The sustainability challenge.
Maybe you’re a pessimist, seeing dire threats in global warming, worrying about the rate at which we’re using up the planet’s resources, concerned at the way we’re carelessly throwing the litter of our thoughtless consumption for later generations to pick up.
Or maybe you’re an optimist, seeing new opportunities in this changing world perspective, shifting to low carbon solutions, cleaner energy and smarter homes and cities. Unlocking new technological possibilities to reshape the way we are able to interact and survive.
Either way it’s likely that innovation - right across the spectrum, from new products and services, through new and improved processes to rethinking our underlying business and social models – will be involved. And this raises some important questions about how we approach the management of this – is it simply a case of business as usual or do we need to adjust and extend our routines for handling the challenge?
Image: Tobias Weinhold on Unsplash
We’ve seen it before….
This isn’t a new conversation. Back in the 1970s there was a wave of concern about reaching ‘the limits to growth’ and many influential commentators predicted massive changes in a negative direction. In the event we are still around and have managed to survive their worst forecasts – but not by standing still. The period since the publication of the influential Club of Rome report in 1972 has been one of continuing and radical innovation – of changes to products, services and processes which give us hope that we can meet the sustainability challenge.
Organizations - such as the influential Science Policy Research Unit (SPRU) - grew up around this time and made an important contribution to our understanding of how innovation could make a difference and ameliorate some of the problems. One of the key contributions was exploring the idea of long waves of change - shifts in ‘techno-economic paradigms’ which offer a powerful way of understanding long-term changes in our environment and how innovation plays a key role in driving them.
Chris Freeman and Carlota Perez have worked extensively on this and highlight two key points; first that it is the interplay of social, economic and technological forces which create upswings and downswings around growth - which means that we need to understand today's environmental challenges in the context of such complex systems.
And second, that it is very difficult when we are living in one paradigm to imagine what life might be like in an alternative one. We are understandably preoccupied right now with so much of the negative story around climate change, resource depletion, pollution and waste that we find it hard to think about a different world in which these problems may have been solved or at least ameliorated. Yet, as a recent article in New Scientist (4th September) argues, it is possible to construct such an alternative narrative (in their case by imagining a science -fiction scenario for a net-zero world in 2050) and then to back-cast from that optimistic vision to find key action points around which we can innovate today.
The innovation ‘get out of jail free’ card…
Innovation has a good track record of getting us out of various kinds of environmental trouble; it’s not by accident that we’ve survived as a species despite limited physical strength or speed. Our ability to innovate is what has made the difference - and the way in which the current pandemic has been at least pushed back owes a lot to this capacity once again exerting itself.
But innovation doesn't happen by accident - it needs organizing and managing. It’s much more than a flash of inspiration; the cartoon model of a flashing lightbulb above someone’s head is a poor guide to how innovation really takes place. The good news is that we know a lot about how to make this journey, creating value from ideas - not least because we’ve been studying it for the past century and trying to codify the recipe for success.
The not-so-good news is that innovation is a moving target. We might learn to manage it and develop the ability to deliver a stream of product, process and service innovations but our knowledge base is one which derives from experience. And there will always be new challenges in technologies and environments which will require us to update or even rethink our innovation models. Perhaps the biggest shift from the last century to this one has been in the need to rethink how we work at a system level, innovation as a multi-player game in which we need to build and manage networks of partners to create value.
Sustainability-led innovation (SLI)
There’s increasing evidence to suggest that the adoption of sustainability targets as part of mainstream innovation strategy is accelerating and that an increasing number of organizations are moving into this space. Arguably the debate has shifted from early ‘cosmetic’ activity (in which organizations sought to improve their image or strengthen their corporate social responsibility image through high profile activities designed to show their ‘green’ credentials, through a second phase in which increasingly strong legislation provides a degree of forced compliance. The frontier is now one along which leading organizations are seeking to exploit opportunities within this space, as they recognize the need for innovation to deal with resource instability and scarcity, energy security and systemic efficiencies across their supply chains.
But what does this mean for how we organize and manage innovation? Are our current models for handling the process sufficient – or will the nature and pace of change be so disruptive that it requires radically new approaches? What kinds of innovation ecosystem might emerge and how will current players position themselves within it? What new skills will we need within – and between – our organizations? What tools, techniques and approaches will help equip established players and aspiring new entrants to manage effectively? In the face of radical change, what do we need to do more of, less of and differently in the ways we manage innovation?
A model for sustainability-led innovation
A helpful model for thinking about innovation strategy in the context of the sustainability challenge is one we developed with a Canadian organization, the Network for Business Sustainability (NBS). ((You can find the report and more details here)) We looked at a wide range of literature and cases, trying to distil practices and experience around the SLI theme. The core model has two axes, one dealing with the extent of innovation, from incremental (doing what we already do a little better) through to radical, (doing something significantly different). And the other moving the focus from the enterprise through to wider multi-player ecosystems.
This allows us to look at three distinct approaches to innovating for sustainability:
Operational optimisation – doing what we do but better
Organizational transformation – creating new opportunities
System building – enabling societal change
The model and implications for each level is summarised here:
Not surprisingly most of the reported examples of SLI have concentrated so far around the ‘do better’ agenda. Many of the ‘eco-efficiency’ type of projects which involve finding new and more efficient ways of ‘doing more with less’ fall into this category. For example, reducing carbon footprint through supply chain improvements or switching to less energy or resource intensive products and services which deliver equivalent value can generate significant savings.
The success over decades of the ‘lean’ approach which targets elimination of waste of all kinds underlines the power of such innovation - and by now the strategy question it should pose in any boardroom (public or private) is simple one of ‘why not?!!!’ It’s a no-brainer.
But there are an increasing number of activities which climb up the ladder, moving into radical innovation within the organization. Interface Flor have been active in this space for over twenty five years and provide an excellent illustration of what can be achieved – and also the economic case for doing so. Interface has cut greenhouse gas emissions by 82%, fossil fuel consumption by 60%, waste by 66%, water use by 75%; and increased sales by 66%, doubled earnings and raised profit margins. To quote Ray Anderson, founder and chairman; “As we climb Mount Sustainability with the four sustainability principles on top, we are doing better than ever on bottom-line business. This is not at the cost of social or ecological systems, but at the cost of our competitors who still haven’t got it.”
Strategy is about vision, mission and values - and it’s clear to see this template at the heart of many start-ups. Anita Roddick’s Body Shop emerged as a successful global player through having this identity at its core, something mirrored in the Brazilian company Natura (who now own the brand).
Here the strategy question in the boardroom is much more challenging, centred on the identity question - ‘who are we, what kind of business do we aspire to be?’ and driving innovation model innovation from that. It’s harder to do this in large established organizations since it involves significant rethinking. But it can work, through sustained catalytic change agency and a top level commitment - as the case of Philips shows.
Philips have been working for some time on a mixture of ‘do better’, ‘do different’ and ‘breakthrough’ projects in their SLI activity. This covers internal processes and the wide range of products and services which they offer. For example since 2004 they have been working on ‘green’ products which offer significant environmental improvements in one or more Green Key Focal Areas: energy efficiency, packaging, hazardous substances, packaging, weight, recycling and disposal and lifetime reliability.
It’s paying off. In 2010 green products accounted for 37.5% of the Philips sales resulting from an investment of around €1bn; by 2017 this was over 60% and continues to rise.
Whilst there is now quite extensive experience around the first two, the challenge of moving to thinking and working at a system level is significant. The boardroom innovation strategy question here is ‘who else (or what else) do we need to make this change happen?’ and it opens up the big challenge of collective innovation through collaboration and partnership.
Image: Clint Adair on Unsplash
We know this model can work; these days most discussion is about innovation platforms and ecosystems and we look to players like Amazon as examples. But they represent an older model, one in which creating value networks of complementary assets and mobilising alignment and commitment to shared vision across them matters. A century before Jeff Bezos, Messrs Sears and Roebuck pioneered the system of remote retailing with their mail order business. It was a good idea – but to make it work they needed to assemble a lot of pieces of the jigsaw puzzle and make them work. Selling is one thing, capturing and processing orders, arranging for stock to be available and storage and distribution, handling logistics over a large area – and very important, managing the cash flow so that they didn’t sit on lots of stock but manage to get paid up front.
Theirs wasn’t a single component innovation; they built an ecosystem. And they were smart enough to recognise that they didn’t need to own or control everything as long as they could orchestrate it and co-ordinate it. So major manufacturers and other players came into the ecosystem tent – all sharing in the value creation.
We’ve seen the power of such systems thinking in the lean story; Toyota is widely recognized as having pioneered the kind of cooperative supply network which shares a vision and innovates across the system to enhance productivity across a number of dimensions. This is not management by edict; Toyota continues to invest in building system-level capacity by sharing knowledge, lending guest engineers, providing training and development and other inputs to raise the overall capability of the network.
There’s plenty of potential for such ecosystems in the sustainability world. For example Interface Flor’s ‘Net Works’ programme is attempting to mobilize a novel supply route for Nylon 6, an important raw material in their business of carpet-tile manufacture. Whilst this normally comes from a petrochemical feedstock Interface are attempting to mobilize fishermen in the Philippines to recycle their damaged and discarded nets as a source of recyclable material – in the process not only contributing to a resource-saving innovation but also to poverty reduction and economic development at the ‘bottom of the pyramid’.
Systems thinking lies at the heart of success in this level of innovation. Not least in the concept of the ‘circular economy’ reflecting the potential of seeing a ‘zero waste’ connected system.
A good role model for such an approach might be found in the work of James Brindley, pioneer of the canal system which he helped to create and which underpinned the British Industrial Revolution. He worked with water all his life and the idea of ‘flow’ was not an abstract metaphor for him. His many innovations were all about enabling a complex system to operate; it was all about flow. These included reducing the size of the passageway to conserve water, through extensive pumping and hydraulic innovations, his pioneering use of puddling clay to line the canals and prevent water loss, his lock designs, his following of natural contours of the landscape to reduce the need for expensive earthworks and his use of tunnels and aqueducts where this was not possible. He even pioneered the concept of containerisation, speeding up the flow of traffic along the canals by reducing loading and unloading times.
Fast forward 250 years and we are seeing the same innovation management challenges emerging around making things work at a systems level. There's no doubt that innovation will help us meet the challenge of sustainability. But we need to expand our thinking in order for that to happen....
(This blog is based on a keynote speech which I delivered to the CINet Annual Conference, September, 2021)
Take a look at my other blog pieces here
Listen to my podcast here
Follow my online course here