When Innovation, Profit and Purpose Collide – Part 1
There’s been an uptake in interest about business purpose, which has spawned new structures such as social enterprises and B-Corps. However, the majority of economic and market power still resides with traditional businesses, and their challenge is to remain relevant and deliver outstanding shareholder returns. Less airtime has been devoted to this sector because, up until now, few people have been able to espouse a clear path for moving forward. With the help of Phil Preston, we propose an innovation agenda that bridges the gap between profitability and social purpose.
Was it that long ago since the Blackberry was exciting technology? Since Al Gore led a climate awareness campaign? Since we rejoiced about new home loan financing techniques that increased affordability and competition? It highlights how the backdrop for doing business has shifted rapidly in response to factors such as advances in communications technologies, pressures on our planetary resources and deep examination of the capitalist system post-financial crisis.
Never has there been more pressure on company boards and executives to maintain earnings growth while simultaneously staving off business model obsolescence. At the same time, alternative business structures, such as social enterprise and B-Corps, have piqued our interest and consumed a disproportionate amount of attention. Less airtime has been devoted to adaptation processes for traditional businesses that, despite what the headlines may have us believe, are a massive economic force.
This is in part due to the “shiny new toy” effect that follows a crisis, but also because there have been few credible paths provided to move business forward. We took it upon ourselves to develop a conversation around this problem and propose a pathway forward: an innovation agenda that bridges the gap between future profitability and social purpose.
Innovation is an oft-used term that is little understood. Commentators have a tendency to look in the rear view mirror and espouse that copying something Apple did will deliver success. As we well know, it isn’t that easy in practice. Innovation is hard work and producing reliable outcomes requires dedication to structure and process. On the up side, a superior innovation process can deliver sustained advantages.
When innovation is lacking, our natural response is to equip people with tools and techniques to generate ideas. However this is only a fraction of the capability story because, for example, without a decent system for submitting, evaluating, supporting and implementing ideas, they feel rejected or ignored and lose the will to apply their entrepreneurial spirit. It’s worth remembering that corporate governance frameworks are not solely for risk management, guidelines issued by the ASX Corporate Governance Council state that an effective structure should encourage the creation of value through entrepreneurship, innovation, development and exploration.
Our first innovation challenge is to capture the latent value that people bring with them to work every day. Employees feel good if they have permission to innovate and are recognised for their success. The Hargraves Institute has found that, when presented with the opportunity to innovate, only 5-10% of employees grasp it. This does not indicate failure, it means that we should identify the 5-10% and focus our capability building resources on them rather than the entire workforce.
The second innovation challenge is effective collaboration: Who to collaborate with? How to do it? Formalise the process or leave it to chance? On a recent assignment, we learned about Bristol-Meyer Squibb working closely with logistics provider, DHL, who devised a system for replacing single-use eskies with reusable Cool Green Cells. The innovation saved 87 tonnes of packaging materials and 565 cubic metres of landfill annually for Bristol-Meyer Squibb alone. High performing companies are more likely to look for collaboration opportunities and have formal processes in place to do it.
Adopting a more holistic view of our business, including its purpose and benefit to society, is our third major innovation challenge. IAG’s mission is currently stated as “to help people manage risk and recover from the hardship of unexpected loss”, which carries a clear purpose compared to “we aim to be the preeminent general insurance provider in Australia” and opens up a wider range of possibilities.
Written by Allan Ryan, Executive Director of the Hargraves Institute and Phil Preston, Community Engagement Strategist and Director of Phil Preston Pty Ltd