Open Sustainability Innovation Gives Companies a Competitive Advantage

Filed under: 1sdn,Green Marketing | |

This post makes the point that companies need a long-term and open approach to thinking about sustainability and innovation that will require companies to adopt a more collaborative perspective and a more open approach to innovation. The increasing adoption of open innovation is important in getting sustainability innovations out of market niches to allow them to spread across a whole industry sector.

by Frank-Martin Belz, Professor at the Technische Universität München (TUM School of Management) and Ken Peattie, Professor at Cardiff Business School, and Director of the Research Centre for Business Relationships, Accountability, Sustainability and Society (BRASS). Both authored the award winning book, Sustainability Marketing: A Global Perspective. Read their blog, Sustainability Marketing.

One of the arguments put forward in Sustainability Marketing: A Global Perspective is that companies need a new, more strategic, long-term and open approach to thinking about sustainability and innovation. Conventional strategic thinking, popularised by Michael Porter and Claas van der Linde in their 1995 Harvard Business Review article ‘Green and Competitive’, is that green innovations will allow companies to generate a competitive advantage and more effectively market themselves to those customers who are concerned about the environment. Such thinking would naturally encourage companies to innovate competitively and keeping tight control of their intellectual property, since gaining an advantage over their competitors was a prime objective. From a sustainability perspective however, such thinking is far from ideal. One company innovatively improving their products, production processes or business model is a good thing, but substantive progress towards sustainability will depend upon whole industries changing and innovating. Economic purists might argue that eventually the ‘good’ companies should be able to leverage their advantage to force the others to innovate or even force them out of business. However, the imperfections and inertia in markets is such that if we rely on a form of pseudo-Darwinian evolution of companies towards more sustainable technologies and business practices, then the impacts of climate change will probably have intervened in the market in a big way long before the process is complete. Progress towards sustainability is going to require companies to adopt a more collaborative perspective and a more open approach to innovation. There were some early developments in key industries during the 1980s and 1990s when the major players in the electronics industry collaborated with the goal of eliminating CFCs as a solvent in electronic assembly processes; and the quest for low emission vehicle technologies created some unprecedented levels of information sharing between the ‘Big Three’ car manufacturers . However, such collaborations were a long way from truly ‘opening up’.

More recently open innovation has become fashionable amongst a wide range of businesses large and small (Chesbrough 2003 2006). It is often however promoted in terms of the benefits that companies themselves get from being open. It is seen as a way of spreading cost and risk, and getting a wide variety of new ideas into a company. It is becoming increasingly common for companies and government departments to sponsor open innovation competition to solve particular problems. Starbucks for example ran the ‘betacup’ contest for innovations to reduce paper cup use on the collaborative idea platform www.jovoto.com, attracting thousands of ideas between April and June 2010, including the winning ‘Karmacup’ design. Similarly Graham Hill, founder of TreeHugger.com launched an $70,000 open innovation competition called ‘LifeEdited’ to design him a low carbon New York apartment to live in. There are plenty of good examples of open innovation, particularly related to sustainability, on the IdeaConnection website. Open innovation and the ‘crowdsourcing’ (a sort of open version of outsourcing) of ideas and design services has also been significant recently in the automotive industry in creating more sustainable vehicles. At last year’s Sao Paulo Auto Show Fiat launched the Fiat Mio, the world’s first crowd sourced concept car, and Local Motors in the USA is using crowdsourcing to develop new and more sustainable approaches to vehicle design and assembly.

Related post: “Green Marketing Should Focus on The People“, argues that green organizations should put greater focus on social solutions that are built around people.

Realising the full potential of open innovation is not just a question of opening up companies’ innovation processes in order for them to get better ideas in, it will also depend upon companies being more open about allowing their ideas, innovations and designs out into the world to be utilised by others. This will be particularly important in getting sustainability innovations out of market niches to allow them to spread throughout an industry. This is something that Nike sought to promote by making its ‘Environmental Apparel Design Tool’ publicly available with the aim of spurring the adoption of more sustainable processes across the industry. This software-based tool helps designers make real-time decisions that shape the environmental impact of their products, and led to the sustainability orientated football shirts worn at the South Africa 2010 World Cup (see our post “An Outstanding Performance with No Environmental Penalty?” from June 5, 2010).

The notion that making progress towards sustainability will depend upon openness among big market players received a dramatic boost this month when Facebook announced that it would share the design secrets of its new highly energy-efficient data centre in Prineville Oregon, with its rivals. This facility uses 38% less power than existing data centres, and spreading this technology could bring a significant improvement to the IT industry’s carbon footprint. The level of energy consumed by Facebook’s data centres is slightly ironic given the original argument that moving our lives into the digital domain would ‘dematerialise’ them and reduce environmental impacts. The logic was that the storage of photos online, for example, instead of printing physical copies, would protect the environment by eliminating all the harmful chemicals (like boric acid and benzene compounds) and water used in photo processing. What people overlooked about this brave new digital world was that the infinite numbers of digital photos people would leave undeleted on their Facebook pages and other sites would accumulate and spin on into eternity on data servers somewhere, gradually clocking up an environmental impact in terms of carbon footprint. By 2020 Greenpeace estimate that the total global energy use of data centres will reach 2 trillion kw/h based on current growth patterns and technologies. Facebook hope to improve this situation through its initiative, called the Open Compute Project, which will provide open access to the specifications and mechanical drawings of the Prineville buildings and servers. This is a marked departure from the rest of the industry who have traditionally kept the design of data centres highly secret. The company has already started using the media to pressurise some of its competitors to follow suit, and it represents and interesting example of the type of Sustainability Marketing Transformation that we discuss in chapter 11 of our book.

Prineville is Facebook’s first custom-built data facility, created at a cost of $188m. The building’s architecture takes advantage of natural air currents for cooling instead of depending on air conditioning, and stripped-down energy efficient versions of the servers have been built to handle the data. A number of big companies have already signed up as partners to the Open Compute Project including Dell, HP, AMD and Intel. The hope is that companies big and small can benefit from the cost savings and environmental benefits that come from sharing sustainability orientated innovations. Although Facebook have attracted some environmentalist criticism for not opting for more sustainable energy choices in terms of their suppliers, their attempts to dramatically reduce the amount of energy they use is to be applauded, or at the very least rewarded with a click on the “Like” button.

Read more in detail about Facebook’s innovative new data center in our related post: “Facebook Open Compute and the PUE Trifecta“.


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