Embracing Sustainability and Innovation to Get (and Stay) Ahead in Business

This week, I am sure that you are reading this along with the many other blogs that mark the 40^th anniversary of Earth Day.   For 40 years, as Americans, we have aspired to change the world through enhanced environmental consciousness, policy making, and technological innovations that drive sustainability.  In the U.S. we have lurched forward, sputtered badly, recovered, then stopped all together, then jumped forward again.  So our choices and actions moving forward in this new “green economy” have not been entirely without influence or challenges, from ourselves and from nations afar. The only certainty is that it’s our own actions that can shape the path of our own organizations, communities and markets.

Disruptive technology and disruptive innovation are terms used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically by being lower priced or designed for a different set of consumers. http://www.claytonchristensen.com/disruptive_innovation.html.  Christensen’s’ theory, featured in both “The Innovators Dilemma” and “The Innovators Solution” provides a prescription for a small entrant with less resources to compete with and beat a large incumbent. A quick look at the Disruptive Innovation model is at http://www.youtube.com/watch?v=DaKgMcFP4Mo

Disruptive innovations either create new markets or reshape existing markets by delivering relatively simple, convenient, low-cost innovations to a set of customers who are ignored by industry leaders. Historically, companies that dominate an industry have had little interest in pursuing these types of innovations because profit margins are often lower and the innovations don’t address the needs of those companies’ best customers. http://www.innosight.com/documents/diprimer.pdf

What does this have to do with “sustainability”?  I had the chance to participate in a recent Leadership Summit here in Portland, hosted by the University of Oregon.  The goal of the summit was to vette business and sustainability leaders in Oregon/SW Washington are as to how the U of O Center for Sustainable Business Practices could serve as a catalyst for innovation and bring sustainable solutions to the marketplace in Oregon and beyond.  One goal that the Center has is to seek innovative approaches that can break the endemic boom-bust cycle that Oregon and many western states have often found themselves in.  Never mind that there are tax related issues or brittle governance, or well intentioned but ineffective public-private partnership infrastructures that add to the fiscal malaise.

The discussion that ensued was interesting and of particular note because of the many references to disruptive technology.  From this dialogue, it became clear that collaboration- finding ways to harmonize research, policy, manufacturing and service – is vital to a stable, sustainable economy.  It was generally agreed that  in order to support meaningful job growth, an educated community and sustained economic performance, two things must happen:  1) all parts must be working together and 2) there needs to be a policy/governance, educational, and public-private infrastructure that supports disruptive technology and innovation.

A book that I have been reading, The Silver Lining, A Playbook for Uncertain Times, by Scott Anthony, provides some answers as to how communities and organizations can move forward to realize opportunities in their markets. This 10-point checklist synthesizes The Silver Lining‘s key messages and provides practical guidance for leaders. Each item links to a blog post describing the item in more depth.

Does your organization:

1. Recognize today’s transformation imperative?
2. Have a handle on the future potential of innovation?
3. Have a process to prudently prune its innovation portfolio on a regular basis
4. Have clear consensus on the 1-3 top growth opportunities?
5. Always ask, “How does the customer define more?” before asking people to do more with less?
6. Match technological experiments (“can we?”) with strategic experiments (“should we?”)?
7. Constantly search to share the innovation load to de-risk innovation?
8. Have a plan to “love the low end” in existing and emerging markets?
9. Run an innovation factory with systems and structures to make innovation repeatable?
10. Have a plan to help leaders transform themselves?

Finally, I want to share with all of you a seminal piece which I recently purchased from the Harvard Business Review (HBR) and that I “tweeted” about last fall http://bit.ly/2yfirf.   Please read this!  Authors Nidumolu, Prahalad, and Rangaswami have found that the quest for sustainability can unearth organizational and technological innovations that yield both top-line and bottom-line returns. That quest has already begun to transform the competitive landscape.  The authors found that companies on the journey to sustainability go through five distinct stages of change:

1. viewing compliance as opportunity
2. making value chains sustainable;
3. designing sustainable products and services;
4. developing new business models; and
5. creating next-practice platforms.

By going through these key stages of change, the study found that “sustainability isn’t the burden on bottom lines that many executives believe it to be. In fact, becoming environment-friendly can lower your costs and increase your revenues. That’s why sustainability should be a touchstone for all innovation.  In the future, only companies that make sustainability a goal will achieve competitive advantage. That means rethinking business models as well as products, technologies, and processes.”

This research was for me transformative and insightful, and offers compelling reasons for embedding sustainability into operational practices and strategic business strategies.

Whether you read Anthony, explore Christensen’s ideas or the review the HBR article, history shows us that innovation flourishes, no matter how dark the times. You can either reflect on this time in our economic recovery as the beginning of the end or a jump-start to transform your business or your market space. It all depends on your actions, so get innovative now!

All Parts Working Together

Sustainable Sourcing with a “Green” Supply Chain Brings Competitive Advantages

Well, can the economic tides be turning?  In my former home base of San Diego, they had a saying: “It takes a long time to carefully turn an aircraft carrier around”.  Capgemini Consulting’s new study of 300 leading companies across Europe, US, Asia-pacific and Latin America states that economic recovery has surpassed economic downturn in the list of business drivers for 2010.

Some key findings of note from a supply chain perspective:

• Over 58 percent of the supply chain managers say their main business driver for 2010 is “Meeting (changing) customer requirements”.  (Well, I guess that is a no-brainer, as a successful business should be nimble and always responsive to customers’ needs to succeed in the marketplace)
• More than 50 percent of the participating companies indicate they will start up or continue with operational excellence / LEAN.  Another obvious direction – reduces waste, optimize resources.  This should translate into bigger profits and competitive position.
• Sustainability is the second most important business driver for 2010 — up 16 percent over last year. However, the survey results suggest that this has not yet directly translated into a significant increase in supply chain sustainability projects.  Well, remember that aircraft carrier quote that I just mentioned?

These findings really suggest that while the road to recovery is long, that much foundational work remains.  But the trend from survival to revival is in play now.

Perhaps the biggest take-away from this report is the increasing emphasis of supply chain management in creating the proper ingredients of a successful business strategy. And coincidentally, the concept of a Green Supply Chain is gaining interest among operations practitioners as a sustainable and profitable undertaking. A Green Supply Chain can be thought of as a supply chain that has integrated environmental thinking into core operations from material sourcing through product design, manufacturing, distribution, delivery, and end-of-life recycling.

The implementation of Green Supply Chain initiatives has evolved from strictly a compliance issue into a means of generating value. Traditionally, companies incorporating green projects have focused solely on cost avoidance by assuring compliance, minimizing risk, maintaining health, and protecting the environment. In the emerging value-creation model, implementing green initiatives along a company’s supply chain can raise productivity, enhance customer and supplier relations, support innovation, and enable growth. The Green Supply Chain is no longer exclusively about green issues, but also about generating efficiencies and cost containment. As organizations restructure to reduce their company’s environmental footprint, supply chains have increasingly become a key area of focus. Improvements in transportation efficiency, operations, raw material selection and packaging are all topping the list of “green” supply chain initiatives.

Source: Diamond Management & Technology Consultants

Green Supply Chains enable organizations to:

• specialize and concentrate manufacturing efforts in a way that manages environmental risks and costs of compliance with existing or new regulations;
• improve product, process, and supply quality and productivity.
• make innovative decisions that respond to “green economy” requirements;
• gain access to key markets through ISO 14001 registration or other certifications;
• improve or create brand differentiation and customer loyalty by offering unique capabilities to address environmental related requirements and expectations;
• reduce customer pressure and even gain preferred status; and

The ISO 14001 Certification / Supply Chain Nexus

Over the past several years, studies have been performed worldwide comparing ISO 14001-2004 and its value in development of green supply chains.

• One recent study found that more than 75% of manufacturing executives surveyed had ISO 14001 certification or were in process in order to enhance their competitive supply chain position,
• Companies that are already ISO 14001 certified are 40% more likely to assess their suppliers’ environmental performance and 50% more likely to require that their suppliers undertake specific environmental practices,
• Preference in market share is often given to suppliers that have attained ISO 14001-certification,
• Consumer preferences are increasingly important drivers for many companies to improve their supply chain environmental activities,
• Procurement officers increasingly use ISO 14001 certification as a required vendor qualification,
• Suppliers without an environmental management system will feel increasing pressure to modify their practices or risk losing customers, and will be subject to higher costs for licenses, inspections and insurance.

Questions and issues to consider when developing your Supply Chain/Value Network:

• Will the service provider enhance the cause of sustainability both upstream (i.e., primary customer/end customer) and downstream (i.e., all tiers of supply base, including logistics service providers)?
• Will some relationships drive significant redesign of the supply chain, including product innovations and modifications (e.g., collaborative development of decomposable packaging material?
• Is your supply chain implementing progressive environmental management systems to manage their environmental footprint?
• Establish a more cohesive collaborative model in transport, warehousing and distribution that will drive efficiencies up and incremental costs down, while reducing environmental impacts throughout the supply chain.

The Green Economy Post assembled a number of Green Supply Chain studies to assist you in your efforts to understand and address these issues in your business (15 Green Supply Chain Studies You Should Know About http://bit.ly/6X3YDU).

Environmentally responsible procurement, in alignment with your company’s environmental sustainability values, is critical for organizations that desire to manage their environmental risk and maintain a competitive advantage.

Not only does this mean that businesses must choose their suppliers well, they also have to ensure that suppliers comply with the standards they claim to meet.

I will have the honor of conducting a breakout session on this topic on April 13th at the Aberdeen Research’s Supply Chain Management (SCM) Summit in San Francisco, CA (http://summits.aberdeen.com/index.php/Supply-Chain-Management-Summit/2010-scm-summit-overview.html).  Hope to see you there!