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Going from Green to Gold – a model for Innovation and Sustainability

1 09 2009

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It wasn’t that many long ago that friends and clients who have known me for a while, would start giggling when asking me a question on the topic of green innovation.

In part I think this was because of my reputation for doggedly insisting that companies focus exclusively on value creating activities – something that has always set myself firmly apart from so many others in the innovation space – and partly because they like to hear my rant on the history of how Sustainability became a respectable corporate pursuit – a “highlight” of a conference presentation I gave a few years ago.

In that “history” I detailed an amusing, but logical, development path starting with the originators of the true green movement (tree-hugging hippies from the 60’s..) and charting the development of that movement alongside the development of what’s become the modern day green agenda. Interestingly I think you can match the way corporate environmental programs gained credibility with the career development of these 60’s kids:

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The argument went something like this:

60-70s

– Kids – taking too much acid, hugging trees, and getting nothing in return but tree burns and bad hangovers. Hate big companies.

– Corporates – green? What green dept? Are you smoking something??….

70-80s

– Kids – now split up into two groups – the activists who decide to sober up and provide a more organized resistance to the destruction of the environment ; and their colleagues who realized they finally needed to get a job (usually at one of those hated big companies) in order to pay for their college loans  who then start financing the activists (hence the flourishing of organizations like Greenpeace)

– Corporates – with the influx of a new generation of workers, comes a changing culture. The kids joining the workforce bring with them an acute awareness of the environmental effects that starts to pervade the company they join.  Some of these kids even land roles in fledgling corporate environmental departments; but they’re not really taken seriously, are generally underfunded and ignored by the older controlling generation and thus their activities are reduced to minor programs like introducing recycling programs next to photocopying machines in their organizations. Regardless of any benefit they bring in, these departments are still generally regarded as cost centers.

90-2000’s

Now reaching middle/senior management positions in the big corporates they joined, the kids are finally in a position to mandate some the environmental morality they’ve carried with them from their youth. However, you don’t get to senior management without having developed an acute sense of business profitability – so whilst departments are formalized and programs are funded – they are done so on the condition that they contribute to overall company profitability.  Programs focus on becoming better Global Citizens, finding Eco-efficiencies, Sustainable Ventures to ensure the next generation of products can be built,  and responding to the overall global increase in the consumer demand for green products and industry(corresponding to the rise in 60s kids with disposable income! In fact, even today, despite the cost pressures of the current economic market, “environmentally friendly” still ranks as the #3 consumer priority behind “Price” (#2) and “Ability to do the job” (#1)). Sustainability and innovation offices of corporations are no longer seen as a cost center, but a potential profit center.

Likewise for their activist counterparts who have now realized that they’re getting too old to be chasing Japanese whaling ships around the Pacific and vain attempts to stop developed countries from testing nuclear weapons (“that shit gets dangerous dude”) – and have now set about embracing the overwhelming entrepreneurial spirit of the times to start up and develop new companies either providing new green products and services.

2010’s –

– With most of the 60s kids now in senior mgmt positions and corporate sustainability offices well established; they embark on the next phase of development – using Green as a platform from which to innovate – either by using it as a competitive differentiator, using nature as inspiration for innovative directions, or developing new breakthrough business models that exploit ecological factors. At this point, the sustainability and innovation offices of corporations are no longer seen as cost centers nor profit centers, but rather as a source of competitive advantage.

tree-huggerWhilst there was more than a touch of cynicism, and a fair dose lot of tongue-in-cheek in that history – there was also, in my mind, a lot of truth in there too, and it served well to ridicule managers still stuck in yesteryear with regards to their attitudes to corporate green initiatives.

For whilst there are some wonderful ecological, philanthropically, and social reasons for advancing a corporate green agenda – what’s actually making these things possible and viable from a corporate perspective – is the changing attitude of today’s Sustainability Executives who understand that a solid “Green” Strategy relies on focusing on activities that make the company solid “Gold” so to speak.

Whilst we would like to think of companies as being capable of selfless activities to make a better world for our children, avoid climatic, social, and economic doomsday scenarios, and generally reduce the impact that they have on this big blue cosmic marble we all inhabit – the truth is that they do this most effectively, with the most conviction, and with the most impact, when those activities have an impact on the bottom/top line too.

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You can call it a cynical observation on a capitalist society if you wish, but I simply call it a realistic observation on what really motivates companies to act and react in the modern era.

The good news though is that Green IS an issue that can drive just this type of impact – in many different and valuable forms – and if you’re looking to drive a successful green program – it’s crucial that you focus on this in order to be allowed to operate freely.

By now I’m sure you’re saying – “ok, ok – enough rhetoric Boris!” – so here’s some meat for you.  I spent a year going to multiple conferences, spoken to the sustainability arms of several large companies, and even attended a World Economic Forum event on sustainability as an “innovation expert” – and found myself developing a model that offers a comprehensive strategic formula for directing an innovative green agenda.

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You start by considering the 4 key elements that a company consumes and produces:

–       Water

–       Energy

–       Waste

–       Toxics

Although your company may not use/produce every single one of these elements; they constitute the backbone of a comprehensive environmental agenda (ps, proper attribution for the four elements has to go to Nike, who first introduced me to this elemental concept).  The idea is to then take each in turn (or combinations of the 4) and think about all the possible things you can do to them (always with a view to adding/contributing to company profitability):

–       Reuse/Recycle the element

–       Replace the element from your production cycle

–       Reduce the amount of the element you use/produce

–       Look for ways to increase your Revenue/utilization rate of that element

For example:

–       nike_airNike defines waste as “anything that doesn’t end up in the consumer’s closet” – the annual value of the waste they throw away amounts to an incredible $844,000,000 per annum – so finding even a manner to reduce waste by 1% can lead to significant financial gains

–       Several of the major superstores of one retail giant in the Southwest of the US have invested in covering the roofs of their stores with solar panels with the result that they not only are they reducing the amount of energy they’re consuming from the national grid; some stores even found out they were able to generate a surplus of energy which could be sold back to the grid, providing them with a new form of revenue.

–       600px-no_left_turn_signsvgUPS made headlines a few years ago when they rerouted their delivery routes to eliminate left hand turns – significantly reducing the amount of time their trucks spent idling waiting for a red light (For international readers, in the US, drivers in many states are allowed to make right hand turns on a red light). UPS also introduced a system whereby in certain cities with tight parking or narrow streets (like New York City for example) the driver will park his truck once in a central location, and then delivers smaller packages to the local area by bicycle instead.  Whilst these seem like very green initiatives, they also increase efficiency, and reduce fuel expense – a double whammy for UPS!

Finally – once you’ve considered the various angles offered to you by the model for your own production and consumption – start looking at how you can apply the model to both your inputs and outputs. Are there ways you can reduce the waste in products you source other companies by asking them to reduce the amount of packaging they use (maybe you can negotiate a better price in exchange for the savings you’re creating for them); or can you sell your waste products to someone else to reuse (creating a new revenue stream, whist also reducing waste); or maybe there’s a more efficient way to deliver your products to your customers (Think about how Apple didn’t even include a DVD drive with their recent MacBook Air line – instead suggesting that clients download all the software they need instead – reducing packaging, material cost and improving customer service and margins all in one go – not to mention better target the “road warrior” clients for whom light weight and high style are super important buying factors).

6a00d83452507d69e2011570387192970b-500wiI’m excited to see where the next generation of environmental agents takes the corporations of the future – for the next stage of environmental innovation is upon us – and that HAS to be good thing! Go forth and be green everyone!

In the meantime – please feel free to add in your own green stories and examples in the comments section below – I’d love to hear from you all!

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Innovation Metrics – Part 3

13 08 2008

Innovation Metrics - Part 3

 

Innovation Metrics - Part 3

 

Continuing the thoughts on metrics.. 

3) The Three F’s – When beginning to consider innovation metrics – there are three main “F”’s that you need to measure – Form, Flow, and Function. 

    a. Form – Form is your ability to perform each part of the innovation process.

    b. Flow – Flow is your efficiency at both passing stuff through the individual elements of the process as well as the overall process itself.

    c. Function – Function looks at the program as a whole and its ability to achieve organizational goals, and the organization’s innovation capacity as a whole.

Taking the innovation process you’ve developed in section 2 (see last week’s post) above, you then go through the process figuring out what metrics are most appropriate taking into account the 3 F’s.  For most companies, the metrics will be broadly split into two sections – the form and flow of the pipeline itself – and the function of the program as a whole:

 

Innovation Metrics Worksheet - Form and Flow

Innovation Metrics Worksheet - Form and Flow

Some good examples of Form and Flow metrics: 

1) Problem Identification and Definition stage: 

  • Number of Problems submitted for consideration (form)
  • Number of individual event sponsors recruited (form) 
  • Number of Event Charters defined (form)
  • Number of Events accepted and set up  (flow)
  • Number of Events in each of the key corporate strategic areas (flow) 

2) Idea Collection, Building and Management 

  • Number of ideas/builds collected (form)
  • Number of Event Visitors / Contributors (form) 
  • Number of Idea/Build  Authors (form)
  • Number of ideas reviewed and concluded (flow)
  • Number of Ideas passed through to concept development (flow)

3) Concept/Opportunity Development

  • Number of Prototypes developed (form) 
  • Number of ideas going into Project Management (flow)
  • Potential value of ideas going to Project Management (flow) 
  • Average time idea spends in Concept Development (flow)

4) Project Management

  • Average time to project completion (form) 
  • Number of projects completed versus target (function)
  • Number of projects currently in the pipeline versus target (function)
  • Effective capacity versus capability (function)

5) Initial Launch

  • Target sales/cost reduction/process improvement versus actual (form)
  • Customer satisfaction (form)
  • Customer uptake versus local competitor/alternative (form)
  • Number of Launches proceeding to Expanded Launch (function)
  • Number of Launches failed (function)

6) Revise, Expand, and Re-Launch

  •  Contribution to profit margin from innovations

And for Innovation Function: 

Innovation Metrics Worksheet - Function

Innovation Metrics Worksheet - Function





Innovation Metrics – Part 2

8 08 2008

Continuing the thoughts on metrics from last week! : 

2.    Plan the Path – Now that you have a direction to point your innovation efforts at, it’s time to plan the path to get to that effort.  In the same way that strategy documents are formulated with multiple time points to set milestones for where the company wants to be at 1,3, and 5 years – so should your innovation plan and strategy as to how you’re going to help the company achieve those aims and the contribution the innovation program will make to the company’s strategic aims.

Your innovation pipeline will be led and directed by the strategic context of the program (see step 1 from last week) below, which follows the general form of: 

i) Find and Identify the problems or barriers to achieving the strategic objectives and define each tightly in terms of applicability, feasibility, and commitment to implementation of the solution. Then decide upon the order in which to tackle those problems.

ii) Collect ideas from internal/external sources on how to solve those problems/overcome the barriers, and begin the collaborative process to build those ideas into base concepts, selecting the most effective concepts/solutions for further development.

iii) Build out the selected concepts and begin testing for feasibility, cost constraints, market acceptance, etc – the various tests and building activities carried out in this stage(s) will vary depending on the company, industry, and target of the innovation process. 

iv) Decide upon and begin developing that project through effective project management

v) Launch the developed solution in a limited manner – to one geography, one factory, one business unit, etc – and tightly monitor and control to look for effects and improvements

vi) Redevelop based on insights from the limited launch and Re-launch to a wider audience, usually in stages. 

Underpinning the program are the dual disciplines of Portfolio Management (ensuring that the quality of the pipeline is sufficiently high and sufficiently robust in order to achieve the company goals) and Foundations (ensuring you have the culture, skill set, tools, processes, leadership,  etc to fully enable the innovation process) .  

The pipeline is meant to provide you with a guideline as to the general best practice of a robust innovation program – and you will find that most innovation programs will be able to be overlaid onto this model.  You’ll need to spend time understanding how to translate your overall program strategy, into a comprehensive program that fits your company’s capacity, culture, and aspirations.  Once you have your process set out, you’ll be ready to start sorting out what you’ll need to measure to ensure you’re achieving your aims. 

To be Continued (again 🙂  ) 





Innovation Metrics – Part 1

1 08 2008

Metrics are one of the most important elements of an innovation program’s success – determining everything from a program’s future direction – to whether a program even gets funded the following year.  Yet metrics are probably the least understood, and most misused activity in a corporate program agenda.  Understanding what to measure, and how to benchmark your performance is paramount to achieving both recognition and validation at the senior executive level – so how do you get it done?  I thought I’d paste in a step by step guide over the next few weeks to let you know!

Understanding the Innovation function

1. Start with Strategy – Key to understanding the metrics used to measure your innovation program is understanding what the real goal of that program is.  Your whole program should be focused at trying to help the company achieve its strategic objectives (if it’s not – make sure it’s realigned to do so or you risk having a marginalized program that will be cut at the first opportunity!) – so it makes sense to start your journey into metrics by getting a better understanding of what it is exactly that the organization is trying to achieve – where does it want to go? What are the barriers stopping the company from achieving it? Where are the key competitive forces?  These and other questions will lead you into a better understanding of how best to target the activities of your innovation efforts to best benefit the organization as a whole. 

Don’t be fooled into believing that the answer will always be via the creation and development of the company’s product set either.  Sometimes it could be a need to dramatically improve process efficiency that will drive a company forward. For other companies it could be a need to develop innovative business models to drive profitability in the forthcoming years – and yet others might be driven by a need to get out of a commoditized marketplace and develop an entirely new value proposition and new client base altogether (see my earlier White paper on Innovation Dimensions for more on the different dimensions an innovation program can and should be attacking).  Even within the same industry – different players will typically be driven by different environmental and competitive factors that will lead the decision to pursue a particular business strategy.  This strategy should then lead both the direction of your program and the metrics you use to measure the program’s effectiveness. In the same way that companies do not typically simply copy another’s business strategy blindly, neither should you simply copy their innovation metrics and benchmarks – as what’s appropriate for one company in a certain situation could be disastrous when applied to another.  With metrics, the wrong metrics will give you misleading information on your ability to help meet the company goals

I’ll be adding more in weeks to come! 





Non-Value Events and the Pursuit of Expansion

30 07 2008

I don’t think any client ever hears me say “focus on the value” enough times for the most part – but I will accept that there is a time and a place for running events that don’t directly add value creating ideas into the pipeline. 

One great example of such a time is in helping to broaden and expand a program by running an event that is broader in scope than your standard event in order to engage the most amount of people possible and give as many as possible a good experience of using the methodology.  

One recent client in the aerospace industry actually did this quite well – as part of their initial pilot period they ran both value enhancing events, but also ran one event for a senior marketing VP which was much ‘softer’ in nature – focusing more at understanding the characteristics of a new market they were thinking of attacking.  The value events drove some great results and perceived ROI despite being reasonably technical in nature and as a result had low participation rates. The non-value event got a fair amount of ideas on all sorts of subjects related to the new marketplace. Whilst it didn’t generate any actionable ideas, it did however generate a lot of interest in the tool from potential event sponsors and enquiries about how it could be used. The client then pointed to the ROI figures from the value-driven events to convince future event sponsors of what could be achieved with it. 

I think companies nowadays should drive a mix of events – and as with so many things in business, I suggest using the trusty 80:20 principle for figuring out the correct split of value to non-value: 80 % of your events should be focused on driving new and novel value for the company. 20% of your events should be focused on topics/methods designed to market the innovation program to a wider audience and thus expand the overall reach of innovation within your company.








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