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Lecture notes of 35 pages for the course Organizing Sustainable Innovation at VU (All lectures)
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Inhoud,HOORCOLLEGE 1: BUSINESS SUSTAINABILITY
Sustainable development = development that meets the needs of the present while safeguarding
Earth’s life-support system, on which welfare of current and future generations depends.
Sustainable innovation = the development of new products or processes that consume fewer
environmental resources, foster the health of individuals and communities, and are financially viable
for producers and consumers.
Sustainability is not the same as corporate social responsibility.
Example: a socially responsible oil company would build local schools and hospitals to compensate
communities for their resource extraction. But such measures do not always acknowledge the long-
term impact on the communities.
Main differences sustainability & csr
1. Time scales
Long-term thinking vs. more immediate
2. Focus and scope (paradigms)
Tied to profitability of business vs. ethics, morality and norms
3. Validation and motivation
External certification and focus on growth opportunities (align with the larger system) vs. internal
impact measures and enhancing business’ reputation (e.g., through philanthropy or community
volunteering).
Towards intertemporal trade-offs
Organizations are confronted with intertemporal tensions:
- Companies tend to focus on the short term at the expense of the long term, even if they face
suboptimal long-term organizational outcomes
- Demands of today differ from the needs for tomorrow
- Trade-offs across time: “choose between investing less for smaller profits sooner and investing
more for greater profits later
However, a non-alignment of short and long-term benefits neglects intergenerational equity which is
a core feature of business sustainability
- Balancing the present with the future by center-staging intertemporal trade-offs
- Juxtaposing instead of polarizing: “engage in sufficient exploitation to ensure its current viability
and, at the same time, devote enough energy to exploration to ensure its future viability”
So, there is a threat of short-termism.
- Bias for immediate gratification
- Reinforced by urgency and uncertainty
- Focus on operations, neglect strategic investments
- Can lead to sub-optimal outcomes
- Highly volatile outcomes, further increasing risk-taking
- Vicious circle
,Investors care more about sustainability, and hence long-term investments, than many executives
believe. Why?
- Long term value creation
- Improved revenue potential
- Better operational efficiency
- Compliance with market expectations
- Signals effective management
- Enhanced employee productivity, retention and attraction
- Increased innovation potential
- Higher community acceptance
- Lower risk for company
- Lower cost of capital
But companies are still struggling. They see sustainability as important but only a few have a positive
business case for sustainability. There is also a difference between sectors.
Sustainability as a driver of innovation
Compliance is a opportunity.
Right capabilities
An idea is just the beginning. We need right capabilities to bring innovation to market.
Capability = collection of routines, together with inputs, allow a firm to consistently produce a set of
actions towards an outcome.
Hargadon’s definition: interaction in organizations between people, practices, cultures, structures
and tools that enable firms to be good at what they do.
Stable times vs. turbulent times
In stable times, you need the right capabilities to compete effectively. But when conditions are
changing, you need the right capabilities to innovate effectively. This is dynamic capabilities = enable
your company to change, to take advantage of opportunities responds to threats etc.
- Best practices alone does not suffice. Firms also need to have specific capabilities to succeed in
sustainable innovation. So, identification of capabilities are a key!
Long periods of calm are followed by swift changes = a long fuse, big bang story.
= most of the element of a big bang have already emerged but not yet formed into a clearly defined
system.
- Like the experiences in railroads, automotive, internet, and AI.
- Speed and scope of changes depends on the long fuse.
, HOORCOLLEGE 2: COMMITMENT, CAPABILITIES, AND CRAFTING AN INNOVATION STRATEGY
Is the fuse still long today? Yes.
Although individual technologies get shorter lifecycles in sustainable innovation, we are faced with:
- The systemic nature of new innovations
- The wickedness of sustainability
Wicked problem = the problems we face promoting sustainability are not just more complex, they
are a different class of problems.
Characteristics: no clear solution, unforeseen outcomes, involves changing behaviors,
interdependent & multi-causal and socially complex.
Example: algebraic equation is a tame problem. Healthcare, racism and income disparity are wicked.
Drivers of sustainable innovation
1. Market-based drivers
- Consumer demand
- Competitive pressure
2. Legitimacy-based drivers
- Regulations
- Voluntary industry
3. Other drivers
- NGOs
- Investors
4. Organizational drivers
- Commitment
- Growth mind-set
Corporate commitment
The innovation strategy = the contract that defines what your commitment means.
Without commitment to a clear strategy and specific initiatives, it’s hard to know what capabilities
you need. And without the right capabilities it’s hard to recognize potential and pitfalls.
Commitment itself is also a capability (a skill).
- It includes leaders, processes, and structures
- Follows new products and services from launch to support
- Requires coordination of employees and stakeholders
Commitment is key for sustainable innovation.
- Slower adoption and longer development time
- New skill sets and strategies
- Compete with existing unsustainable offerings
Embedded in many elements (people, structure,). Looks different in different types of organizations.
Commitment is just the end of the beginning.
And there is a common set of challenges and capabilities in the pursuit of sustainable innovations.
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