Economy

Why businesses must ‘shape and innovate’

Published

11 years ago

November 4, 2013

Green Futures

David Bent, director of sustainable business at Forum for the Future, describes the new frontier for leading companies.

In my 10 years at Forum for the Future, I have seen a shift in mind-set among senior executives at leading companies.

In the early 2000s, their attitude was summed up by the word ‘responsibility’. Companies had a responsibility to minimise their bad impact on the world.

But it turns out that unsustainable development has a bad impact on business, with resource shortages affecting the long-term viability of supply chains. That’s why leading companies talk in terms of ‘sustainability’.

Doing nothing presents real risks. Acting now opens up opportunity. Executives in leading companies are realising that long-term value creation requires a dynamic, successful society. And creating this means the global economy must operate within environmental limits, as well as ensuring people have the capability to act through skills, institutions and other social foundations. But creating these conditions is too much for one company alone.

That’s why, when I look at leading companies, I see them exploring the next frontier. They are learning a new dance, which I call #theBIGshift two-step of ‘shape and innovate’. They are both shaping the context around them, and at the same time innovating their core business offer for commercial success.

Look at Nike. The Road to Zero coalition will shape the supply chain so there are no more hazardous chemicals in its products by 2020. This is a good thing for everyone. Internally, Nike is training designers and developers so it can produce the best apparel and shoes without hazardous chemicals. This is a good thing for Nike’s shareholders.

Change agents in companies tell me that learning this new dance is difficult. The ‘shape’ step often means collaborating with competitors, and finding leverage points in a complex, confusing world. Usually big companies are adept at incremental improvements on existing products or services. But this particular ‘innovate’ step is about long-term disruption; it means being prepared to cannibalise today’s sales for a more successful tomorrow. Developers of breakthrough innovations in big companies struggle to nurture them and protect them from the momentum of business-as-usual.

So, what do I expect from businesses as they try to learn this two-step? First, different companies are at different stages of awareness about the risks of unsustainable business, and will act accordingly. The unaware will remain laggards. The aware will watch the leaders for stories of success. Then they will join in.

The curious companies will start to experiment with different collaborations. The experimenters will get more systematic. Today’s leaders will see it in their own interest to help other companies to make a similar journey.

Second, there will be consolidation of best practice through collaboration. There’s a need: I know of at least three different attempts at ways to report on sustainability, although I hear of moves to negotiate a combined standard. I know of at least four different attempts to establish a widely accepted definition of ‘sustainable business’ which will set expectations of what is ‘good enough’. The same is true for labour standards, packaging, and more.

Any young field has a period of diversity followed by a shakedown, in which a dominant version comes out on top. Sometimes the winner simply beats the others; sometimes they all merge. The same will happen with today’s dizzying variety of collaborations within sectors.

Finally, there is the need to innovate to win. After all, companies need to create shareholder value. I expect leading businesses to gather many players around themselves who can help originate, develop and then scale innovations. You can refer to this as ‘stakeholder engagement’, but that seems too sterile to me.

They are orchestrating an ‘innovation ecosystem’ – this is what will emerge from their shape-and-innovate dance. And this will be how companies win in our connected, interactive, collaborative world. They will lead ‘the big shift’ towards building long-term value, together.

David Bent is director of sustainable business at Forum for the Future. This article originally appeared in Green Futures, the leading magazine on environmental solutions and sustainable futures published by Forum for the Future.