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Wednesday, July 12, 2017

Digitalization and Sustainability – Connect them to Innovate BIG

Written by 

Smart I am wondering…
With the changing political landscape and environmental regulations will enterprises continue on the path to the “Circular Economy[1]” moving away from the traditional “Linear Economy?” Will they continue to celebrate their “Sustainability” success stories?

Given that every object and transaction are being linked and soon to be revealed through “digitalization,” how should enterprises approach innovation and new product development?”

Lately, these questions have been on my mind as I prepare for a new research project entitled “Future of ‘Digitalized’ Enterprise Innovation and Product Development.”

Many enterprises have learned that adopting sustainability as a core strategy drives topline growth, as well as minimizing total lifecycle costs.  In 2014, over 72% of S&P500 companies reported on sustainability[2] indicating its wide adoption. In addition, research indicates the positive impact of “sustainability” on business performance[3]. Investment funds that incorporate ESG (Environment, Social and corporate Governance) rose 28% between 2012 and 2014, and their value reached over $4.3 trillion[4]. As examples, Environmental policies include carbon emissions reduction policies, green supply-chain policies, and energy and water-efficiency strategies; Social policies include diversity and equal-opportunity, and health and safety improvement; Policies related to community include corporate citizenship commitments, business ethics, and human-rights criteria.

With increased awareness of corporate impact, consumers expect companies to be good citizens, and they are willing to play an active role with their purchasing choices. Cone Communications and Ebiquity[5] have studied consumer attitudes, perceptions, and behaviors around corporate social responsibility. They analyzed the sentiments of nearly 10,000 citizens in nine of the largest countries by GDP: the United States, Canada, Brazil, the United Kingdom, Germany, France, China, India, and Japan. 90 % of consumers said they would switch brands to one that is associated with a good cause, given similar price or quality. Four-in-five indicated their willingness to purchase fewer products to preserve natural resources or buy a product from an unknown brand if it has strong social responsibility commitments. Corporations have an opportunity to build and protect their brands by making responsible choices, and by being transparent about these choices. They should also remember that consumers are demanding accountability throughout their supply chain. And with rapidly developing technologies around the Internet of Things and blockchain, they will soon be able to easily peek into a manufacturer’s supply chain right at the store[6].

Once Upon a Time…

Early on many enterprises started their “sustainability” journey with “low-hanging fruit” opportunities. They modified their existing products with more environmentally friendly materials, or redesigned (or reformulated) their products and packages with less materials (which often led to cost savings.) They also updated their manufacturing and supply chain operations to reduce emissions. However, these enterprises quickly realized that achieving “sustainability” breakthroughs required end-to-end thinking, and having a clear, articulated strategy, and making sure that the organizational culture, competencies, processes, and metrics are aligned with it.

Steps to Achieve Sustainability

Understanding your firm’s impact on the environment and communities is a first good step. Next comes envisioning a future state where the firm not only removes negatives, but actually makes positive impacts. To achieve the new vision, the firm needs to innovate in every aspect of the business – soon incremental improvements will no longer be sufficient. This is where embracing “digital,” model-based, and data-driven innovation approaches would be the most beneficial to address a firm’s sustainability goals. Digital approaches, like crowdsourcing, allow engagement of diverse communities in ideation and problem solving. And digital, model-based approaches allow “low cost” exploration and experimentation with many more options for designing new products, manufacturing processes, and materials while allowing optimization against multiple requirements, e.g., satisfying sustainability goals, as well as reducing product lifecycle costs, and improvements to quality and reliability. Therefore, connecting your sustainability and digitalization strategies and efforts will likely lead to BIGGER innovation outcomes at lower cost.

A few suggestions to consider:

Establish an innovation platform that provides the foundational environment and core capabilities required to create, capture, manage, and repurpose the intellectual property of your global enterprise. For example, consider additive manufacturing (AM), also referred to as 3D printing, which promises great benefits from using new materials to create lightweight products with optimized shapes, which previously were beyond manufacturability. A platform approach to AM provides the ability to connect the various functions, like material science with design, engineering, and manufacturing within a common environment to design and produce products for specific functional purposes. The platform enables collaboration, promotes cultural change, and provides a new “business experience” for organizations.

Embed sustainability and digitalization at the front-end to develop new ideas and capabilities that are inherently consistent with your sustainability and digitalization strategies and goals. When sustainability is managed by stand-alone, operationally focused teams, more short-term initiatives are typically taken up by functions like quality management, finance, and supply chain operations. In contrast, when sustainability is embedded in the fuzzy-front end, a broader range of functions, including R&D, marketing, product development and design, are engaged, and more holistic initiatives, that have higher growth potential, are produced. Enterprises with a longer-term vision for sustainability, e.g., GE, P&G, Unilever, Philips, and BASF, invest significantly in sustainability-led research and development to successfully grow their green portfolios and revenues. Likewise, these companies invest in digital capabilities that enable “virtual” ways to collaborate, create, and explore new ideas.

Restate “sustainability” and “digitalization” challenges as “BIG” innovation opportunities to drive sustained focus, engagement, and collaboration across your global innovation ecosystem. The world is facing unprecedented environmental and social challenges – climate change, resource scarcity, water shortage, poverty, and inequality – that need diverse ideas to address them in the most effective ways. Likewise, digital technologies are advancing at a rapid pace, and finding effective ways to leverage them for sustainable innovation require openness to local and global ideas and collaborations. Identifying these challenges and sharing them openly as your “innovation” challenges invite engagement with diverse innovation networks, and may help produce more ideas to evaluate and select from.

Let me know what you think!



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