmental system that provide the resources and stability, we rely on. We often refer to this as the need for securing that the sources of life and value creations are not systematically destroyed, or reduced, but rather enhanced, and regenerated. In fact, during these times of alternative truths, it's important to go to research and science to gain knowledge, to check what it's actually applies, and draw the correct conclusions. Scientific conclusions are far more important in drawing up long-term sustainability strategies, than what the customer's wishes are for the day, which, of course, we should still always take into account and respect. There is also a unifying framework developed for sustainability analysis, planning corporations, which can help us. It is the framework for strategic sustainable development, and you can learn more about it in the reading section. Let me conclude by saying that I now hope that it's clear why it is important to go beyond the immediate system we interact within, and to apply a broader system perspective in order to be successful in the longer-term, and why you need to shift focus from the internal processes and the immediate interactions, to the bigger picture, and the system conditions for a sustainable development of your entire business system or business ecosystem when developing your corporate strategy. The leap is when you're really thinking outside of your own box. One of the best examples of the leap is actually Scania, because when they started to look at how they would move into electrification of vehicles and transport being one of the most problematic areas when it comes to climate change, a lot of companies would just want to shy away from that, show that they have their emissions under control, but the team at Scania led by Henrik, they said, "No, we're going to transform, not just our company but the industry." They have very specific business strategies around creating a roadmap for sustainable transport, and that starts with first creating a market around biofuels, looking at all the issues from supply to demand and getting that market to take off, and all the complexities that exist within biofuels, and then ultimately moving into fully electrification and looking at all the surrounding. It's not just about the truck for them, it's the surrounding infrastructure, it's all the players in the ecosystem and making sure that you can get that to work from both sustainability as well as business perspective.
