CHAPTER
9

Where Innovation Meets Society

In addition to meeting the pressing demands of business, innovation is also increasingly valued in other walks of life. There is a growing recognition that innovation and progress are inextricably linked. Many (perhaps all) of the challenges confronting us personally, nationally, and globally require innovative solutions. New ways of looking at the world may yield innovative approaches for tackling so-called wicked problems such as global warming and world poverty. New ideas are coalescing around these challenges. Social innovation—the idea that society itself can be improved through innovation—is a concept that is gaining currency.

At the other extreme, too, there is a growing sense that we as individuals can benefit from innovation in our working and nonworking lives. Employee engagement is coming to the fore. Indeed, where people once felt it necessary to preserve two separate lives—professional and personal, with correspondingly compartmentalized identities—these artificial boundaries are merging into what some call whole lives: a more holistic, rounded view of an individual and his or her identity. Human beings, it turns out, want to bring their humanity to work. They want roles that allow them to express themselves and find significance. Organizations that help them do so will reap the dividends of that most human of qualities: ingenuity.

Innovation for Life

Teresa Amabile is the Edsel Bryant Ford Professor of Business Administration in the Entrepreneurial Management Unit at Harvard Business School, and also a director of research at the school. While she is well known for her work on creativity, she has recently focused more broadly on organizational life and its influence on people and their performance.

Amabile is the author and coauthor of a number of books, including The Progress Principle: Using Small Wins to Ignite Joy, Engagement, and Creativity at Work (2011). Her previous books include Creativity in Context: Update to the Social Psychology of Creativity (1996) and Growing Up Creative: Nurturing a Lifetime of Creativity (1989).

In The Progress Principle, coauthored with Steven Kramer, Amabile shows how apparently insignificant everyday events in the workplace can affect individuals’ working lives and performance. The book draws on the findings from a long-running multistudy research program, including analysis of some 12,000 diary entries from more than 200 employees in seven companies.

What, ask Amabile and Kramer, is the most important factor in employee engagement? Is it incentives, recognition for good work, support for making progress in the work, interpersonal support, or clear goals? When they put this question to hundreds of managers, 95 percent got it wrong.

It turns out that inner work life—positive emotions, strong internal motivation, and favorable perceptions of colleagues and the work itself—is the key to an innovative, productive, engaged, and committed workforce. In Amabile and Kramer’s view, the fundamental job of managers is to create and sustain the right circumstances so that the employees’ inner lives are mostly positive.

“As long as the work is meaningful, managers do not have to spend time coming up with ways to motivate people to do that work. They are much better served by removing barriers to progress and helping people experience the intrinsic satisfaction that derives from accomplishment,” they say.

In The Progress Principle, Amabile and Kramer explain that:

• Small wins often have a surprisingly strong effect on people and performance.

• Small setbacks often have a disproportionately negative effect.

• Nourishing people’s sense of progress is the key to sustaining their motivation and stimulating their innovation.

Social Innovation

If personal progress is important to individuals, there is also a growing sense that society’s worst ills can be tackled only through a shared desire for progress. Increasingly, the talk is of “social innovation.” Business, it is recognized, has an important role to play here, too.

Corporate social innovation embraces new ideas, processes, products, and business models that are specifically geared toward solving some type of environmental or social issue.

“It is very powerful,” says Ioannis Ioannou, assistant professor of strategy and entrepreneurship at London Business School and shortlisted in the 2013 Thinkers50 Awards. “We have these acute, global challenges—climate change, lack of social cohesion, increasing social inequalities, the spread of disease, and so on—and social innovation has the potential to scale up to achieve positive environmental and social impacts. At the same time, it allows the organizations that engage in the resolution of these problems to remain profitable and to scale up these solutions even further.” That’s a win-win.

There are multiple drivers of social innovation. Professor Ioannou’s research (along with that of researchers at Harvard Business School) seeks to help businesses better understand some of the dynamics that are at work in social innovation. In particular, his work has looked at stakeholder engagement, the adoption of longer-term time horizons, the ability to attract people whose values are aligned with the organization’s, and the ability of corporations that engage in social innovation to accumulate financial as well as nonfinancial information to help ignite sometimes radical solutions.

Innovating Socially

Heather Hancock, managing partner for talent and brand at the business advisory firm Deloitte, believes that the financial crisis has led business leaders to start to rethink their role in society. “A lot of social innovation is about taking a broader view of the contribution you can make to many societal goals as well as making your business successful in the short and the long term—particularly in the long term, but it’s got to have the short-term impact as well,” she says. “The financial crisis has been an accelerator for social innovation at the corporate level.”

Of course, changing the world (or an organization) is never easy. Ioannis Ioannou points to corporations, including Unilever, Nike, and Puma, that are actively engaged in social innovation. “We see some very bright examples that integrate this kind of innovation into their business model. They come up with their environmental profit and loss, for example. But even with those leaders who are ahead of the pack, we’re far from getting to what one would define as a sustainable organization that socially innovates and is going to be around 30 or even 60 years down the road.”

Heather Hancock suggests that we are at an early stage, but one where the nature of the dialogue has changed fundamentally. What was previously left unsaid is now high on the agenda.

It’s about a company’s willingness to engage in a different, perhaps more mature conversation with its stakeholders. So, for example, a lot of the problems we’re talking about have always been thought of as the domain of governments. We have been through a system where governments commissioned private-sector organizations or apparently partnered with them. This tended to be based on the existing model. Now what we’re seeing is government starting to understand it is one of the actors solving some of these challenges and definitely an actor in changing the institutional regime or the legal framework. But government is unlikely to generate the actual technical solution or the innovative, creative new service or approach that’s going to work.

Both governments and companies are still feeling their way forward. Stumbles are par for the course. Ioannis Ioannou’s work identifies two sets of mistakes that companies commonly make. The first is what he calls “the efficiency trap,” and the second is the “ticking the boxes trap.” In the efficiency trap, companies focus on waste management, energy management, recycling, and the like. These are important operational efficiency issues, but they are not sufficient to turn an organization into a sustainable company that is coming up with new ideas and social innovations. In the second trap, companies concentrate on ensuring that they are doing the right things rather than focusing on value-adding and innovative activities.

The will to overcome such traps is likely to increase. Research into the millennial generation repeatedly finds that these people expect innovation and societal impact to be highly important for businesses and their own role in business.

The stakes are unquestionably high—not only dealing with some of the world’s biggest problems, but redefining the role of the corporation within society. Says Ioannis Ioannou: “We’ve seen the corporation over the years solving the production problem, but now the challenge through social innovation is to bring those problem-solving skills to this brand new domain of problems and to do so with the support or the synergies that come with a capitalist system.” The challenge is laid down.

Cradle-to-Cradle Thinking

Alongside the rising importance of social innovation is the concept of sustainability. If you want an idea that should resonate with businesses over the next decade, one front runner could be the idea of cradle-to-cradle. This basically argues that our attitude toward environmentalism and sustainability has to change. At the moment, organizations are happy to be a little bit better. They feel virtuous simply because they recycle a little more, cut their energy usage, or do something similar. Cradle-to-cradle contends that our attitude to products and how we manufacture them remains rooted in the Industrial Revolution. It argues that products and services that generate ecological, social, and economic value can be created.

In their book Cradle to Cradle, William McDonough and Michael Braungart, an American architect and designer and a German chemist, map out the thinking behind the idea. “Today’s industrial infrastructure is designed to chase economic growth,” lament McDonough and Braungart. “It does so at the expense of other vital concerns, particularly human and ecological health, cultural and natural richness, and even enjoyment and delight. Except for a few generally known positive side effects, most industrial methods and materials are unintentionally depletive.”

Among the examples of the idea in practice is the redesign of Ford’s River Rouge facility. Ford invested in an $18 million rainwater treatment system that reputedly saved $50 million that the company would have had to spend on mechanical treatment. Ford also has a prototype car, the Model U, that is made according to cradle-to-cradle principles. Elsewhere, Nike has developed cradle-to-cradle shoes, and EDAG has developed a recyclable car.

Carpet-to-Cradle

One of the converts to the concept is the Dutch carpet manufacturer Desso and its former CEO, Stef Kranendijk. A 19-year Procter & Gamble veteran, Kranendijk is unlikely revolutionary material, but he has been championing cradle-to-cradle as a means of changing the company and getting ahead of the competition.

Kranendijk’s conversion began when he watched a DVD of a documentary on the subject. Next, he read the book, then he contacted one of the authors.

We produce a lot, and much of it ends up in landfills. For example, all the synthetic carpets in France, the United States, and the United Kingdom go to landfills. Elsewhere, they are incinerated—also not a great idea. We have two crises: the climate crisis and the raw material crisis. And that is what we have to solve. When I saw the program, I thought, “This is fantastic; this is what we should do because we produce so much volume and so much waste.” Then I read the book and approached Michael Braungart. I said, “I want my whole company cradle-to-cradle, and I will do it, but you will have to help me.”

Kranendijk joined Desso as CEO in 2007 after the management team and a private equity firm bought the company from its American owner. Kranendijk and his team developed a new strategy focused on operational excellence, innovation, geographical expansion, and external communication. Among this quartet, innovation was seen as the key, and three drivers of innovation were identified: creativity, functionality, and cradle-to-cradle.

“Cradle-to-cradle is about making products from such pure materials that you can endlessly recycle them,” says Stef Kranendijk. Immediately after the acquisition, he appointed a sustainability director, who investigated what Desso’s sustain-ability initiatives had achieved over the previous decade. It had actually cut its energy consumption by 28 percent over that time. Cradle-to-cradle sought to move this to another level.

In Search of Purity

At the heart of cradle-to-cradle is the idea that ingredients can be reused to create high-quality products. Desso invested in a take-back system called Refinity. This takes back carpet tiles from offices, schools, and universities after 10 years’ use. The bitumen is then sold to the road and roofing industries, and the yarn goes to one of Desso’s yarn manufacturers.

Desso invested €20 million in a plant in Slovenia that takes the old, used yarn and depolymerizes it so that it can be reused. About 60 percent of all the carpet tiles that Desso sells worldwide now use 100 percent recycled yarn.

Like any idea, cradle-to-cradle comes with its own vocabulary. The Slovenian facility is an example of what is known as upcycling.

“The idea of cradle-to-cradle is to use very pure materials so that you can recycle them at a very high level. That’s why they call it upcycling,” says Stef Kranendijk.

And that’s what we try to do. Because if we make a carpet tile and after 10 years take it back, we can make yarn from the yarn again, we can make backing from the backing, but you might use this material to make a new office chair. The idea of cradle-to-cradle is that you have a kind of bank of pure raw materials going round and round.

Basically, we have to go from a linear economy to a circular economy. We need to do a lot of urban mining—taking raw materials out of existing products—and the cradle-to-cradle concept fits fantastically within that. It will ensure that we only use pure materials so they can be recycled rather than toxic materials.

No Halfs

It quickly becomes clear that there can be no half measures, no half revolutions in this cyclical approach. Desso aims to have all of its products cradle-to-cradle by 2020. It also aims to be using only renewable energy by that time. It has installed 23,000 square meters of solar panels on one of its Belgian plants. It is also investing in six-megawatt wind turbines, biomass fermentation to produce biogas, and geothermal energy.

Having started with carpet tiles, Desso is now looking at artificial turf, which currently has have a latex backing, for upcycling. The company has developed hot-melt technology that ensures that the backing can be reused. Among its more ambitious innovations is to make yarn from bamboo—it has excellent antibacterial properties, apparently.

“The fantastic thing about cradle-to-cradle is that it’s all about innovation. You talk all the time about design and raw materials, and focus on what end users want, corporate social responsibility, and the ultimate sustainability strategy,” says Stef Kranendijk. “But it is a lot of work and costs a lot of money, because analyzing all your ingredients is hard work. It’s grinding. It took us a couple of years.”

With Profits

Of course, a concept without profits is an empty commercial experience. But there is a growing body of evidence suggesting that social responsibility can be profit enhancing. Research by Ioannis Ioannou at London Business School and George Serafeim of Harvard Business School, for example, has made the links between being good and doing well explicit.

“One of the most important questions regarding sustainability is its impact on financial performance. In an empirical study of two matched sets of firms covering an 18-year period, we found strong evidence that the high-sustainability firms significantly outperformed the low-sustainability firms, measured in both accounting and stock market terms,” says Ioannou (who has also written a case study of Desso). “There are significant differences in corporate governance and stakeholder engagement between the two sets of firms. High-sustainability firms have a longer-term time horizon, have more long-term investors, and place a greater emphasis on measuring and reporting nonfinancial information.”

A Wider Lens

What unites social innovation and the notion of personal progress is the willingness to break down the silos of the mind. Where once we might have preferred to keep society and business separate, there is now a much greater understanding that business is part of, not separate from, the broader society. Companies require a license to operate. They must demonstrate their worth to the society that they are part of.

At the same time, as the ideas in this book amply demonstrate, innovation is becoming less secretive and more open to outside influences. No company, industry, or country can afford to ignore developments outside its borders. Indeed, cross-pollination is the order of the new day.

How, then, can organizations and managers ensure that they cast their innovation nets wide? In his 2012 book The Wide Lens: A New Strategy for Innovation, Ron Adner offers some ideas.

Adner is a professor of strategy at the Tuck School of Business at Dartmouth College, New Hampshire, and was previously at INSEAD.

He argues that many companies fail because they focus too intently on their own innovations, while neglecting the innovation ecosystem on which their success depends. In an increasingly interdependent and global world, Adler argues, winning depends on more than simply delivering on your own promises. It means ensuring that a host of partners—an entire ecosystem, in fact—deliver on their promises, too. It is only by viewing the world through a wide lens that companies can hope to thrive in the future.

By extending that logic and widening that lens to take in people and society as a whole, innovation can be a force for good in the world, and human ingenuity can drive progress.

The Don of Innovation

Innovation, as we have seen, has made the journey from being linked narrowly with technological and mechanical progress to being more broadly defined and much more broadly ambitious. Among the very few thinkers who have also made this journey is Don Tapscott, an adjunct professor of management at the Joseph L. Rotman School of Management at the University of Toronto and one of the world’s leading authorities on innovation, media, globalization, and the economic and social impact of technology on business and society.

The author or coauthor of 14 books, Tapscott wrote the 1992 bestseller Paradigm Shift. His 1995 hit, The Digital Economy, changed thinking around the world about the transformational nature of the Internet, and two years later he defined the Net Generation and the “digital divide” in Growing Up Digital. His 2000 work, Digital Capital, introduced seminal ideas like “the business web.” His other books include The Naked Corporation (2002); Grown Up Digital (2009); Wikinomics: How Mass Collaboration Changes Everything, the bestselling management book in 2007; and Macrowikinomics (2011).

Tapscott is also the energy behind Global Solution Networks, a new, landmark study of the potential of global web-based networks for cooperation, problem solving, and governance. When we spoke with Don Tapscott, we asked him to begin by discussing the organization.

Can you explain the organization and its ambitions?
There are new models about how we go about solving the world’s problems, cooperating, and governing ourselves on this planet, and I’ve undertaken a big project to research these. Just to be clear, I’m not actually going to solve the world’s problems in the next two years—there’s a fine line between vision and hallucination—but, essentially, our models for solving problems today came out of Bretton Woods at the end of the Second World War, when we created the World Bank and the IMF, and a little later the World Trade Organization (it was the GATT at the time) and the International Standards Organization. The G20 and so on are all institutions based on nation-states.

But increasingly, our problems are truly global, and the nation-state, while necessary, is insufficient as a vehicle for solving these problems. Meanwhile, enter the Internet and a whole bunch of other big drivers that are now causing us to examine new, more dynamic, more resilient network models of addressing problems. These are multistakeholder networks that are not controlled by states and are not based on states, but they’re becoming material, and some of them are expanding and growing on an astronomical scale. We know nothing about these.

Some of these global solution networks are quite distinctive—Kony 2012, for example. Can you tell us a little bit about that?
Yes. The African warlord Joseph Kony is a bad guy. He has, allegedly, kidnapped 60,000 children; the boys become soldiers, and the girls become sex slaves. If they misbehave, he’ll cut off their face or force them to kill their families. So this multistake-holder network, called Invisible Children, decided, “We’re going to make Joseph Kony famous,” and they created this half-hour video. When I saw it on a Monday night, 12,000 people had seen it. By Friday, more than 85 million people had seen the video.

The thing about the material is, it had a huge impact on the world, but it shows both the promise and the peril of these new networks. It’s inspired, but is it legitimate? Who is it accountable to? Where does the money go? How do you determine the policy of this thing? Is it right that we should have more U.S. troops in Uganda? Is that the correct approach to Joseph Kony? What do you do when your leader has a meltdown, which occurred in this case? So it shows the yin and the yang of these new global solution networks: they can grow rapidly and virally, have great efficacy, and be impactful, but there are many, many things that we don’t understand about how to make them truly effective.

It turns out that this is the classic case of the blindfolded people and the elephant. Some people think that these things look like a tree, a wall, a snake, or whatever, but there are, in fact, nine different types of networks.

I’ll give you some examples. We have policy networks that develop policy for the world, but are not based on states. The International Competition Network would be an example of that. We have a second type called knowledge networks. We’ve had research consortia developing knowledge on a global basis before, but we’ve never had something like Wikipedia, TED, or knowledge networks that can be massive and have a huge impact. There are advocacy networks, like Kony 2012, that are advocating change. There are new things that I call platforms. These are now trying to solve problems—cooking fires, human rights, conflict, entrepreneurship, or whatever—by creating a platform where others can do that. There are watchdogs, like Human Rights Watch, that have hundreds of researchers out around the world identifying and documenting human rights violations. There are networks that are developing standards in the world, but they’re not controlled by states the way the International Standards Organization is. We have governance networks that actually govern something on the planet.

In December 2012, there was a big battle in Dubai between the UN, the International Telecommunications Union, and the ecosystem that controls the Internet. It was an example of the old state-based models versus the new dynamic network models, and the Internet won.

Then we have what I call global network institutions. These are entities like the World Economic Forum, the Clinton Global Initiative, and Business for Social Responsibility; they’re starting to look like a chunk of the UN, but they’re not controlled by states. These things are having a huge impact on the world. They’re engaging millions and millions of people, and they hold vast promise for helping us address the big challenges on this shrinking planet of ours.

What does this mean for nation-states? Are they now irrelevant? Have they become an inappropriate way to deal with global problems?
The nation-state is not irrelevant, and it’s still appropriate in the sense that it’s not going to go away. Nation-states came out of an earlier period in history where they were really part of the transition from a very intuitive society to an industrial society. Yesterday, I came back from traveling in India. India wasn’t really a nation-state until 1947, and it wasn’t the current nation-state until 1961, when it took over Goa from the Portuguese. Italy wasn’t a nation-state until 150 years ago. And we created these national economies, generally with a common language, a sense of national identity, institutions of governance, internal policy, domestic policy, currency, and so on.

It was a good idea—nation-states for national economies—except for the little detail that, increasingly, we have a global economy. So, arguably, the nation-state and its institutions are the wrong size to address these global problems. That’s one of the scope challenges of my project: it’s hard to imagine a problem in the world today that can’t be addressed differently.

I gave you some examples, but let’s just take the case of climate change. This is a big problem. Most people agree that we have climate change, global warming, and extreme weather, and that this is largely based on human activity. So Bill Clinton says to us that if we reduce carbon by 80 percent by the year 2050, it will still take 1,000 years for the planet to cool down. In the meantime, some bad things are going to happen—you can expect a billion and a half people to lose their water supply in the next 10 or 15 years. So all these nation-states go to Copenhagen, Cancun, and Rio and try to get a deal. Not for 80 percent, but for around 6 percent, and they can’t do it.

Meanwhile, there’s a global solution network, a set of multistakeholder networks, involving tens of millions of people. They’re not Malcolm Gladwell slacktivists who go onto Facebook and say that they’re changing the world. They are people who are actually doing something. There are architects who are trying to figure out how to retrofit buildings. There are kids in schoolyards all around the world who are trying to reduce carbon in their communities. There are various policy people who are thinking about carbon credits and new ways of engaging states and solving these problems.

This is the first time in human history that the world is being mobilized and we’re all on the same side. We’ve been mobilized before during world wars, but we were on different sides. So it is a great example of an issue that our traditional institutions are having problems with, and we’re starting to see real progress with the new resilient dynamic network model.

Who else is involved?
There are a number of leading thinkers that are involved, including Vint Cerf, Tim Berners-Lee, Richard Florida, Anne-Marie Slaughter, Roger Martin, and Pankaj Ghemawat. Some of them are business thinkers, and this is a program that business is very much engaged in and should care a lot about because businesses can’t succeed in a world that’s failing. There are huge global business issues, like entrepreneurship, competition, regulation of the financial systems, and all kinds of issues that traditional state-based institutions are struggling with.

My goal is to get the world’s leading thinkers who have an interest in and care about this issue collected in one group, and we’re making some good progress.

The project is being funded, so far, primarily by corporations, and we’ve got some big companies that care a lot about the business issues related to this. We have financial services companies that care about global problems like cash. Cash is a global problem. It’s the foundation of crime and corruption. It is obviously related to financial inclusion. Because of cash, we have trouble taxing people and funding states appropriately. So there are a whole bunch of subset issues that corporations are involved in helping us research and helping us fund.

The problems of the world will never go away. There will always be new frontiers and new challenges. But innovation in its many and hugely varied forms will always be the answer.