You need to be innovating to shift markets for the better and face sustainability challenges. David Bent tells us how you can make it happen.
Its 1991. The coffee price has gone through the floor. A bunch of investors see a gap in the market and launch a new sort of coffee: high quality and fair trade. Fast forward to 2012: Cafedirect has 34 per cent market share, helped over 1.6 million farmers, shifted the habits of millions of consumers and forced every major coffee brand to respond.
Cafedirect is an example of a ‘breakthrough innovation’ – a product or service which simultaneously shifts a market and has superior outcomes for the world at large. The investors behind Cafedirect were unusual: Oxfam, Traidcraft, Equal Exchange and Twin Trading are development agencies. But many more big businesses want to have the same sort of breakthrough innovations. Why?
Fundamentally, sustainability challenges like climate change, resource crunches and poverty hurt shareholder value. The CEO of Nike recently said the company’s long-term potential, and the long-term potential of virtually every other major company in the world, will be severely pressured by factors like rising energy costs, many more natural resources becoming increasingly scarce and the demand for equal access to economic opportunity. Nike’s response is to put its effort into breakthrough innovation.
Globally we need to move to an economy where people can realise their potential and play a positive part in society, all within environmental limits. We need breakthrough innovations such as Cafedirect to get there.
Businesses who push in an unsustainable direction will become more expensive, regulated, criticised, and difficult to maintain. Activities that contribute to a sustainable future will be more profitable. So, how can growing businesses create breakthrough innovations for a brighter future? Here are three recommendations:
1. Have a balanced portfolio of activities. Some activity should be aimed at the incremental sustainable innovations that will capture the low hanging fruit such as energy efficiency. But at least some resources need to be devoted to creating and protecting the more radical ideas that will create new markets or shift existing ones in a more sustainable direction.
2. Make sure that sustainability and an innovative mind-set is embedded in your culture. It should be evident in who you recruit, how they are managed and incentivised and where you look for new ideas.
3. Have formal structures such as an innovation fund or company competition, protect fledgling ideas from the grind of day-to-day business and allow them to flourish.
David Bent is Deputy Director at non-profit Forum for the Future. He runs Forum’s Sustainable Business Practice, which helps leading companies like Unilever and O2 go further on sustainability issues like climate change and poverty. Prior to Forum, David qualified as an accountant at PricewaterhouseCoopers.