Sustainability and Innovation

1. Sustainability and Innovation Professor Ray Amtmann

2. The Reality of Sustainability • There is no alternative to sustainable development. • Yet companies worry about their competitiveness • Businesses in developed countries feel at a disadvantage compared to businesses in non-developed countries without environmental regulations • Therefore, “executives treat sustainability as social responsibility divorced from business objectives” • This creates opinions that regulation must be needed because businesses will not enforce sustainability voluntarily

3. Reality cont. • But this is not really true • “Sustainability is a mother lode of organizational and technological innovation that yield both bottom-line and top-line returns..” Resulting in • Lower cost • Less input • New products • The search for sustainability becomes transformative • Innovation can be a key to success and profitability especially in tough economic times

4. Five Stages of Sustainability • Viewing Compliance as an opportunity • This can be complicated and vary by area • Complying with the strictest standards early on gives a company a lead position for the future • Can turn regulators into allies • Making Value Chains Sustainable • The drive for efficiency shifts to the supply chain and resource conservation • Consider waste reduction • Packaging • Returned products

5. Five Stages cont. • Large companies like Walmart set standards and timelines their suppliers must meet • Life cycle analysis • Operations procedures • Walmart and their trucking analysis • FedEx with new efficient aircraft • UPS trucks try to only make right turns • Create energy efficient workplaces 3. Designing Sustainable Products and Services • Meet consumer’s eco-friendly desires • May provide competitive edge

6. Five Stages cont. • Analyze products for environmental impact • Proctor & Gamble • Figured out their detergents needing hot water cost billions of kilowatt hours of electricity • Developed cold water detergent saving 80 billion kilowatt hours of electricity and 34 million tons of carbon dioxide 4. Developing new business models • Executives must learn to question existing models and act entrepreneurially to develop new models of delivery

7. Five Stages cont. • FedEx acquired Kinko's and now instead of shipping companies documents across country they digitally send them and then print locally • Customer gets more preparation time • Better quality printing • FedEx is viewed as more eco-friendly • FedEx costs shrink 5. Creating Next-practice platforms • Can we change the current paradigms • Another words innovation • Example of the “Smart Grid” using digital resources to manage power usage

8. So how do you make it happen? • It takes leadership and buy in at the top of the organization • Examples • Walmart • GE • P&G • What about entrepreneurial businesses? • The owner / entrepreneur sets the tone or culture in any business • You have to be the change agent and have to lead by not only words but actions every day

9. Lubin and Esty • In Harvard Business Revue for May 2010 they make a case that Sustainability is a “Megatrend” • They feel it is important for companies to realize this and to take note of previous Megatrends such as • Globalization • Quality Management • Information Technology

10. How to Respond • They point out that many companies are “flailing around launching a hodgepodge of initiatives without any over arching vision or plan.” • They attribute this to companies thinking they are “facing an unprecedented journey.” • They point out there is a roadmap from previous Megatrends

11. Response cont. • They illustrate how companies which missed the boat on Total Quality Management (TQM) and Information Technology (IT) paid a heavy price • These trends were Game Changers for companies who adopted them • Quality was initially looked at to reduce defects • It however when viewed Holistically • Drove changes across the business spectrum • Reducing • Costs • Waste • Risk

12. They agree with Prahalad • They agree with the five stages we have discussed above • They also feel it is crucial to not only have the vision correct but to get the execution correct in five critical areas • Leadership • Methods • Strategy • Management • Reporting

13. Leadership • Chief Executive Officers (CEOs) need to commit to this type of leadership at the corporate level with a Chief Sustainability Officer (CSO) • For an Entrepreneur that means you! • You need to work within the company at all levels and with • Suppliers • Customers • Stakeholders

14. Methods • You need to be able to quantify your • Benefits • Risks • If you can’t measure it you can’t manage it • Companies are setting targets and goals with timelines • These have to be realistic or a company will be accused of “Green Washing” when they fail

15. Strategy Development • Companies such as Walmart have created “Sustainable Networks” within their companies • These networks focus on strategic issues • They are often composed of company employees and external players from • Government • NGOs • Academics • They are open source and seek transparency

16. Management Integration • You need to fully integrate sustainability into day to day management • Some companies integrate sustainability goals into compensation • Use technology to support sustainability

17. Reporting and Communication • Your company needs to share information • Internally • At all levels • Externally • Government Regulators • Customers • Public • Transparency is a must • You need to share the good and the not so good

18. Four types of Companies • Losers • Put in place only modest initiatives for • Cost • Risk • Waste • Risk losing their positions • Defenders • Go Slow Approach • Can work, but can be overcome by other competitors who move fast and or innovatively

19. Four Types cont. • Dreamers • Let vision and ambition get too far ahead of capacity • Can’t fulfill their promises and get accused of “Green Washing” • Ford made promises it could not keep under Bill Ford • Did not have the capacity or technology • Now under Alan Mullaly they have moved foreword and are competing well • Winners • Made strategic moves • Provide transparency • Deliver what they promise • Establish Best Practices

20. Works Cited • Lubin, David, A.; Esty, Daniel, C.; The Sustainable Imperative, Harvard Business Review (May 2010) • Nidumolu, Ram; Prahalad, C. K.; Rangaswami, M. R.; Why Sustainability is Now the Key Driver of Innovation, Harvard Business Review (Sept 2009)