Most businesses have focused their sustainability work on reducing their environmental impact and lowering their resource costs. These bottom-line initiatives, many of them highly innovative, are critical to staying viable and competitive while benefiting society and the environment. They’ll grow profits, for a while anyway. But, they are not a path to continued growth or advantage. The re-engineering, quality and IT movements showed that improved efficiency doesn’t drive long-term value creation.
To consistently grow the bottom-line, sustainability innovation needs to drive the top-line. Innovation that successfully builds new products, services, businesses and customers drives advantage and value. One only need look at the success that Toyota had with the Prius and the huge bet GM is making on the Volt to see the opportunity that environmental innovation at the top-line offers to companies. Similarly, companies like Unilever are pursuing top-line growth from socially responsible innovations like making more nutritious food products.
Top executives now say that innovation is their top growth priority and addressing sustainability issues are critical to their success. In large sample size surveys conducted this year, 84 percent of executives told McKinsey that innovation is extremely or very important to their companies’ current growth strategy, 93 percent of CEOs told Accenture that sustainability issues will be critical to their future success and 95 percent of those CEO’s said sustainability considerations should be fully integrated into their strategy and operations.
How do you leverage sustainability to innovate for top-line growth if your company is already a good innovator or you want to build your innovation capability to take advantage of this opportunity? There are some approaches that may already exist in your set of innovation capabilities that you will need to lean on especially hard for top-line sustainability innovation to succeed. And, you will undoubtedly need to develop others to the take full advantage of the sustainability opportunity.
Here are a few to start with:
1. Stick to your evaluation criteria and don’t add sustainability to them. If you want more than a demonstration or niche market product, forget about using an environmental or socially responsible benefit as part of your evaluation criteria. Recent research shows that mainstream customers won’t favor a more sustainable product if it doesn’t offer equal or better value along existing dimensions like price and performance (subject of an upcoming article). The best innovators aren’t marketing sustainability benefits or trying to educate customers to value them.