A recent blog by Jenny Ekelund highlights the importance of partnerships and the critical role they can play in shifting business models and innovating for good. She quotes Justin Adams, The Nature Conservancy's new Managing Director for Global Lands in the UK and former BP renewables executive, who had this insight from his time at the oil giant:

"I…learned how hard it is for any organization to innovate away from its core competence. There were all sorts of forces that constantly brought BP back to its core purpose of extracting fossil energy as efficiently and responsibly as it can."

​This quote really struck a chord with me.  If we look further at BP as an example, their inability to change is really no different to, say, Kodak (who invented the digital camera!) or Blockbuster (whose CEO declared that Netflix wasn't on its “competitive radar” as late as 2008) both of which have now gone bankrupt in the face of digital competition.  It is fundamentally about an inability to innovate the business model. For ‘digital’ you can easily read ‘renewables’ in BP’s case.

So why do so many established companies find it so difficult to evolve?  Looking at Kodak’s inability to adapt as an example, we can see many of the issues that are often at play. For example, one of the big problems was that it made 80% gross margins on photo film.  As a result, every innovation project, especially the digital ones, had far too high a hurdle to overcome to be taken forward.  Kodak had invested a lot in this ‘Razor and Blades’ model and this led to the board’s blinkers and unwillingness to cannibalise their core business. It is not that they didn’t see the digital revolution coming – they just couldn't make it work within their culture and corporate world-view.

I would suggest that some, if not all of the following things were therefore at play at Kodak:

• (lack of) senior management buy-in to its innovation programme
• short-term targets driven by shareholder demands and staff compensation structures
• an unwillingness or inability to challenge company / industry assumptions
• an unwillingness to cannibalise existing markets
• asset and capabilities / skills gaps
• cultural barriers
• not understanding the customer need well enough
• lack of foresight and plausible future scenarios

Managers would do well to be aware of the list above and make them a central part of innovation focus, decision making and wider strategic planning. Some of them, such as short term focus, are fundamental to the whole strategy and need to be addressed head on, taking all stakeholders, including shareholders, on a journey to longer term returns – Paul Polman is setting a great example at Unilever in how to do this.

Changing the culture and willingness to challenge the status quo won’t happen over-night.  But it needs to be a priority for senior managers to address these barriers head on. There is a ‘green’ and circular economy revolution happening in every industry and those that don’t, or worse, are unable to embrace it because of some of the straitjackets listed here, might just be the next case study of a business that failed to evolve its business model.

by Jesper Ekelund

BMW may have taken its time entering the electric vehicle (EV) market, but its latest offering, the carbon-fiber i3, is creating a stir in the motor industry.

What makes the i3 interesting is the thinking that went into its design. Jacob Harb, Head of Operations and Strategy explains: [the project]..started a decade ago, looking at how to ‘future-proof’ our business…it sounds a cliché, but we really started with a blank slate, we re-examined the design process from the ground up. Sustainability and innovation are embodied in the i3.”

The result is a carbon fiber chassis, 50% lighter than steel. Amongst other efficiencies, production uses 50% less water and 70% of the energy used in conventional processes.

Designed with disassembly in mind, the i3 is an impressive 95% recyclable. Perhaps just as importantly, it is the sort of car you can imagine people aspiring to. It’s not a half-baked nod to sustainability, it’s a car that expects to capture a good portion of the market on its own merits. The i3 may well shake up the burgeoning EV market and push its competitors (the hitherto dominant Chevy, Nissan, Tesla and Prius) to go one better.  This can only be a good thing- for consumers and for the environment. It’s a good example of a competitive marketplace driving a ‘race to the top’, stimulating more creative thinking to solve our sustainable transportation challenges faster.

Delve a little deeper into BMW’s story, however, and you’ll discover that supply-chain and community collaboration also played a key part in creating the world’s first mass produced carbon fiber vehicle. Carbon fiber is pricey. Very pricey. So in order to make the production process cost effective and reliable, BMW formed a partnership with SGL Carbon SE and opened a hydro-powered carbon fiber plant in Moses Lake, Washington. The two firms worked with a local community college to train employees for the plant, which created 80 new jobs, and according to SGL’s Managing Director, Dr Joerg Pohlman aided in “starting the production at a high level of quality and efficiency.” Without the bold $100m invested in the Moses Lake joint venture, BMW’s vision may have stalled.

The i3 is an interesting example of an innovative, more sustainable product created for a highly competitive market. Yet it is also a useful case study in collaboration and the value of well-managed partnerships in creating social and environmental value.

It’s a conclusion Darwin arrived at more than a decade after the publication of On The Origin of Species. In the Descent of Man (1871) he outlined his conviction that cooperation and reciprocity were as essential as competition to the evolutionary process. According to philosopher Roman Krznaric, Darwin’s new thinking was “largely neglected at the time, and we are only beginning to recover it now.”

Perhaps what businesses really need to help solve the knottier social and environmental challenges of our time is more of this kind of thinking- a philosophy that balances intelligent and well executed collaboration with an ability to compete (and fight fairly!) in the evolution of ever more effective and sustainable products and services. Perhaps then we might realise the true power of the emerging social economy.

by Jenny Ekelund

I recently saw this short clip from Paul Sloane on why customers are a bad source of breakthrough innovations. He states that "if you want breakthrough innovations you don't start by asking customers, you start somewhere else". He then simply and powerfully makes his point, illustrating how if we asked customers back in the 1950s how we could improve spectacles, they would never have suggested contact lenses or laser eye surgery.  A similar and often quoted example is Henry Ford's "if I asked customers what they wanted they would have said a faster horse". 

In my opinion, customer insight and involvement is critical to all forms of innovation, including disruptive innovations. It should always be at least one of your starting points. 

Of course customers wouldn't have come up with the car, but they would have came up with the need of getting from A to B more quickly. Equally, in the glasses example, we can learn from what customers say - "plastic lenses instead of glass lenses", "a scratch proof lens" and "a flexible frame" are all fantastic insights and great stimulus to generate ideas for solutions. After all, the contact lens solves all the real issues the customer is highlighting here.  It is then up to innovation leaders along with the right mix of internal and external stakeholders to interpret the customer needs through a series of creative exercises and R&D processes.  

To be fair to Paul he may well go on to say this (I've only seen the two minute clip), but ignore the customer at your peril in any type of innovation.

by Jesper Ekelund