Innovation nation? | The U.S. needs to embrace sustainability or get comfy in the dust
Sharpe-McNally chair of Green and Socially Responsible Business, College of the Atlantic, Bar Harbor
Innovation in business is often driven by perspective. Perspective reveals value to entrepreneurs where those before them saw none. Apple’s Macintosh computer is a famous example of this. Other companies developed all of the “innovations” in the Macintosh, but no one saw value in these individual parts until Steve Jobs and friends put them together to redefine the personal computer.
Sustainability drives innovation in a similar manner. The classic view of companies is that they exist to maximize shareholder value. As a result, they focus narrowly on profits. In contrast, sustainable companies examine how their actions impact the environment, society and the bottom line. As a result, these companies see new connections between stakeholders and uncover value unseen before.
While finding innovations at a moment in time is important, continuous innovation is the Holy Grail. The creative destruction of the capitalist system ensures that those on top need to keep innovating or be torn asunder. Only two companies listed in the Dow Jones Industrial Average in 1928 are still listed today. With a bar that is continually being raised, sustainability helps with this problem by promoting continuous innovation. What we think of today as a sustainable practice will be outdated as time goes on.
Look no further than Portland’s local food movement for examples. New companies are joining the movement by the day to create everything from mead to bookstores. The results have helped revitalize the local economy and made Portland a food destination. Looking at food on a national scale, companies like Whole Foods have redefined the shopping experience for customers and, in doing so, built the most profitable grocery company in the United States.
Innovation goes far beyond food to the core of the U.S. economy: autos. Zipcar, the car-sharing service that went public recently, has redefined car ownership. Instead of owning a car, customers reserve cars (including high-end models) as needed without the burden and costs of ownership. Other companies, such as Better Place, are focusing on the electric car market and have raised hundreds of millions of dollars to lease electric cars and install battery switching stations to remove the problem of range and charge time from the electric car equation.
Don’t fool yourself into thinking sustainability is only for a few outliers. Huge companies like Wal-Mart, GE, Staples and DuPont are using this new perspective to cut billions in costs, develop new products, motivate employees and find new sources of revenue. These companies also understand their market value is mostly made of intangible assets. Reputation, future liabilities and the ability to innovate are all part of their market capitalization. This perspective has been borne out in studies showing that public companies with a broader stakeholder perspective have higher returns than their counterparts.
While sustainability acts as a catalyst for innovation, it does not ensure success. Any business has a tremendous number of moving parts that can derail it. As the former COO of O’Naturals, our efforts to be a sustainable company helped us redefine the quick-meal experience. We were the first quick-service restaurant in the world using exclusively natural and organic ingredients. With that came numerous benefits, including loyal customers and staff, media attention and opportunities to work with multi-billion dollar companies. As a restaurant company, we also faced all of the typical challenges of any restaurant: locations, staffing, sourcing products, food cost, operations. Sustainability did not make us perfect or prevent us from having to close unprofitable locations, but it did help to create and find new opportunities.
Total Quality Management is an example of what can happen to companies that ignore the wave of innovation. When Total Quality Management showed up in the U.S., manufacturers said you could never substantially reduce defects — it was too expensive. However, the Japanese took a different perspective and we all know what happened then.
Today there is a new cast of characters, but the U.S. remains on the side of resistance versus innovation. With air you can’t breathe, water you can’t drink and ecosystems breaking down, the Chinese are embracing sustainability because they have run squarely into the wall of the first industrial revolution. While we politicize climate change, they are moving ahead of us in industries we used to dominate. They have already surpassed us in wind power. Famed investor Warren Buffet has invested $230 million dollars in a Chinese battery manufacturer that has developed a non-toxic electrolyte fluid as a power source. California-based Applied Materials has opened the largest private solar research facility in the world in China.
The Chinese realize where the next generation of economic growth will be; do we?
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