Can Innovation and Sustainability Go Hand in Hand?
Innovation is often associated with buzz phrases like “break free from rules”, “think outside the box” and “fail fast, learn fast”. When it comes to sustainability, one might automatically think about social responsibility and risk control, either in an environmental setting or an ethical context. My instinct tells me that sustainability and innovation might not get along well with each other.
A couple of weeks ago, I was at Volvohallen in Gothenburg as a guest speaker talking about how Telia’s smart irrigation monitoring solution improves water usage efficiency in farming. The conference was organized by the Nordic Chapter of UN Global Compact with focus on the Sustainability Development Goals of United Nations (UN SDGs). The case I presented was used to exemplify how digital innovations can both address societal challenges and generate new revenue streams.
While most of the audience were impressed by how much Telia knows about and does in the space of Internet of Things (IoT), I was triggered to start thinking more in depth about the relationship, or possibly the synergy, between innovation and sustainability.
Synergic or Not
So what is the synergy between sustainability and innovation? Or, if there’s any synergy at all? The answer is most probably yes if you’ve read articles from The Economist or Harvard Business Review on related topics. Michael Porter, well-known Professor of Strategy and Competitiveness at Harvard Business School, is frequently quoted as saying “Society’s challenges represent the next wave of innovation and productivity growth in the global economy.”
“Society’s challenges represent the next wave of innovation and productivity growth in the global economy.” — Michael Porter, professor at Harvard Business School
Sounds good, at least in theory. I understand that if a novel solution happens to solve a societal challenge, we can say it sits at the intersection of innovation and sustainability. But how can companies like Telia put the theory into practice? And are sustainability and innovation only synergic in the context of new product development?
Let’s use Telia as an example, take one step back and see what’s on its agenda of innovation and sustainability, respectively.
Innovation at Telia
Without going into details about Telia’s innovation strategy and processes, I simply cluster our innovation initiatives into three themes: digital transformation, culture change, new business development. Let’s go through them one by one.
Digital transformation is probably the buzzword of the decade. Almost every established organization, across all sectors and industries, are going through a transformation or digitalization journey. Although both the starting point and the path vary from one organization to another, the end goal of transformation is more or less the same — to become customer centric, data driven and operationally efficient. In Telia, transformation is a responsibility shared across different countries, business units and staff functions. We do it by simplifying operations, replacing legacy systems and enhancing customer experience. We believe that upgrading IT systems such as business support systems (BSS) is only an enabler for transformation but not the end goal itself. At the end of the day, transformation is about disrupting and reinventing the business model.
Although both the starting point and the path vary from one organization to another, the end goal of transformation is more or less the same — to become customer centric, data driven and operationally efficient.
“Culture eats strategy for breakfast.” This is a phrase originated by Peter Drucker, who has been described as the founder of modern management. It’s more about emphasizing the importance of organizational culture than depreciating the value of strategy. In the context of innovation, it is proven to hold true. In Telia, we have a squad of innovation catalysts with the mission to create an innovative culture within the company. They do this by facilitating events, hackathons and workshops; equipping the rest of the Telia with tools, methods and new way of working that can generate and nourish innovative ideas; and coaching colleagues to develop an idea into a concrete product or business case. Moreover, they advocate and practice “open innovation” by staying close to the startup communities and bringing in potential collaborations. While one innovation catalyst sits in the enterprise business unit in Sweden, another might be part of the HR team in Norway. Instead of innovation catalysts, I actually prefer calling them “Culture Change Makers”.
New Business Development
Connectivity has always been Telia’s core business. Without doubt we’re one of the leading players in the global telecom industry. However, we see ever increasing challenges when connectivity is being commoditized and “over-the-top” (OTT) players likes Facebook and Netflix are capturing more value than we do on our network infrastructure. To move “up” in the value chain and explore opportunities beyond the core business, Telia has established Division X as the emerging business unit with the mission to spearhead our journey towards the New Generation Telco. The vision is to go beyond connectivity and position Telia as an enabler in the technology ecosystem. The focus is on strategic business areas such as IoT and Digital Health.
To move “up” in the value chain and explore opportunities beyond the core business, Telia has established Division X as the emerging business unit with the mission to spearhead our journey towards the New Generation Telco. The vision is to go beyond connectivity and position Telia as an enabler in the technology ecosystem.
Telia’s Sustainability Approach
Enough about innovation at the moment. Let’s take a break and talk about sustainability. So, what is on Telia’s agenda?
Telia’s sustainability approach has two cornerstones: “Sustainable Operations” and “Shared Value Creation”.
The “Sustainable Operations” track resembles a classic Corporate Social Responsibility (CSR) program from any other large international corporation. The core is to ensure responsible and sustainable business processes in supply chain and delivery of customer offerings. A few examples in our focus areas are “Responsible Procurement”, “Customer Privacy” and “Children’s Safety Online”.
Shared Value Creation
The second track in Telia’s sustainability approach, even more exciting from my personal perspective, is about creating shared value. Make no mistake, “Shared Value Creation” does not mean giving away the hard-earned money at Telia. That’s called philanthropy. “Shared Value Creation” is about leveraging our assets and competency to address societal challenges and at the same time unlock new business opportunities. We create shared value, very often with partners, with focus on four themes: “Connected The Unconnected”, “Digital Innovation & Entrepreneurship”, “Education for All” and “A Healthy & Safe Society”.
This is where things start to become interesting. “In addition to taking care of the risks, we also look into the opportunities.” said Anne Larilahti, Head of Sustainability Strategy at Telia Company during an internal interview. In fact, the combined approach in sustainability is not only unique itself but also resonating with our innovation activities.
“In addition to taking care of the risks, we also look into the opportunities.” — Anne Larilahti, Head of Sustainability Strategy at Telia Company
Let’s use two examples to elaborate on what I mean by “resonating”.
Smart Irrigation Monitoring Solution
Remember the agriculture case I mentioned in the beginning? The smart irrigation monitoring solution powered by Telia not only solves the water leakage problem for farmers like Dag Fredrik Eftedal, but also addresses the bigger challenge behind — the efficiency of fresh water usage in farming. What’s equally important is the increasing demand of the global market for such smart irrigation solutions, which is expected to reach 1.5 trillion USD by 2022. That means a solid business case and an emerging revenue stream.
Trust as a Service
Another example is the ongoing development of “Trust as a Service” in Division X, a consent and privacy management solution that aims to not only prepare Telia itself for the upcoming data privacy regulations such as General Data Protection Regulation (GDPR) but also commercially enable other organizations facing similar challenges to stay or become fully compliant. Again, we’re addressing a social challenge (online privacy) while unlocking a new business opportunity — “killing two birds with one stone”.
Have you sensed the synergy between sustainability and innovation so far?
The shared characteristics of the aforementioned examples, and in fact many other cases, is that they fit perfectly into Professor Porter’s definition of Shared Value Creation: “generating economic value in a way that also produces value for society by addressing its challenges.”.
From Telia’s perspective, shared value creation sits right in the intersection of innovation and sustainability. This is where we see a lot synergy recurring across different cases.
So apparently, innovation and sustainability can indeed go hand in hand. In particular, there’s strong synergy between exploring new business opportunities and creating shared value.
If we follow Porter’s theory in shared value creation as our guiding principle for exploring new business opportunities, it’s almost guaranteed in theory and proved with examples that we will be able to constantly develop meaningful products that both solve challenges in society and pay the bill for my lunch.
I call it “Purpose-Driven Product Development”.
Meaningful products is not a new concept in Telia. Our products in IoT, from connectivity to platform services to vertical solutions, address a plethora of big challenges in society, directly or indirectly, by digitalizing business processes for enterprises and improving quality of life for private customers. That’s exactly what we mean by “connect the unconnected”. Our solutions in Digital Health such as HomeCare contribute significantly in creating “a healthy and safe society”.
From Coincidental to Systematic
However, it seems to me that some of the “greater good” products are out of coincidences other than a systematic approach. There’s no shame in starting with purely commercial incentives and ending up with a humankind-saving product. But companies like Telia, that have been always driven by social responsibility and sustainable development, probably want to be more proactive. That’s why we need a systematic approach to developing purpose-driven products rather than “greenwashing” existing products on a coincidental basis.
To establish a systematic approach as such, my simple suggestion is to embed sustainability, in particular Shared Value Creation, as a guiding principle in any future business development process.
To establish a systematic approach as such, my simple suggestion is to embed sustainability, in particular Shared Value Creation, as a guiding principle in any future business development process. Or, more concretely, we should have sustainability as one of the key assessment criteria in parallel to financial return and technical feasibility, when filtering the vast amount of new business opportunities.
Who knows? In a few years, there might be no longer a title called “New Business Developer”. Instead, we might have an increasing number of “Shared Value Creators” who develop purpose-driven products and build meaningful businesses. I might well end up being one of them.
Acknowledgement: Some of the thoughts in this article are inspired by my Telia colleagues during lunch conversations. In particular, I thank Tomas Zimmermann (Director Sustainability Strategy, Telia Company) for providing some of the supporting material.