Building values-based innovation cultures for sustainable business impact
Sustainability matters - of course. You'd have to be living in a bubble not to be aware of the wide-ranging conversation on this theme. But how to translate the rhetoric - whether it be the UN or EU's sustainable development goals or the aspirational strategies of businesses - into something practical?
That's the focus of the IMPACT project which is exploring new ways of putting stakeholders’ values into action and showing how sustainability challenges can unlock innovation.
You can listen here to a podcast interview with Professor Henning Breuer, project leader of IMPACT and explores the origins and achievements of the programme.
And below is a transcript of the interview:
Podcast with John Bessant (by Henning Breuer, 21.3.2023)
JB: Great to have you in my podcast, Henning. In an ongoing project you are working on several issues, that listeners of our podcast are interested in – like innovation culture, strategy, and practices – and on new topics like values-based innovation. Can you tell us in a few words what this project is about?
HB: Sure, the IMPACT project is essentially both about a likewise classical, and a new, rather existential challenge :) In some respect we are dealing with a classical management issue. Management theorist and consultant Peter Drucker came up with a descriptive proverb: Culture eats Strategy for Breakfast. Yummy.
What he meant is: Even if you have a great coherent plan, what to do, how to reach your goals, it will not survive the day (or even breakfast) in an organisation, if it is misaligned with people and their practices. If people don’t know why they should do anything, and how they can do it, all strategic goals and plans are in vein.
Today, the classical and seemingly theoretical tension between strategy and culture assumes an existential meaning. In our transition to a more sustainable economy, sustainability strategies regularly fail, or at least do not yet live up to their full potential.
JB: Is this why the project is called IMPACT – because you intend to increase the impact of these strategies?
HB: Well observed! The title IMPACT is actually a shortcut for the full title: “Building values-based innovation culture for sustainable business impact”.
JB: Oops, this is a densely packed bundling of concepts. Can you unpack them for our listeners?
HB: Sure. The key point here are the values, understood as notions of the desirable and systems of priorities. On the one hand, my interest in values stems from previous works on values-based innovation management. Together with Prof. Dr. Lüdeke-Freund, I explored how values, rather than short-lived interests or external opportunities, can drive and direct innovation efforts, and how they help us to address the grand challenges we are facing today. On the other hand, values are the foundation of organisational culture – which brings us back to the proverb by Peter Drucker.
Talking about innovation culture also suggests a holistic view on innovation practises and outcomes, and our assumption is that such a holistic view on the organisation and a values-based innovation culture are required achieve a positive impact on sustainable development – not just in a one-off project, but in a repeatable and reliable manner.
JB: Can you give an example for this?
HB: Imagine two companies. Company one follows a conventional approach to uncover new market opportunities, and to increase its market share. It responds to increased customer demand for sustainable products by introducing a green alternative to its flagship product – like Coca Cola once introduced Coca Cola Life (as reduced-calorie drink that used natural stevia as a sweetener, which was distributed in South American test markets). Even if company one issues a green product strategy, this can remain an isolated activity, and it might be difficult to manage since the internal competencies and supply chains for this green product are not well developed.
Then imagine another company two that would review its given set of core values, together with its employees and other stakeholders, to become a truly sustainable company, and to express this ambition through its vision, mission or purpose. (Examples like the green search engine Ecosia, the well-known case of Patagonia, or even cases from traditional companies like IBM have been described in the literature.) In such a company, not only some enlightened employees, but diverse parties would seek new ways to enhance sustainability. New, motivated applicants would join. This would not just result in new products or services, but also internal operations, capabilities and business models would be repurposed towards new ecological, social and economic outcomes.
JB: Ok.
HB: Yes, and the question in our IMPACT project is not, how to convince companies to do the right thing, but how to succeed in this once the decision is taken. All companies and organisations in Europe are now asked to adopt sustainability goals. A new Corporate Sustainability Reporting Directive and EU Taxonomy require mid-sized companies to contribute to environmental goals.
It is unspoken, but this essentially requires a significant cultural change for most organisations. Many have already adapted their strategies, but few have established effective inherent practices and manage innovation based on values of corporate sustainability.
JB: Ok, but how can they do this, or why do many of them still fail?
HB: In the IMPACT project we work with a technical inspection provider, a science-based multinational corporation, an energy service provider and a bunch of smaller companies engaged in a cleantech cluster. We conducted 36 ethnographic field interviews to understand each organisational culture with respect to sustainability and innovation, and to identify good practices and methods, but also tensions and barriers to sustainable innovation.
JB: So, what did you find?
HB: Most of them are actually already quite advanced in redirecting their culture towards values of sustainability – after all, they volunteered to participate! Some had adopted sustainability as one of their core values, and position themselves strategically as leaders in sustainable product and service design in their industry. One of them introduced a quite sophisticated sustainability assessment routine, and takes the results as key criterion for evaluating its overall innovation portfolio. This can serve as a benchmark for the whole industry.
JB: Sounds great, so all is running smoothly, and sustainability is adopted step-by-step into the culture?
HB: That might have been our hope, but we also saw substantial challenges that all or some companies are struggling with. It begins with what we called sustainability literacy – establishing a shared understanding what essential terms actually refer to, and what they imply. With respect to sustainability, some respondents just talked about ecological aspects, while others stressed the importance of the social dimension. Some advocated a triple bottom line of ecological, social and economic value, whereas others in the same firm argued against a triple bottom line approach and in favour a system value approach. One company had created its own cultural dictionary to ensure a common understanding of essential terms and their translation into desired behaviour.
Two of the companies had a history of prioritizing safety and error-proof engineering expertise, and were somehow struggling the stakeholder-inclusive and failure-tolerant mindest that sustainable innovation requires. We also found a “hidden treasure”.
JB: That sounds promising, I can literally see the glitter ;)
HB: Yes, a hidden treasure we found in the fact, that in some cases sustainability-oriented engagement of employees exceeds the absorptive capacity of the organisation, so to say. Ideally you would hope that motivated employees who identify with the strategic and normative goals of the company have every chance to contribute. In fact, we noticed for instance at the inspection company that several of the respondents once joined the organisation with an idealistic desire to become part of the solution rather than the problem.
These employees brought up several initiatives, for instance to improve sustainability with emission-free infrastructure (such as solar panels of roofs) or utilized informal communication to bring their message across. For instance, they specifically engaged in canteen talk, and blended in expressive backgrounds into their video chats, in order to promote their personal sustainability mission. However, even though such self-initiative was theoretically welcomed by top management, several of these propositions did not receive any or adequate feedback, or even scale-up support.
JB: So, what can companies do to lift such hidden treasures?
HB: In our project we facilitate co-creation workshops with our industrial partners to raise such treasures.
Some of these workshops focus on the ecosystem these firms are part of. In an ecosystem workshop, we first prioritize the most relevant stakeholders in a domain, we review which values they share, and which benefits they provide and receive. Then we depict an overview of current trends affecting them, and assess the trends and their impact. With these coordinates we envision a desirable future state for this, our envisioned ecosystem, and we reveal new potentials for economic, social and ecological value creation.
Even though this is all still work-in-progress, I hope this can help to extend for instance the technical inspection business into new domains, such as sustainability inspection, or provision of environmental footprint data for a European product passport. This again can enable for instance green pricing for comparative customer services. It could, so to say, awaken diverse organisational sustainability potentials.
JB: So, what are the next steps in the project?
HB: We are starting to wrap up what we have. We have some analysis of our initial literature review, in-depth expert interviews and a survey. We have documentation and results from the ethnographic field studies and co-creation workshops in four countries. Together these materials and results contain a rich repository of cases, insights and methods. From these we create some hopefully useful resources for educators and innovation professionals seeking to understand and design values-based innovation cultures. Professional and student courses on “Sustainable Innovation Practises” and an accompanying toolkit provide step-by-step guidelines on how to re-apply the research and workshops formats.
JB: What do you take away as one of the lessons learned from this project?
HB: For all team members this project involves a lot of hermeneutic work on values and culture. With it, we gained a more profound understanding of different business approaches and challenges in the transition to a sustainable economy.
Business sustainability, even for a focal firm, is not just a matter of isolated activities or larger campaigns. It is not enough to introduce new processes, products or services, nor does it suffice to create new sustainable business models or strategies, or to add sustainability onto the list of your core values. It requires significant cultural changes involving deeply engrained beliefs and values, practices and methods, activities and artefacts. These changes usually require time. Unfortunately, we don’t have this time, but instead we face a multitude of sustainability threats. A global poly-crisis was just proclaimed at the 2023 World Economic Forum (see global risks report at https://lnkd.in/egWxJGKg).
The challenges persist, and we just looked into one relevant subset. We came up with some new approaches to rapid ethnography, but we need to complement them by rapid high impact interventions that boost and speed up the ongoing cultural change.
JB: Thanks very much for sharing these insights! Any last comments from your side?
HB: Indeed. We benefitted a lot from the exchange among the European project partners, and I want to thank them very much for keeping up the great collaborative spirit and the enriching and fruitful discussions we had. Heartfelt thanks go to our academic partners, Dr. Sandra Dijk and Timo Brunner at HHL Leipzig, my research assistant Kiril Ivanov at HMKW Berlin, Prof. Dr. Carmen Abril and her team at the Complutense University of Madrid, the colleagues from the University of Florence and the its Foundation for Research and Innovation including Dr. Alessandro Monti, Prof. Dr. Mario Rapaccini, Chiara Guiggiani, Raffaella Montera and their team, and the team at the Cracov University of Technology including Prof. Dr. Katarzyna Matras-Postolek, Dr. Jacek Kasz and Irena Śliwińska. We all thank our industrial partner companies TÜV Nord, Baker Hughes, South Poland Cleantech Cluster and 3M. We also thank the supporting organisations, namely the ISPIM conference and its organisers, Circular Change, InnoFora, and the Accreditation Agency ASIIN, and last but not least the Erasmus+ Programme of the European Union that co-funded the project. And thanks to you, John!