The Big Pivot

Radically Practical Strategies for a Hotter, Scarcer, and More Open World

Andrew S. Winston

• Publisher: Harvard Business Review Press
• Year: 2014
• Print ISBN: 9781422167816
• eBook ISBN: 9781625270528
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

We live in a fundamentally changed world. It’s time for your approach to strategy to change, too. The evidence is all around us. Extreme weather, driven by climate change, is shattering records all over the planet. Our natural resources are in greater demand than ever before as a billion more people enter the global middle class, wanting more of everything. Radical transparency is opening up company operations and supply chains to public scrutiny.This is not some futuristic scenario or model to debate, but today’s reality. We've passed an economic tipping point. A weakening of the foundations of our planetary infrastructure is costing businesses dearly and putting our society at risk. The mega challenges of climate change, scarcity, and radical transparency threaten our ability to run an expanding global economy and are profoundly changing "business as usual.” But they also offer unprecedented opportunities: multi-trillion-dollar markets are in play, and the winners of this new game will profit mightily.According to Andrew Winston, bestselling author ( Green to Gold ) and globally recognized business strategist, the way companies currently operate will not allow them to keep up with the current—and future—rate of change. They need to make the Big Pivot.In this indispensable new book, Winston provides ten crucial strategies for leaders and companies ready to move boldly forward and win in this new reality. With concrete advice and tactics, and new stories from companies like British Telecom, Diageo, Dow, Ford, Nike, Unilever, Walmart, and many others, The Big Pivot will help you, and all of us, create more resilient businesses and a more prosperous world. This book is the blueprint to get you started.

Imagine this scenario. You’re in a large ship that has hit something big, and the boat is in trouble. It’s filling with a significant amount of water, which needs to be bailed. The captain and the ship’s engineer think they can keep the vessel afloat, but only with some serious effort by everyone on board. Wouldn’t all the passengers pivot immediately from whatever they were doing to start bailing water?

But perhaps it would have been better to pivot earlier and change the focus of this boat (or organization), or at least its leaders, toward spotting obstacles and avoiding the problem entirely. Or go back further: we could have designed the ship with a double hull or with much better radar. Or maybe we would want to rethink the entire trip and fly or conduct a teleconference instead.

In the mid-1980s, Intel faced a similarly profound moment of decision, when its business looked like it would be taking on water soon. The early warning signs of a deep market shift were there. Intel was being outcompeted by Japanese firms, and its profits were plummeting. The question the leaders faced was this: should Intel keep competing in the memory business it had been so successful with, or should it move into semiconductors?

CEO Andy Grove and founder Gordon Moore heard the wake-up call, asked themselves what a new CEO coming into the company would do, and realized they needed to pivot. Recognizing that it was a life-or-death situation for the company, they made a brutal shift in their business model.¹ There were layoffs and early financial losses, but Intel began a remarkable run in the microprocessor business by first acknowledging some hard truths.

Like Intel in the 1980s, we need to face some tough realities today about the global human experiment. We have enough information now to hear the wake-up call and address these truths. A Big Pivot is necessary, and it will make us healthier and more profitable. So let’s start by listening to the three loudest wake-up calls.

CHAPTER ONE

Hotter (and Cleaner)

Doing Business in a More Extreme, Unstable World

When Hurricane Sandy raged toward the Eastern Seaboard of the United States, the eye of the storm bore down on New Jersey. But with its record 900-mile breadth, Sandy wreaked havoc from West Virginia to Maine. The oceans rose up to cover downtown New York City and rendered major chunks of the Jersey Shore uninhabitable.

As the scope of the devastation became clearer, another reality came into sharper focus. Along with cars and trees and homes, the storm swept away some of the continuing public resistance to the facts of climate change. BusinessWeek blared on its cover, “It's Global Warming, Stupid.” Time magazine journalist Michael Grunwald, noting that climate change had long been treated like a niche, secondary issue that only environmentalists would care about, cleanly summed up the absurdity: “Sandy was a blunt reminder that the technical term for people affected by climate change is people. It's an environmental issue, a security issue and, yes, an economic issue.”¹

Within a week of the storm, New York City Mayor Bloomberg, Governor Cuomo, and many other leaders had decided that the connection between climate change and extreme weather was getting clearer. We must change how we operate, they all warned, to prepare for a climate-change-riddled present that we had all hoped was still years away.

Global warming, global weirding, climate change, climate disruption, climate crisis—whatever we call it, it amounts to the same thing. The greenhouse gases (GHG) that have kept the planet warm enough for us to evolve and develop our society are now building up dangerously high. This warming is overwhelmingly due to humanity's burning of fossil fuels and its use of the atmosphere as a carbon dumping ground. Skeptics point out that the planet has warmed up before, but as climate expert Ken Caldeira described it in Scientific American, “humanity is altering the climate 5,000 times faster than the pace of the most rapid natural warming episode in our planet's past.”²

Climate bands—regions with differing average temperatures—are shifting by about twenty meters per day: By the latter decades of this century, the weather in Illinois will feel a lot like Texas does today, with summer months spent mostly above 90 or 100 degrees Fahrenheit.³ The pace of change is a big problem. As Caldeira says dryly, “Squirrels may be able to keep up with this rate, but oak trees and earthworms have difficulty moving that fast.”⁴ And to put a human face on this reality, a family can move if it has the means, a business can move sometimes, but a city—or entire swaths of productive farmland—can't just pick up and go.

But even with warning signs hitting us over the head, we have trouble acting on a problem like this. It would be easy just to say it's denial, but it's not so simple: we have deep-seated reasons for avoiding the topic.

The Psychology of Climate Change

If we wanted to create a problem to test our species' ability to take on tough challenges, climate change would be close to ideal. It's slow-moving (until recently), complex, and seemingly remote in distance and time. In addition, tackling climate change requires proactive action (we're better at reacting), and unlike air or water pollution, climate change is invisible. But hardest of all, the responsibility for climate change and its effects are spread out over 7 billion of us, and taking action on it can feel like a sacrifice, which—let's be honest—we don't like very much.

Climate change plays to all our psychological strengths and foibles, most of which served us pretty well for the first ten thousand years of society. But they're failing us now. Anthony Leiserowitz, director of the Yale Project on Climate Change Communication, sums it up well: “You almost couldn't design a problem that is a worse fit with our underlying psychology.”⁵

Climate can also seem easy to write off because the warming numbers don't sound scary. A couple degrees warmer may sound pleasant, but we're not really talking about going from 75 to 77 degrees Fahrenheit on a nice spring day. As many others have pointed out, the right metaphor is a fever. Take your core body temperature up one degree, and you don't feel so great. Five degrees, and you're sick as a dog. Ten degrees, and you're dead.

Think also about how urgent your doctor's actions would become as your fever rises. At some point, lowering your body temperature becomes the only thing that matters. Similarly, for society and business, addressing climate change is rapidly becoming an “at all costs” issue, with every other goal secondary. Understanding this reality is the core of the Big Pivot.

Think of climate change as the final exam for humanity. The core question, for all the credit, is this: Can we come together to solve a problem that hits so many of our psychological barriers, when the solutions involve effort, some investment, and disruption to many of our traditional ways of doing business?

If we have any hope of passing the test, we must trust the scientific community when it tells us how big the problem is and how fast we have to move. Of course, scientists are sometimes wrong. Unfortunately, climate scientists have been wrong repeatedly … but usually they err on the conservative side. How often have we all seen headlines that say something like, “The Arctic is melting even faster than experts thought.”

But experts are getting bolder and blunter as the situation gets more serious. Hundreds of the world's best scientists have signed a joint statement telling us that our very survival is at stake. Titled “Maintaining Humanity's Life Support Systems in the 21st Century,” the consensus document says bluntly, “It is extremely likely that Earth's life-support systems, critical for human prosperity and existence, will be irretrievably damaged” by what we humans are doing to natural systems. And they called for “concrete, immediate actions.”⁶

This view is hard to accept because it sounds so extreme, the consequences are frightening, and a reasonable response would be to make fundamental changes in how we live and do business. Companies today require a clear profit motive for all initiatives, and execs don't enjoy the idea that some actions might be both expensive and required. But a big part of making the Big Pivot is taking a hard look at what “expensive” means and truly considering all the short- and long-term value that the strategies in this book can create. Yes, there can be trade-offs as we invest in making our businesses more resilient for the long haul, but a great deal of what we need to do is actually profitable in the short run (energy efficiency, for example).

Before getting to value-creating tactics, however, we need to understand the scale of the challenge, or what we could call “the math of it all.”

The Math and Physics of Climate Change

While we are an intuitive species and our psychology creates some challenges, we also respect hard numbers, particularly in business. And climate math is getting clearer every day. In a wonky but popular essay in Rolling Stone magazine, climate activist Bill McKibben—leveraging some very important analysis from the NGO Carbon Tracker—laid out three fundamental climate numbers that we should all heed:

1. The world's scientists say that the increase in global temperature from pre-industrial times must not exceed 2 degrees Celsius (3.6 degrees Fahrenheit) if we're to avoid the worst of climate change.
2. The world can only emit an additional 565 gigatons (that is, 565 billion tons) of carbon dioxide (CO₂) to keep global warming below this 2-degree limit.
3. Unfortunately, the fossil fuel industry has 2,795 gigatons of carbon dioxide equivalent in reserve, or five times the “safe” amount to emit.⁷

The first two numbers will guide regulations and the goals that countries and companies set for a long time (for example, 141 countries, including all of the largest ones, have signed the Copenhagen Accord, a nonbinding agreement to hold the line at 2 degrees). But what do these numbers really mean? How fast do we have to change? To answer these tough questions, we can turn to two of the world's best number crunchers, McKinsey and PricewaterhouseCoopers (PwC).

McKinsey's Global Institute reconciled what it called two global objectives, “stabilizing atmospheric greenhouse gases (GHGs) and maintaining economic growth.” First, the institute assumed significant growth in China, India, Africa, and many other places. Then it looked at how much carbon the world needs to drive the global economy. Every ton of carbon dioxide we emit—when we combust coal or natural gas to turn the lights on or when we burn oil to get around—creates economic value. McKinsey calculates that the world currently reaps $740 of GDP for every ton of CO₂ produced.

To meet the 2-degree hard target for warming, McKinsey says, the amount of GDP that we wring out of every ton of CO₂, called carbon productivity, must rise. And it must go up fast—tenfold by 2050, which is quicker than productivity has ever risen for any input into our economy.⁸ On top of this sobering news, a PwC report added that time was our enemy, with the 2-degree warming target looking increasingly out of reach. PwC recommended a significant increase in the pace of change.⁹ (See the sidebar “The Most Important Number in the World?” for more on these numbers.)

Of course, all of these calculations are based on overwhelming evidence from thousands of studies published in peer-revie...

Table of contents

• Cover Page
• Title Page
• Copyright
• Contents
• Introduction: Signals from a New World
• Part I: Today’s Mega Challenges
• Part II: Radically Practical Strategies
• Conclusion: Envisioning a Big-Pivot World
• Afterword
• Appendix A: Sustainability 102: The Business Case for Green Strategy
• Appendix B: Setting Science-Based Goals
• Notes
• Acknowledgments
• About the Author