“Many of the most innovative, resilient and profitable firms have strong values, including ethical values, and see themselves as serving a wider role in a society, not just being an engine for generating profits – but, counter-intuitively, they typically generate superior returns also, especially when judged over the longer term,” says Vlatka Hlupic author of The Management Shift and Professor of Business and Management at Westminster Business School, University of Westminster.
When we first started writing about business and talking to thinkers on business, the focus was on improving corporate performance. Managers wanted to know how to up profits by a percentage point or two. Now, there is increasing and refreshing emphasis on changing the world. Business thinkers want to make the world a better place – and so, too, do a great many business leaders. Yes, really.
Of course, a percentage point improvement in performance is always welcome but they now range more widely to measure their impact.
Listen to London Business School’s Costas Markides: “Throughout history, most innovation happened when an individual took an idea from one domain and applied it in another. So, maybe the problem of not scaling up is that people always think they are different, that someone else’s innovation won’t work in their ‘special’ case. Take the innovative way to deal with young drug dealers: you tell somebody in the UK about this solution in a US city and the reaction often is, ‘Ah yes, those Americans. It worked there, but it’s not going to work in Manchester.’ The NIH (Not Invented Here) syndrome is a big problem. Maybe it’s not going to work here, but we won’t know until we try it. I take it as a good sign that David Kennedy is in high demand telling other US police departments about his theories and his work. I hope they listen — and act. For innovation to work, either inside a corporation or inside a country or hemisphere, you need people who take it upon themselves to take the initiative. It’s the same in business. There are lots of ideas in organizations. Most of them die before they even breathe oxygen. Why? It’s not because they are not good ideas. It’s because nobody takes ownership of them to make sure the ideas spread and succeed.”
Another thinker leading the charge to innovate a way to a better world is Don Tapscott, author of Wikinomics among other bestsellers. “This is the first time in human history that the world is being mobilized and we’re all on the same side. We’ve been mobilized before during world wars, but we were on different sides,” he says with his customary vigor. Tapscott has put his considerable energy where his mouth is by championing Global Solutions Networks. This includes leading thinkers such as Vint Cerf, Tim Berners-Lee, Richard Florida, Anne-Marie Slaughter, Roger Martin, and Pankaj Ghemawat.
“There are huge global business issues, like entrepreneurship, competition, regulation of the financial systems, and all kinds of issues that traditional state-based institutions are struggling with,” says Tapscott. “My goal is to get the world’s leading thinkers who have an interest in and care about this issue collected in one group, and we’re making some good progress.
“The project is being funded, so far, primarily by corporations, and we’ve got some big companies that care a lot about the business issues related to this. We have financial services companies that care about global problems like cash. Cash is a global problem. It’s the foundation of crime and corruption. It is obviously related to financial inclusion. Because of cash, we have trouble taxing people and funding states appropriately. So there are a whole bunch of subset issues that corporations are involved in helping us research and helping us fund.”
The problems of the world will never go away. There will always be new frontiers and new challenges. But innovation in its many and hugely varied forms will always be the answer.
Increasingly, the talk is of “social innovation.” Business, it is recognized, has an important role to play here, too. Corporate social innovation embraces new ideas, processes, products, and business models that are specifically geared toward solving some type of environmental or social issue.
“It is very powerful,” says Ioannis Ioannou, assistant professor of strategy and entrepreneurship at London Business School. “We have these acute, global challenges—climate change, lack of social cohesion, increasing social inequalities, the spread of disease, and so on—and social innovation has the potential to scale up to achieve positive environmental and social impacts. At the same time, it allows the organizations that engage in the resolution of these problems to remain profitable and to scale up these solutions even further.” That’s a win-win.
There are multiple drivers of social innovation. Professor Ioannou’s research (along with that of researchers at Harvard Business School) seeks to help businesses better understand some of the dynamics that are at work in social innovation. In particular, his work has looked at stakeholder engagement, the adoption of longer-term time horizons, the ability to attract people whose values are aligned with the organization’s, and the ability of corporations that engage in social innovation to accumulate financial as well as nonfinancial information to help ignite sometimes radical solutions.
Of course, changing the world (or an organization) is never easy. Ioannis Ioannou points to corporations, including Unilever, Nike, and Puma, that are actively engaged in social innovation. “We see some very bright examples that integrate this kind of innovation into their business model. They come up with their environmental profit and loss, for example. But even with those leaders who are ahead of the pack, we’re far from getting to what one would define as a sustainable organization that socially innovates and is going to be around 30 or even 60 years down the road.”
Both governments and companies are still feeling their way forward. Stumbles are par for the course. Ioannis Ioannou’s work identifies two sets of mistakes that companies commonly make. The first is what he calls “the efficiency trap,” and the second is the “ticking the boxes trap.” In the efficiency trap, companies focus on waste management, energy management, recycling, and the like. These are important operational efficiency issues, but they are not sufficient to turn an organization into a sustainable company that is coming up with new ideas and social innovations. In the second trap, companies concentrate on ensuring that they are doing the right things rather than focusing on value-adding and innovative activities.
The will to overcome such traps is likely to increase. Research into the millennial generation repeatedly finds that they expect innovation and societal impact to be highly important for businesses and their own role in business.
The stakes are unquestionably high—not only dealing with some of the world’s biggest problems, but redefining the role of the corporation within society. Says Ioannis Ioannou: “We’ve seen the corporation over the years solving the production problem, but now the challenge through social innovation is to bring those problem-solving skills to this brand new domain of problems and to do so with the support or the synergies that come with a capitalist system.” The challenge is laid down.
Vlatka Hlupic, The Management Shift, Palgrave Macmillan, 2014
This was originally published in What we mean when we talk about innovation by Stuart Crainer and Des Dearlove (Infinite Ideas, 2016).