Creating value from uncertainty
Simon Davis, Agriculture and Sustainability Development Manager, NSF International
18 August 2015
Simon attended our inaugural Sustainability Leadership Laboratory, which focused on how organisations can innovate their business model in order to generate and deliver opportunities for sustainable value creation. The intensive two-day Labs are designed to be truly beneficial to the organisations represented, with participants able to put forward case studies which are then focused on during the Lab.
Simon’s NSF International case study was used during the Lab as his group worked through a suite of tools, designed by the , to identify and maximise value opportunities and competitive advantage within NSF, whilst responding to critical global challenges.
Following on from his experiences at the Lab, Simon reflects in this blog on the nature of uncertainty and considers how stakeholders in complex supply chains can create more value for their business, societies and the environment.
It was Benjamin Franklin who once said, “In this world nothing can be said to be certain, except death and taxes.”
We can be confident that 225 years on not much has changed. Our lives are uncertain, the economies, societies and the surrounding environment we live in are uncertain, today is uncertain and tomorrow will be uncertain. So what value is there to be created from the unknown?
Food is a perfect example: it already has an intrinsic shared common value, the energy it contains sustains our ability to exist and yet today in large pockets of the developing (and developed) world, there is still uncertainty as to when the next meal will come. What additional stress does that uncertainty place on the local economy, society and environment, and how could providing daily access to food add value to both those populations and wider systems?
For those individuals who do have easy access to food, the uncertainty posed by too much choice could create different value dependent on the choices those individuals make. For example, in the UK, choosing products that contribute to a healthy diet may create less burden on the National Health Service, whilst choosing a diet based on regional produce may support local farmers.
Too much choice is delivered to those individuals by the thousands of different products that UK retailers provide to market on a daily basis. These different products contain different ingredients, sourced at different times of the year from most of the countries and regions of the world including those very locations where local populations are uncertain as to when their next meal will come.
These food supply chains are multidimensional. They are not controlled or owned solely by governments, investors, policymakers or growers. Rather these stakeholders act, in one way or another, as guardians of the land, growing food that consumes shared constrained resources, crosses borders and can be processed, packed and distributed to different markets and customers in different ways.
And yet still, in the late 2000s there was a surge in overseas investments in agricultural land to support this uncertain industry. Closer to home in the UK, the price of agricultural land has increased by £5,000 per acre to reach almost £10,000 per acre compared to 2009. So it seems there is value to be had, even in the face of climate change, population growth and their combined uncertain impacts, as demand and prices for agricultural commodities remain largely positive.
In reality, it is unlikely we will ever have the ability to turn uncertainty into certainty, but we can make it less uncertain, and with that create more value. The financial overseas investment brings capability to build infrastructure, provide new skills and jobs and increase knowledge of farming practices and resource inputs such as seeds and fertilisers to the societies and environments in most need. In the UK, uncertainty is reflected in more farmers creating new income streams through the growth of other significant non-farming businesses, which in turn spread future business risk.
At NSF, my role as the Agriculture and Sustainability Development Manager is to support key stakeholders in these complex agri-food supply chains to manage their uncertainties better to unlock value. As a service provider, NSF also has the ability to create and develop its own large-scale value, by adapting its products and services to provide greater benefit to stakeholders through its presence in over 90,000 different supply chains, across more than 100 countries worldwide.
Below is some information on how key stakeholders in complex supply chains can create more value for their business, societies and the environment by reducing uncertainty.
Making uncertainty less uncertain
Know the supply chains the business operates in
Complex supply chains simply move products from one place to another in order to be exchanged. By better understanding the most important supply chains to the business, and identifying the key stakeholders, economies, societies and environments impacted from the movement of that product, businesses can prioritise, focus and collaborate on the areas that will create the most value.
Measure the uncertainty
Consider how collecting and interrogating data can increase the understanding of the biggest uncertainties in those supply chains both now and in the future. Furthermore, by collecting and interpreting relevant data, the business can have a common language to measure continuous improvement and value creation across key stakeholder groups.
Creating and maximising economic, societal and environmental value for more stakeholders
Understand what ‘value’ means to the business and its key stakeholder group
Define value, and consider whether the value is shared across key stakeholder groups. Some value (e.g. providing safe food that does not harm your customers, or providing economic growth to your shareholders) may outweigh other value (e.g. diverting waste to animal feed). Determine which key stakeholders are key to the operational success of the business and what value means to them.
Measure the value that your products or services currently create or miss
Importantly, the existing business model, service or product may not be delivering its full capabilities. Use a tool like the Cambridge Institute for Sustainability Leadership / Institute for Manufacturing Centre for Industrial Sustainability value mapping tool (above) to challenge the business model; identifying the value missed as well as the value created. Contemplate more broadly the value this model, service or product can provide to more economies, societies and the environment. Use data as a common language to support the change in approach.
Be bold and brave
By mere existence, the business, product or service is creating value. Challenge it to do more by understanding its role in confronting the significant uncertainties around the world. Consider the impacts of the business at each level of the supply chain, be proactive to create large scale value, and adapt products and services to provide greater benefit to more stakeholders across more industries.