The Challenges of Sustainable Innovation

Pick up any list of “most innovative companies” (there are dozens published each year) and three things become immediately apparent. First, there is no shortage of role models for innovation. In fact, outside the crowd favorites (Apple, Google, and Facebook) there is not much overlap between lists. Second, there is no singular definition of innovation that fits all of these companies—some of behemoth multinationals employing hundreds of thousands while others are startups with less than hundred; some are in heavy industries and others are iPhone apps; some in the US and others in developing countries. Finally, there are very few—no more than 2 or 3 on most lists—that are there because they’ve developed and launched sustainable solutions. Should we really treat the best practices of innovation as if they applied equally to all companies?

The same holds for business books. There’s a general assumption in the innovation literature that the best innovation practices hold true across all companies and all settings. One of my favorites in this category, What Would Google Do promises innovation insights for individuals, corporations, and governments alike:

By reverse-engineering Google, Jarvis discerns its core practices, strategies, and attitudes. Using the rules he defines, Jarvis applies them to a wide range of industries including airlines, television, government, healthcare, media, manufacturing, and education, and details what each would be like if they operated under Google’s rules.

I’m all for thinking outside the box we spend most of our time in and in other boxes where we might find valuable (and well-developed) solutions. But there are fundamental differences between companies and the challenges they face. The best practices for a 10 year-old internet giant will not be the same for a 100 year-old multinational like GE. The different contexts in which companies compete, and the particular challenges they face in those contexts, require differing capabilities. Sure, there will be overlap—strong leadership, bold action, out-of-the-box thinking—but innovating in internet gaming will require very different capabilities that developing novel materials for desalination plants, novel car batteries for the automotive industry, or high-speed rail.

 

Venn on Sustainability and Innovation

If we don’t recognize these differences, and craft an innovation strategy that matches the context and challenges of a given corporate sustainability strategy, our efforts will quickly founder. The first phase of research for this book focused on understanding the context and challenges that distinguish sustainable innovation from the “lowest common denominator” approach inherent to the innovation literature. Five unique challenges emerged, which I mention here and elaborate on in subsequent posts.

First, declining resources. Very few companies have had to find growth while facing declining resource stocks—indeed, for the last half-century established companies enjoyed an expansion of resources never seen before and, likely, never again. International markets expanded, capital and labor markets expanded, computing and communications technologies expanded. That’s changing, and few companies understand how to use innovation to drive growth in the face of declining inputs.

Second, brownfield markets. Microsoft, Amazon, Google, and Facebook all enjoyed their best growth years in step with growing markets—what are called greenfield markets. In fact, so too did Ford and General Motors in their early days. Yet most sustainability efforts are addressing the problems of mature markets, whose scale and dependency on outmoded practices have proven unsustainable—the incumbent energy, agriculture, transportation and construction industries, for example, that are large, well-established, deeply entrenched, and highly subsidized. Innovating in brownfields presents unique challenges.

Third, the critical balance between scale, reliability, and cost. Bringing any new product or service to market is challenging—the risks of growing (scaling), of getting the product right (reliability), and of keeping costs under control must always be balanced. Introducing sustainable innovations into brownfield markets (remember: large, well-established, deeply entrenched, and highly subsidized) makes the margin for error in this balancing act razor-thin.

Fourth, the overdetermined uncertainties. All innovation involves uncertainty (will the technology scale? will customers buy it? will competitors beat it?). The uncertainties surrounding sustainable innovations are often overdetermined. In other words, they are driven by multiple, compounding, and overlapping uncertainties that include not only technical challenges and market reactions, but also regulatory and political uncertainties, scaling, reliability, and cost uncertainties, and supply chain uncertainties.

Finally there is the breakthrough bias Companies pursuing sustainable innovations must do so in a technical, market, and political environment in which new and tantalizing breakthroughs are continually distracting regulators, policy makers, investors, and customers away from the hard work of realizing
known solutions.

Each of these represent relatively unique innovation challenges. What differentiates the pursuit of sustainable innovations is often the mix of these challenges in any particular context (and for any particular strategy). Understanding these (and other challenges?) becomes the first step to crafting an innovation strategy that fits your efforts.

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One thought on “The Challenges of Sustainable Innovation

  1. I enjoyed this post. Of particular interest was the breakthrough bias. I run an A/D focused company and find that Architects and Designers are constantly being distracted by new products. Thus we have to innovate our product to ‘reintroduce’ it. This adds cost but also allows us to keep a key eye on competition. One of our largest overdetermined uncertainties is the China market threat. We recently had our products ‘replicated’ in China and reintroduced into the USA. While some might view that as a market reaction, I view it as intellectual property theft. I am unsure where legal threats fit into the above framework.

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