By addressing these topics, this study can foster the adoption of a business behavior that integrates the goals of sustainable development in a strategic and systemic way.
In spite of their relevance, studies that seek to verify the relationships that are intrinsic to these subjects, as well as the implications for management with regard to the competitiveness of Brazilian companies, are still incipient. This paper is structured in six sections, besides this introduction. Sections 2, 3 and 4 present the theoretical contributions and Section 5 describes the methodological procedures.
Subsequently, we present the analysis and discussion of results, followed by the final remarks. Organizations have a critical role in facing these crises, by implementing innovations that promote sustainable development. According to Charter and Clark , there is not a single established concept for sustainable innovation, which reflects the difficulty to define sustainability and sustainable development.
However, despite this conceptual trouble, there is an emerging recognition that sustainable innovation is related to entrepreneurship and to new concepts, technologies, products and services, as well as to the adoption of new processes and social systems. The authors emphasize that, although the terms sustainable innovation and eco-innovation are often used as synonyms, eco-innovation only addresses the environmental and economic dimensions, while sustainable innovation also comprises ethical and social aspects.
For Boons, Montalvo, Quist and Wagner , sustainable innovation goes beyond eco-innovation by including social objectives, and refers more clearly to the holistic and long-term process of sustainable development.
Szekely and Strebel define sustainable innovation as the creation of something new that improves performance in the three dimensions of sustainable development: social, environmental and economic. Such improvements are not limited to technological changes, and regard changes in processes, operational practices, business models, thinking and business systems. Hence, the great challenge for organizations is to innovate through the perspective of sustainable development, by adding value to products and processes and contributing to minimize socio-environmental impacts that result from industrial activity.
A company can implement incremental or radical sustainable innovations. This is due to the difficulty of organizations to go beyond incremental levels, because there is not a large market for sustainable products and services yet.
For Boons , sustainable innovations need to go beyond incremental levels, since sustainable development requires the change of production and consumption systems. Thus, sustainable innovation needs to cross the business environment and be valued by society, so that companies can invest in levels of radical innovation, building a new logic toward sustainability.
In order to evaluate and structure the effects of sustainable innovations, Hansen et al. The target dimension explores the concept of the Triple Bottom Line, by distinguishing the economic, environmental and social effects of innovations.
The life cycle dimension relates to the effects of products and technologies in the different stages of their life cycles. The types of innovation dimension consider technological innovations of products or processes, innovations in business models and product-service systems PSS.
Considering the possible intersections of these dimensions, the model has 27 individual areas that show the moment when the potential effects of sustainability emerge. Through the three dimensions of the generic model — target, life cycle and types of innovation — Hansen et al. Bocken, Short, Rana and Evans suggest a set of sustainable business model archetypes, in order to develop a common language that can accelerate the development of sustainable business models in research and practice.
They identified several examples of mechanisms and solutions that can contribute to the innovation of business models for sustainability, based on a review of literature and business practices. They proposed eight archetypes, grouped in the dimensions of technological, social and organizational innovation, to describe mechanisms and solutions that can contribute to sustainability: to maximize material and energy efficiency; to create value from waste; to substitute by renewable and natural processes; to deliver functionality instead of ownership; to adopt a leadership role; to encourage sufficiency; to adapt businesses to society and environment; and to develop a scale of solutions.
Table I presents this proposal. Archetypes have the potential to incorporate sustainability into business objectives and processes, increase the adoption of innovations, accelerate their introduction, and reduce implementation risks. According to the authors, companies can use a combination of archetypes to shape their own change, in order to explore new ways to create and deliver sustainable value. The eight archetypes proposed were used as a basis for the analysis of sustainable innovation practices, because they comprise a wide set of actions.
Some factors are relevant for the adoption of sustainable innovation, such as the size and nature of the activity. Robinson and Stubberud observe that large companies are more likely to implement green innovation practices, because they generally have more capital to invest. On the other hand, small companies face challenges in competing with larger companies, and can find in environmental innovation an effective and sustainable way to provide consumers with products that they appreciate.
Zee, Fok and Hartman , in a study with small and large companies in Germany, found that large companies are more inclined to produce green products and services. On the other hand, small businesses tend to have higher levels of environmental awareness and a greater belief in the importance of sustainability. Nidumolu, Prahalad and Rangaswani by studying sustainable initiatives of large organizations, noticed that success is related to the fact that sustainability is perceived as a new innovation frontier.
Successful companies reconcile sustainability with innovation, and thereby achieve competitive advantage, because they redefine products, technologies, processes and business models, and still reduce costs, by using less inputs; and new processes and products also generate additional revenues or allow the creation of new businesses.
Klewitz and Hansen , in turn, deal with sustainability-oriented innovation in small and medium-sized enterprises SMEs , since such organizations are increasingly recognized as fundamental for sustainable development.
From a systematic review of the literature, they identify product, process and organizational innovation practices and develop an integrated framework on sustainability-oriented innovation for SMEs.
For Kennerley and Neely , p. Measuring performance is a critical factor for organizations. Most of them recognize its importance, but they lack a systematic process with defined parameters for evaluation and control. To evaluate business performance, it is necessary to define the parameters that the company will use.
Therefore, a series of performance measures is necessary, so that organizations can think about their organizational results and provide parameters for decision-making.
Several studies associate innovation and sustainability with business performance. Regarding the innovative performance, Gunday et al. However, the authors observe that the analytical and empirical studies related to the subject are still limited, both in quantity and in depth of analysis. Through the analysis of manufacturing companies in Turkey, they highlighted the positive effects of innovation on the different dimensions of business performance: innovative, production, market and financial performance.
Table II describes the four different categories proposed in the study. This author analyzed the relationship between sustainability management and economic performance; by using separate measures for social and environmental performance, he showed that the latter has a direct effect on economic performance, while the former presents only a moderate effect. Sustainable innovation incorporates technological improvements that can lead to energy saving, pollution minimization, waste recycling, green product development and corporate environmental management.
For companies, sustainable innovations should generate a good diffusion rate in the market and high profits, while improving the natural environment Hillary, Cheng, Yang and Sheu investigated the interrelationships between the types of eco-innovation process, product and organizational and their impact on business performance in Taiwanese companies. As a result, business performance, measured by return on investment ROI , market share, profitability and sales, can be boosted by eco-innovation.
Aguilera-Caracuel and Ortiz-de-Mandojana found no improvement in the financial performance of green innovative companies when compared to non-green innovative firms. However, although the green innovation potential for improving financial performance is evident, this effect may occur only in the long term, and companies must have the necessary conditions to enhance performance. In summary, we highlight the need for researches that provide more evidence on the link between sustainable innovation and organizational performance.
Based on these topics, we tried to relate the adoption of sustainable innovation practices to the performance of industrial companies through a conceptual model. Based on the literature review, we present the conceptual model for analyzing sustainable innovation practices and business performance, which jointly addresses both topics.
We evaluated sustainable innovation practices based on the study by Bocken et al. We assessed business performance by considering the dimensions proposed by Gunday et al. Therefore, based on the conceptual model, we developed the following hypotheses that guided this research: H1. There is a positive relationship between the adoption of sustainable innovation practices and business performance.
The study has a quantitative descriptive approach, and we conducted a survey with Brazilian industrial companies that invest in innovation. For data collection, we developed a structured questionnaire based on the conceptual model of Figure 1. It had closed questions and a five-level item scale was used, where respondents specified their level of agreement or disagreement for a series of statements from 1 — strongly disagree — to 5 — strongly agree Experts in the areas of innovation and sustainability validated the data collection instrument.
This step sought to check the adequacy of the data collection instrument with regard to clarity, format, content and scales. After making the necessary adjustments, we sent it to the companies through an online platform, along with a letter of invitation that explained the study objectives.
We also conducted telephone and Facebook contacts with the firms in order to clarify the purpose and relevance of the research. We decided to apply the questionnaire through an online platform due to easy access to the target population. For Malhotra , data collection through the internet has been growing fast due to its agility and lower cost. The research universe comprised Brazilian industrial companies that had investments in innovation. We chose this population as research object because this type of company is more inclined to implement a strategic management of sustainable innovation, and, consequently, make changes in the business model, thus presenting a superior corporate performance.
We selected the research sample from the register of members of the National Association of Research and Development in Innovative Companies ANPEI , which is the organization that represents the segment of innovative companies and institutions in Brazil.
ANPEI has associated companies, which belong to a wide range of industrial sectors, such as technological services, chemical, electronics, auto parts, machinery and equipment, petrochemical, energy, biotechnology, pulp and paper, food, construction, steel, mining and others ANPEI, b.
It was a non-probabilistic sampling, since we contacted all these companies, and the sample comprised those that effectively received, answered and returned the properly completed questionnaires. They were sent through an online platform to all companies of the population, between September and January We got back 51 questionnaires, representing Although the return rate was not high, the achieved results allow the specific analysis of the characteristics and behaviors of those companies.
However, we cannot extrapolate the evidence found to the research universe. Companies are characterized by their lifetime, industrial sector, number of employees, gross operating revenue in , type of predominant innovation introduced in the previous five years, and main responsibility for the innovation activity.
Table III presents a summary of the main attributes of the companies investigated, showing the predominant profile. The average lifetime of the companies is 28 years, the oldest organization being years old and the youngest, one year old. The considerable variation in lifetime suggests traditional and conservative perceptions from the oldest ones, considering that 25 percent of the companies are above 35 years old, as well as more modern and entrepreneurial conceptions from younger organizations, since 25 percent of the firms are below 8 years old.
Also, companies mostly belong to the sectors of machinery and equipment, technological and chemical. In addition, the sample is composed of less extractive sectors, which, in general, present greater innovation activities. These data reveal that there is a predominance of micro and small firms in Brazil. Thus, understanding the business behavior regarding innovation and sustainability in this sample can contribute to the diffusion of practices that provide higher business competitiveness.
Regarding the characteristics related to innovation, the data show that organizations introduced in the market, in the previous five years, product and process innovations, showing that product innovation is linked to process innovation, which can contribute to a higher business competitiveness. Even though a significant number of companies are mainly responsible for the innovation activity, we found that the search for external sources of innovation stands out, such as cooperation with other firms, research institutes and universities 64 percent.
The association between sustainable innovation practices and business performance was found from the correlation analysis between the indicators of the independent and dependent variables.
Table V presents the bivariate correlation coefficients and the observed levels of significance regarding the sustainable innovation practices and financial and innovative performance. The data in Table V indicate the existence of 16 significant associations at 0. The correlation tests allow stating that there is a positive association between five of the variables that comprise the sustainable innovation practices and four of the variables of financial performance.
It also confirms the results of Cheng et al. These authors showed that business performance, measured by ROI, market share, profitability and sales, could be strengthened by eco-innovation. Data in Table V indicate 33 significant associations at 0. The correlation tests allow us to state that there is a positive association between 11 of the variables that compose the sustainable innovation practices, and 6 of the variables on innovative performance.
We could observe that the practices of sustainable innovation have many associations with the indicators of innovative performance, showing that innovation focused on sustainability contributes to an innovative performance, which confirms the findings of Nidumolu et al. These authors studied sustainable initiatives of large organizations, and noticed that success was related to the fact that sustainability was seen as a new frontier of innovation.
Successful companies balance sustainability with innovation and achieve competitive advantage, because they redefine products, technologies, processes, and business models, and still reduce costs by using less inputs; in addition, new processes and products generate additional revenues or allow the creation of new businesses. Table VI shows the bivariate correlation coefficients and the significance levels observed regarding the sustainable innovation practices and production and market performance.
The data in Table VI indicate ten significant associations at 0. Correlation tests allow us to state that there is a positive association between five of the variables that compose the sustainable innovation practices and four of the production performance variables. They cannot support the communicational needs of a generation of consumers with the shortest attention span in history.
Instead of aiming to issue corporate-style sustainability reports, making transparency a daily priority like social media will create better results. For instance, it will get the customer feedback loop started, an essential component of any innovation process. In sum, for sustainability reporting to be mutually beneficial, gathering, analyzing and simplifying compliance reports into customer-centric content is the way to go.
Demand volatility is pushing brands towards a more environmentally efficient and demand-driven sourcing model. In the context of ever-evolving consumer sentiment, supply chain innovation will require brands to gain a deeper understanding of consumer trends and needs by leveraging analytics, segmenting assortments with smaller batch sizes, and using dual sourcing and nearshoring to create environmental efficiencies in the entire product development process.
Realistically, this can only be accomplished by building genuinely collaborative relationships with suppliers. The goal is to create knowledge-transfer relationship dynamics with suppliers whereby innovation is always part of the equation. Customer experience CX and social listening are the buzzwords of the moment. Companies from Selfridges to HURR collective are implementing experiential consumption by capturing value from frictionless and memorable customer experience.
Meanwhile, social listening is providing luxury retailers like Farfetch with a vast dataset of often-overlooked customer input including experiences, viewpoints and personal perspectives on social justice and climate change. By understanding the model of influence of its sustainability message, a brand has the potential for positive impact beyond increased revenue figures.
Promoting better consumption patterns among customers and influencing lifestyle shifts are some of these impact outcomes. Customer-centered brands such as Stella McCartney and Gabriela Hearst understand that in the social commerce era, there are opportunities to add sustainability-based value at each customer touchpoint, online or in-store.
All of those touchpoints form a relationship that modern brands need to nurture. Emily Rella. Valentina Fomenko. Christopher Tompkins. Entrepreneur Store. Aman Jain. For that reason, it also challenges, or disrupts, the business models of other companies. Radical innovation is the polar opposite of disruptive innovation. The challenge here is purely technological. The emergence of genetic engineering and biotechnology in the s and s as an approach to drug discovery is an example. Established pharmaceutical companies with decades of experience in chemically synthesized drugs faced a major hurdle in building competences in molecular biology.
Architectural innovation combines technological and business model disruptions. An example is digital photography. For companies such as Kodak and Polaroid, entering the digital world meant mastering completely new competences in solid-state electronics, camera design, software, and display technology.
As one might imagine, architectural innovations are the most challenging for incumbents to pursue. In much of the writing on innovation today, radical, disruptive, and architectural innovations are viewed as the keys to growth, and routine innovation is denigrated as myopic at best and suicidal at worst.
That line of thinking is simplistic. In fact, the vast majority of profits are created through routine innovation. Microsoft is often criticized for milking its existing technologies rather than introducing true disruptions.
The point here is not that companies should focus solely on routine innovation. Rather, it is that there is not one preferred type. In fact, as the examples above suggest, different kinds of innovation can become complements, rather than substitutes, over time. Intel, Microsoft, and Apple would not have had the opportunity to garner massive profits from routine innovations had they not laid the foundations with various breakthroughs.
Conversely, a company that introduces a disruptive innovation and cannot follow up with a stream of improvements will not hold new entrants at bay for long. Businesses in markets where the core technology is evolving rapidly like pharmaceuticals, media, and communications will have to be much more keenly oriented toward radical technological innovation—both its opportunities and its threats.
A company whose core business is maturing may have to seek opportunities through business model innovations and radical technological breakthroughs.
But a company whose platforms are growing rapidly would certainly want to focus most of its resources on building and extending them. In thinking strategically about the four types of innovation, then, the question is one of balance and mix. Google is certainly experiencing rapid growth through routine innovations in its advertising business, but it is also exploring opportunities for radical and architectural innovations, such as a driverless car, at its Google X facility.
Apple is not resting on its iPhone laurels as it explores wearable devices and payment systems. Without an explicit strategy indicating otherwise, a number of organizational forces will tend to drive innovation toward the home field. Some years ago I worked with a contact lens company whose leaders decided that it needed to focus less on routine innovations, such as adding color tints and modifying lens design, and be more aggressive in pursuing new materials that could dramatically improve visual acuity and comfort.
After a few years, however, little progress had been made. Despite a strategic intent to venture into new territory, the company was trapped on its home field. The root of the problem was that business units and functions had continued to make resource allocation decisions, and each favored the projects it saw as the most pressing. Only after senior management created explicit targets for different types of innovations—and allocated a specific percentage of resources to radical innovation projects—did the firm begin to make progress in developing new offerings that supported its long-term strategy.
As this company found, innovation strategy matters most when an organization needs to change its prevailing patterns. It also helps you navigate the inherent trade-offs. Consider one popular practice: crowdsourcing. The idea is that rather than relying on a few experts perhaps your own employees to solve specific innovation problems, you open up the process to anyone the crowd. One common example is when an organization posts a problem on a web platform like InnoCentive and invites solutions, perhaps offering a financial prize.
Another example is open source software projects, in which volunteers contribute to developing a product or a system think of Linux. Crowdsourcing has a lot of merits: By inviting a vast number of people, most of whom you probably could not have found on your own, to address your challenges, you increase the probability of developing a novel solution.
Research by my Harvard Business School colleague Karim Lakhani and his collaborator Kevin Boudreau, of the London Business School, provides strong evidence that crowdsourcing can lead to faster, more-efficient, and more-creative problem solving. But crowdsourcing works better for some kinds of problems than for others. For instance, it requires fast and efficient ways to test a large number of potential solutions.
If testing is very time-consuming and costly, you need some other approach, such as soliciting a handful of solutions from just a few experts or organizations. Similarly, crowdsourcing tends to work best for highly modular systems, in which different problem solvers can focus on specific components without worrying about others. Crowdsourcing is not universally good or bad. It is simply a tool whose strength exploiting large numbers of diverse problem solvers is a benefit in some contexts highly diffused knowledge base, relatively inexpensive ways to test proposed solutions, modular system but not in others concentrated knowledge base, expensive testing, system with integral architectures.
Another practice subject to trade-offs is customer involvement in the innovation process. But others say that working too closely with customers will blind you to opportunities for truly disruptive innovation. Steve Jobs was adamant that customers do not always know what they want—the reason he cited for eschewing market research. Choosing a side in this debate requires the cold calculus of strategy. In addition, close collaboration enables Corning and its customers to mutually adapt the component and the system.
This is critical when subtle changes in the component technology can affect the system, and vice versa. Crowdsourcing, like other innovation practices, involves trade-offs. A supply-push approach—developing technology and then finding or creating a market—can be more suitable when an identifiable market does not yet exist. A good example is the integrated circuit, invented in the late s by Texas Instruments and Fairchild Semiconductor.
Both came up with the idea of putting multiple transistors on a chip as a way to solve a reliability problem, not to spawn smaller computers.
In fact, with the exception of the military, there was little demand for integrated circuits. Producers of computers, electronics equipment, and telecommunications systems preferred discrete transistors, which were cheaper and less risky.
To help create demand, Texas Instruments invented and commercialized another device: the handheld calculator. They believe that given the long lead times of drug development and the complexities of the market, accurate forecasts are impossible.
Again, the choice between a demand-pull and a supply-push approach involves weighing the trade-offs. If you choose the former, you risk missing out on technologies for which markets have not yet emerged.
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