Why Sustainability Is Now the Key Driver of Innovation

Harvard Business ReviewA new Harvard Business Review article co-authored by Ram Nidumolu, C.K. Prahalad and CEF founder M.R. Rangaswami offers a framework for determining your company's green opportunities and an overview of what Global 500 leaders and other innovators are doing with energy efficiency initiatives and new product/business models.

The Idea in Brief

  • Sustainability isn’t the burden on bottom lines that many executives believe it to be. In fact, becoming environment-friendly can lower your costs and increase your revenues. That’s why sustainability should be a touchstone for all innovation.
  • In the future, only companies that make sustainability a goal will achieve competitive advantage. That means rethinking business models as well as products, technologies, and processes.
  • Becoming sustainable is a five-stage process, and each stage has its own challenges. Here’s how to tackle them and emerge from the recession ahead of the pack.

Article Summary

When companies pursue sustainability, it's usually to demonstrate that they are socially responsible. They expect that the endeavor will add to their costs, deliver no immediate financial benefits, and quite possibly erode their competitiveness. Meanwhile, policy makers and activists argue that it will take tougher regulations and educated, organized consumers to force businesses to adopt sustainable practices. But, say the authors, the quest for sustainability can unearth a mother lode of organizational and technological innovations that yield both top-line and bottom-line returns. That quest has already begun to transform the competitive landscape, as companies redesign products, technologies, processes, and business models. By equating sustainability with innovation today, enterprises can lay the groundwork that will put them in the lead when the recession ends. Nidumolu, Prahalad, and Rangaswami have found that companies on the journey to sustainability go through five distinct stages of change: (1) viewing compliance as opportunity; (2) making value chains sustainable; (3) designing sustainable products and services; (4) developing new business models; and (5) creating next-practice platforms. The authors outline the challenges that each stage entails and the capabilities needed to tackle them.

This HBR Spotlight article offers a framework for determining your company's green opportunities and an overview of what other organizations are doing with clean energy technologies and recycling programs.

Click here to access the full HBR article and click here to read a short excerpt from the article posted to The EcoInnovator Blog which presents five simple rules for guiding sustainability strategy.

About the Authors

Ram Nidumolu is the founder and CEO of InnovaStrat, a Santa Cruz–based firm that helps companies design and implement sustainability strategies and new business models. C.K. Prahalad is the Paul and Ruth McCracken Distinguished University Professor of Strategy at the University of Michigan’s Ross School of Business and a member of the board of directors of the World Resources Institute. M.R. Rangaswami is the founder of the Corporate Eco Forum, a global organization of senior executives, and the cofounder of the Sand Hill Group, a San Francisco–based strategic management, investment, and advisory firm.