September 23, 2021 / 10:00AM / ThistlePraxis Consulting / Header Image Credit: Green Biz
Current times have managers racing towards sustainability and innovation. Do managers really understand the interdependent relationships of these two variables? When looking at sustainability over the last twenty years, the rate at which the topic has been examined has significantly increased in research. From 2004-2013, the amount of research that has been published has more than doubled than in the previous decade (1994-2003).
To give a more concise picture on the level of significance sustainability has taken on, the number of publications that has focused on sustainability in the last decade has out-numbered the aggregate total of all research published prior to 2004. Firms, consultants, and researchers are beginning to see the value that sustainability plays in the success and long-term viability of a firm. To maintain market share, meet consumer demands and retain a competitive advantage, firms are now required to learn how to champion sustainability through the strategic implementation of innovation.
But what do we really know about innovation?
There are various types, levels, and characteristics of innovation that must be understood before the assumption that Innovation leads to sustainability can be held as true. Not every type of innovation that is adopted will be salubrious for the organization. Firms must be able to first ascertain their core competencies, before adopting an innovation strategy. A misalignment of innovation strategies and core competencies is a misappropriation of resources (i.e. knowledge), which can be detrimental to the sustainability of the firm.
To give light to some common stratifications of innovation, we will segregate innovation into two core sections: The How (Explorative & Exploitative) and the Where (Product & Process).
Explorative vs. Exploitative - The How
Innovation can be explorative or exploitative in nature. Firms that have high levels of innovation and costs, such as Boeing or Sony, typically embrace explorative innovation strategies, while firms with low levels of innovation and costs engage in exploitative practices.
Explorative innovation practices look for advancements beyond the local domain of previous adopted technologies and pre-existing platforms. This is the stratum where we see disruptive innovations come to fruition. Cost efficient imitator firms would not conventionally fair well against highly innovative firms if they were to change their innovation strategies from exploitative to explorative, because it causes them to abdicate their core competencies.
Conversely, low innovation and low-cost firms specialize by embracing exploitative innovations. These firms look at how to incrementally advance the pre-existing adopted technologies and platforms by investing their efforts within the local domain in which they specialize. Whether explorative or exploitative, a strategic orientation of core competencies and innovative practices must exist in order for innovation to be beneficial to the firm. Innovation does not just come in the form of products; it can also come in the form of new processes too.
Typically, when someone says innovation, we as consumers get excited about a new innovative technology. We exist in an exponentially growing epoch, where the excitement and sexiness of see disruptive innovations come to fruition. Cost efficient imitator firms would not conventionally fair well against highly innovative firms if they were to change their innovation strategies from exploitative to explorative, because it causes them to abdicate their core competencies.
Conversely, low innovation and low cost firms specialize by embracing exploitative innovations. These firms look at how to incrementally advance the pre-existing adopted technologies and platforms by investing their efforts within the local domain in which they specialize. Whether explorative or exploitative, a strategic orientation of core competencies and innovative practices must exist in order for innovation to be beneficial to the firm.
Product vs. Process - The Where
Innovation does not just come in the form of products; it can also come in the form of new processes too. Typically, when someone says innovation, we as consumers get excited about a new innovative technology. We exist in an exponentially growing epoch, where the excitement and sexiness of innovation is technology driven.
Companies like Samsung have mastered the art of showcasing their ability to stay on the leading edge of innovation, which has positioned them as a globally recognized leader that has outperformed Apple in many categories. But Samsung's success does not just come from product innovation; it also comes from process innovation. Process innovation is largely about knowledge management. Distinguishing what the organization's explicit and tacit knowledge echelons are can succor the question "What do we already know, and how can we become better at it?"
Process innovation is largely seen as a core competency within service sectors and imitator firms, and is typically exploitative in nature. Although, we do occasionally see a firm become highly explorative and leave the local domain when adopting a process-based innovation. This is typical when a leapfrogging phenomenon occurs. A great example of this is with the mobile money systems that have been widely adopted in developing African markets. Firms were able to take a pre-existing technology, see a new perceived benefit and adopted new innovative processes outside the local domain. The magnitude of this explorative process innovation can be considered disruptive in nature, because it bypassed the need for traditional financial institutions.
Characteristically, depravity is the driver for innovation. If innovation is the adoption of a technology or process new to an organization, then deprivation is the impetus for innovation adoption. The greater the depravity organizations face, the higher the requisite for a sustainable solution. The fulfillment of depravity originates via innovation (i.e. an adoption of a new product or process), but the product or process life of the innovation is what constitutes sustainability.
Sustainability literally means the ability to sustain, or a state that can be maintained at a certain level. Using available resources to meet the needs of the present without compromising the ability of future generations to meet their own needs is sustainability. Sustainability phenomena come from the triple bottom line that involves economic growth while considering social and environmental dimensions. The triple bottom line has helped companies conceptualize their approach to sustainable development and sustainability. Integrating the triple bottom line into new product and process development is one way in which a company can respond in a proactive manner to the challenges of sustainability.
Firms can enjoy a sustainable competitive advantage when they unswervingly integrate innovative products or processes into their strategies and practices, which correspond to the key buying criteria for the majority its consumers in their market. These attributes will include factors such as: price, specification, reliability, aesthetics, functionality, availability, image, and etc. It is essential that firms continuously try to differentiate themselves from their competitors within the market. Hence, looking from the lens of sustainability, companies will have to closely observe customer value determination and customer value change.
Sustainability and Innovation
Companies have started the concept of open sustainability innovation; use of open innovation (using external ideas as well as internal ideas) in development of sustainable products and processes. Almost all of the automobile manufacturers are focusing on going green via hybrid, electric, ethanol, hydrogen, natural gas or biodiesel.
The R&D departments are not hesitating to borrow ideas from various fields to increase the efficiency of their innovations. Third generation models of the Toyota Prius integrated a solar panel on the roof of the car for better efficiencies. These solar panels not only recharge the battery when the car is moving or at rest but also air-conditions the car. Innovative ideas play a critical part in building of sustainable products and processes. Innovation, coupled with sustainability, brings the acquisition of both competitive advantage and differentiation to firms.
As stated earlier, innovative ideas derive wherever there is depravity. Innovation facilitates and expedites the development of sustainable products and processes, and is a critical protagonist in the process of developing sustainability. Innovations may be explorative or exploitative, but are typically shaped and directed by environmental, social, and economic demands, as enabled by technology. As innovation continues to nullify the voids within society, the overall consensus is that the attribute that innovative products and processes must possess is sustainability.
Credit: This article first appeared here