Impact-Centric Strategy Formulation and Execution

Utilizing Impact Assessment for Decision-Making

While the concept of “impact” may sound novel, in reality, “impact management” is synonymous with “creating a medium-to-long-term value narrative and bringing it to fruition.” In other words, impact is not just about envisioning or externally announcing creation but should also align with a company’s or business’s strategy. Therefore, in the cycle of “vision and strategy formulation → planning and execution of realization methods,” which is practiced in most companies, there are clear benefits in considering impact.

Long-Term Vision and Strategy Formulation

As the importance of purpose-driven management and the creation of medium-to-long-term value narratives continues to grow, the consideration and utilization of impact as a starting point in medium-to-long-term business and strategic strategies that are highly aligned with impact are steadily gaining ground.

There are three fundamental pillars of management that seek economic value enhancement while prioritizing capital efficiency (Management of Economics), pursuing innovation creation contributing to both economic and social value improvement (Management of Technology), and seeking social value enhancement through improved sustainability (Management of Sustainability). These pillars are evaluated and put into practice by considering the company’s mission and values in light of the prevailing trends of the time, including the passage of time and context.

Mitsubishi Chemical Group

Formerly	>>>	Forward
To achieve sustainable long-term growth as a company, what major directions should we aim for? Consider envisioning your desired future state and formulating a vision and strategy through backcasting from promising markets.	>>>	With a company’s purpose at the forefront, the importance of centralizing the creation of long-term impact becomes even more pronounced. This approach distinguishes itself from both the extension of existing businesses (bottom-up) and separate initiatives like SDGs (top-down).

※Note that medium-term business plans may be subject to revision for some companies in recent times, and they are encompassed within the above context.

Formulation of Business Strategies and Other Related Strategies (R&D, M&A, CVC, etc.)

In corporate entities and similar organizations, the awareness of impact is now actively being incorporated into near-term business strategies and investment activities, closely aligned with medium-to-long-term strategies.

Within the entire impact investment market estimated at approximately $715 billion USD, impact investments made by corporate entities now account for over $7.2 billion USD. This figure has been growing at a compounded annual growth rate of 54% since 2016.

Stanford Social Innovation Review（SSIR）

Formerly	>>>	Forward
How to realize the direction set in our vision and medium-term plans for the company and business, along with the initiatives and their priority for implementation, are important aspects of our strategy. Considering scenarios and positioning based on macro trends such as market dynamics.	>>>	Strategic planning based on the impact you want to create is essential. Understanding the approaches available for achieving the impact you want to create is essential, in addition to conducting a specific inventory of needs and current assets.

Formulation, and execution of specific plans are essential for realizing your strategy (e.g., creating new businesses, due diligence, etc.)

Impact, distinct from ESG, can contribute to the creation of new revenue opportunities. Especially in the context of medium-to-long-term themes where alignment is high, and the potential of impact as a whole is significant, there is a natural expectation of a certain market size. Therefore, it is anticipated that impact assessment and quantification in business development and due diligence, centered around impact, will continue to expand.

According to calculations conducted in 2017, the potential market size for SDGs-related businesses was estimated at 2,449 trillion yen($22.3 trillion USD).

METI

Formerly	>>>	Forward
What specific actions should be taken to build the steps for executing the strategy? Taking into account market viability (size and growth potential), business viability (uniqueness and competitive advantage), and qualitative aspects such as corporate values.	>>>	In addition to the conventional evaluation criteria as described, it is necessary to add impact as an evaluation axis. Additionally, there is a need to quantify impact from an economic perspective and integrate it into decision-making.

Utilizing Impact and Leveraging impactlake™

The strategic planning and decision-making process that leverages impact, as described above, has traditionally faced challenges, primarily related to high workloads, slow evaluation speeds (due to extended assessment periods), and the need for comprehensive coverage. Impactlake™ alleviates these challenges and supports the integration of impact into daily decision-making. It is envisioned to be employed in specific scenarios, as detailed below.

Previous Challenges

• While the importance of impact has been recognized, there have been difficulties in applying impact to strategy development and decision-making due to the lack of knowledge and expertise (qualitative perspective) and insufficient internal resources (quantitative perspective).
• Particularly in cases where a swift assessment of impact is needed for topics like new business proposals or business strategy formulation, conducting impact assessments promptly and integrating them into decision-making while considering alignment with the former has posed considerable challenges.
• Moreover, the sporadic evaluation of impact based on individually established criteria and rules by different responsible parties has made it challenging for discussions and assumptions during assessments to be effectively inherited. Additionally, managing impact on an ongoing basis, including KPI management, has been difficult.

Value Proposition of impactlake™

impactlake™ enables continuous and practical impact management, with a focus on strategy development and execution as one of its outcomes. The relevant features and their specific utilization scenarios are as follows:

• Leveraging Standard and Comprehensive Impact Models:
  Viewing standard and comprehensive impact models and their associated statistical information as future market forecasting data, businesses can use this data to enhance their portfolio transformation for areas with significant impact on the company, such as new business development, research and development theme formation, and strengthened initiatives like M&A.
• Rapid Development and Quantification of Impact Models:
  Building and quantifying impact models (logic models) for businesses, funds, and other subjects of evaluation and strategic development can be done within approximately 1-2 weeks (whereas traditionally it used to take 1 month to several months). This organized and structured information, along with other data like market size and competitive advantage, can be used as decision-making criteria.
• Continuous Impact Management for Executed Strategies:
  By conducting ongoing impact management for strategies and business plans, it contributes to the penetration of the strategy, improved execution certainty, and provides visibility into the progress from an impact perspective. This, in turn, enhances the ability to explain and engage with stakeholders effectively.

Exploring and Utilizing Impact Management

In the practical realm of impact management and impact accounting, publicly available information is still limited. IMPACTLAKE strives to systematically organize methodologies, case studies, and tips, making them as comprehensive as possible. We encourage you to make use of this information. Furthermore, for those considering the establishment of a structure and workflow to maximize the use of these resources and to continue creating value consistently, please don’t hesitate to contact us.

In addition to providing tools and support for their use, IMPACTLAKE offers consulting services related to “Impact-Centric Strategy Formulation and Execution.” For those who want to kickstart impact utilization for specific themes and achieve ongoing impact management, we are ready to provide flexible processes and steps to help you get started.