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Barriers to Eco-innovation: “Overcoming the corporate culture

resistance for change and innovation”

by Alexandre Gobbo Fernandes

Université de Versailles Saint-Quentin-en-YvelinesEconoving Master “Management of Eco-innovation” – Class 2010-2011Module: The Nature of Eco- InnovationInstructor: Prof. Keith Culver

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How to build an organizational

structure and culture

that embraces innovation?

“I Love this room, so many happy memories of killing innovations!

3

Eco-innovation managers need special capabilities to lead business

through uncertainties and risksof innovation.

“We reward risk-takers around here, but seriously, avoid the

tuna sandwich at all costs.”

4

To achieve innovation leadershipand

competitiveness, creativity behavior is a vital

issue

“I want you to start thinking back inside the box.”

5

Leadership is the capacity of understand

uncertainties,face the challenges and take the

risks

risk taking + creativity = Innovation

6

Individual behavior is the core of organization

outcomes.

7

In order to be creative, people need to be able to view things

in new ways or from a different perspective.

8

Creativity needs a design attitudeto focus on innovative results

for long-lasting organizational betterments.

9

How to (re) design organizational elements

to engage company top management

on innovation?

10

ADHOCRACY

A firm’s ability to exploit and explore innovations is highly impacted by its organizational design.

11

The capacity of organizational learning, problem-solving and creativity,

is a result of the firm's functions & processes.

Methodologies that uses design tools

can boost Business managers skills.

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“Business innovate or they fail to survive.What will differ for the life beyond the Industrial Age bubble

will be what inspires that innovations.”

Peter Senge

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Eco-innovation is all about inspiration in nature The Case of Xerox

The vision: zero to Landfill, for the The vision: zero to Landfill, for the sake of our childrensake of our children

They could break the rules starting with the way they They could break the rules starting with the way they form their teamsform their teams

Team members had deep appreciation to Team members had deep appreciation to eco systems and environmental design eco systems and environmental design since the beginningsince the beginning

Why design products for a Why design products for a brief visit to a customer brief visit to a customer on their way to a landfill?on their way to a landfill?

The inspiration in nature led The inspiration in nature led to a extraordinary wave of to a extraordinary wave of creativity creativity

Great creative comes from Great creative comes from understanding constraints understanding constraints -- the the nature constraints.nature constraints.

Develop the specifications and invert Develop the specifications and invert the processes to deliver a different the processes to deliver a different productproduct

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Eco-innovation is all about taking-risksThe Case of Xerox

Maintaining the Maintaining the company's company's solvency amid solvency amid extreme extreme financial financial stressesstresses

Developing a new generation of digital Developing a new generation of digital copiers that could be integrate all new copiers that could be integrate all new technologiestechnologies

It was a It was a ““betbet--youryour--companycompany””type of situationtype of situation

A blank canvas on which to reA blank canvas on which to re--create copying for the create copying for the digital agedigital age

Six years of Six years of development a line of development a line of copiers that transform copiers that transform industry and the industry and the company itselfcompany itself

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Eco-innovation is all about profiting in a triple bottom line

The Case of Xerox

The design innovations The design innovations embedded in the product embedded in the product yielded over 200 patents yielded over 200 patents and inspired the whole and inspired the whole coping industrycoping industry

New machines design with 93% reNew machines design with 93% re--manufacturablemanufacturable and 97% recyclable and 97% recyclable resourcesresources

Primary suppliers convinced of Primary suppliers convinced of the importance and adopted the importance and adopted similar measuressimilar measures

Diverted 1.9 billon Diverted 1.9 billon pounds of waste pounds of waste avoided since 1991avoided since 1991

3.6 billion U$ of savings on manufacturing 3.6 billion U$ of savings on manufacturing and components costs since 1991and components costs since 1991

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Thank you!Alexandre G. Fernandes

(Please find references and bibliography used in this presentation in the handled paper)

Université de Versailles Saint‐Quentin‐en‐Yvelines Master “Management of Eco‐innovation” – Class 2010‐2011 Module 1: Eco‐innovation and competitiveness in a globalizing economy Instructor: Prof. Keith Culver Handled paper in complementation of presentation:

“Barriers to Eco‐innovation: Overcoming the Corporate Culture Resistance for Change and Innovation”

by Alexandre Gobbo Fernandes

Slide #2: How to build an organizational structure and culture that embraces innovation? Success depends of the company as a whole: strategy, technology, information and knowledge resources, process, people, structure and culture. Model and transform an “organization's environment” to build an innovative company prepared to be resilient, adaptable and with fast response. Slide #3: Eco‐innovation managers need special capabilities to lead business through uncertainties and risks of innovation. For the complex and dynamic business environment, leaders and firms realized the need of change and engaged on it. Business people lack on tools that complement their business skills to take into account a complex web of factors: competitors, technology, legal, etc. in an unfamiliar and uncharted territory: INNOVATION Slide #4: To achieve Eco‐innovation leadership and competitiveness, creativity behavior is vital issue. The individuals behaving creatively, with the right management tools and within a supportive organizational environmental, are a fundamental part to build a successful innovative company. Slide #5: Leadership is the capacity of understand uncertainties, face challenges and take the risks. First thing, how do we get to innovation? Second thing, we need to be creative. But in which way? Focusing on the targets and the results (that is design attitude).

Byrd, J. & Brown, P. L. (2003). The Innovation Equation: Building Creativity and Risk Taking in Your Organization. Ed. Jossey‐Bass/Pfeiffer.

Slide #6: Individual behavior is the core of Organization Outcomes This chart is based on the “interactionist model of organizational creativity” and shows a simplified model of creative behavior into a social context, within an organization. 1) An innovative firm wants to have creative outcomes to the environment. 2) The functions and processes inside the firm are made by work groups, that can have different behaviors. 3) The behavior of a work group is mainly influenced by the individuals behavior within this group. So, individuals that have creative behavior are needed so companies can have creative outcomes.

Adapted from: Woodman, R.W., Sawyer, J.E. & Griffin, R.W. (1993). Toward a Theory of Organizational

Creativity. The Academy of Management Review, Vol. 18, No. 2. Woodman & Schoenfeldt (1989). Interactionist model of organizational creativity.

Slide #7: In order to be creative, people need to be able to view things in new ways or from a different perspective. Creativity is the ability to generate ideas and alternatives to solve problems and communicate with others. To be creative is important, not only the number of alternatives but the uniqueness of those alternatives. Creativity requires fundamental qualities of thinking, such as: flexibility, ambiguity, unpredictability and enjoy the unknown.

Robert E Franken (1999). From Human Motivation. Thomson Brooks/Cole 3rd ed., 1999. Illustration: Central Design Studio. http://www.co‐d.net

Slide #8: Creativity needs a design attitude to focus on innovative results for long‐lasting organizational betterments. But, creativity itself is not going to bring the organizational, product or process innovations required. To put creativity into practice to serve the organization goals, you must have a design attitude to educate the management practices. The figure shows how a mind of a design thinker manager works. The thinking process is an iteration between diverging: looking for all the ways to solve your problem and converging: focusing on a specific solution.

Osterwalder, A. & Pigneur, Y. (2010). Business Model Generation. John Wiley & Sons Inc.,2010. Illustration: IDEO LLC. www.ideo.com

Slide #9: How to (re) design organizational elements to engage the company top management on innovation. “Most business processes are about making choices from a set of existing alternatives. In order to innovate, we have to have new alternatives and new solutions to problems, and that is what design can do.” Tim Brown, CEO of IDEO (Companies who extend design thinking across the value chain include Apple, Starbucks, LEGO, Sony, Virgin, Whirlpool and Xerox.) Slide #10: A firm’s ability to exploit and explore innovations is highly impacted by its organizational design. Companies have to be able to both: exploit efficiencies of incremental innovations as explore opportunities of radical innovation. The chart shows how different can organizational culture types be, depending on the nature of the business. Adhocracy fits for companies that need more flexibility and have an external focus, the case of innovative and knowledge business such as consultancies, marketing, R&D, design, architecture etc. Sometimes a company has more than one configuration. J. T. Hage (1999). Organizational Innovation and Organizational Change. Annual Review of Sociology,

Vol. 25 (1999), pp. 597‐622. Illustration: Cameron, K. S. & Quinn, R. E. (1999). Diagnosing and Changing Organizational Culture

Based on the Competing Values Framework. Addison‐Wesley Longman, Inc.

Slide #11: The capacity of organizational learning, problem‐solving and creativity is a result of its configuration of functions & processes. So, because of the the environment of innovation is complex and very dynamic, the best configuration for innovation firms and departments is Adhocracy. Adhocracy is a configuration that enable innovation processes to work with: mutual adjustment, low formalization, low centralization, high social specialization and organic structure. Carroll, G. R. (1984). Organizational Ecology. Annual Review of Sociology, Vol. 10 (1984). Published by

Annual Reviews. Illustration from : Cesar Minoru Harada, [email protected] ‐ www.cesarharada.com ‐ CC

Slide #12: Business managers need a methodology that uses design tools to complement skills. “Managing by Design” concept is a new emerging methodology. Since 2009 there is a MBA curriculum that integrates: Design attitudes, Design thinking and Design skills (Weatherhead School of Management, University of Cleveland, Ohio) Not just design companies uses design tools, but many others e.g.: Telenor ‐ Customers Insigths (telecom products); BMW, Nestle, Swatch ‐ Ideation (breakthrough products); HP ‐ Visual Thinking (creative process); Microsoft, Nokia ‐ Story telling (potential future tangible);

Osterwalder, A. & Pigneur, Y. (2010). Business Model Generation. John Wiley & Sons, Inc. Illustration: Design Thinking Process ‐ Stanford Institute of Design ‐ http://dschool.stanford.edu/

Slide #13: “Business innovates or they fail to survive. What will differ for life beyond the Industrial Age bubble will be what inspires that innovations.' Peter Senge The design way of thinking can be applied to: systems, situations, procedures, protocols, and innovation. You can design the way you: lead, manage, create and innovate. Xerox was doing all these things twenty years ago, way before these ideas were that clear.

Senge, P., Smith, B., Kruschwitz, N., Laur, J. & Schley, S. (2010). The Necessary Revolution. p. 285. Nicolas Brealey Publishing.

Slide #14: Eco‐innovation is all about inspiration in nature. The Case Xerox Late 90's Xerox released a innovative Document Center family (DC 260), that: yielded 200 patents, inspired imitators, won national design awards and were pivotal for Xerox finances. They realized they were designing and manufacturing copiers to spend JUST a few years with customers BUT million of years in landfills. They started from a clean sheet, a great creative work starting from understanding constraints ‐ the nature constraints. They developed the specifications and invert the processes to deliver a different product.


Slide #15: Eco‐innovation is all about taking‐risks. The Case Xerox The team of Xerox had to bring up an innovation capable to maintain the company's solvency, that was passing throught extreme financial stresses. It was a “bet‐your‐company” type of situation. The engineers felt they were not working on just typical constraints from management. They started to re‐create the copying business for the digital age. The design objective was to be able to reuse and/or remanufacture all parts of the copiers. They though big and beyond. They had a vision “Zero to landfill, for the sake of our children”


Slide #16: Eco‐innovation is all about profiting in a triple bottom line: The Case Xerox After: six years of development, 800 professionals involved, a completely change of the business model paradigm of the company, the results were astonishing: DC 260 is produced in “Waste free” plants, inspiring suppliers to engage in the “zero to landfill” vision, 97% of the new machine is recyclable and 93% is remanufacturable. At least 1.9 billion pounds of waste was avoided and $ 3,6 billion were saved on manufacturing costs.


Product Services Business Model - Nature of Eco-Innovation Module

Product‐Service Business Model

By Alexandre G. Fernandes

Université de Versailles Saint‐Quentin‐en‐Yvelines

Econoving Master “Management of Eco‐Innovation” – Class 2010‐2011

Module: Nature of Eco Innovation

Instructor: Dr Keith Culver


Product‐Service Business Model

A new model to meet (a practical solution) the needs of a new way of production and consume towards

sustainability”

“A strategy and logic management/operations focused to entire product cycle: supply chain+post disposal”

Changing in the earning logic of the company and the added value delivered to the costumer in two dimensions:

Change in deliverable

Change in the value network processes


Product‐service business model

“Imagine a new way of product thing where the responsibility for the product is endless from the

resources till the discharge of the life cycle of a product”

Product oriented services (product+services: Castrol)

Use‐oriented services (leasing: Dupont, Interface)

Product renting or sharing (share product: Velib)

Result oriented (pay per service: Dow chemicals)


The Nature “Product‐service” business model

systemic, technical and social phenomenon

Natural Capital concepts;

“Move to service‐flow business model”, one of the four

key major economical shifts to Natural Capitalism;

“Industrial Functional economy”, from the convictions

of GDF SUEZ company, website illustrations.


Natural Capital

“Earth’s natural resources and ecological systems provides vital life‐support services to society and all living things”

“Services of immense economic value are literally priceless since they have no known substitutes”

Book“Natural Capitalism: creating the next industrial revolution”, Paul Hawken, Amory Lovins, L. Hunter Lovins, 1999.


“The Natural Capitalism”the four key major economical shifts concepts 1) Radically increase the productivity of natural resources: “make more with less”;2) Shift to biologically inspired production models and materials: “bio mimicry” + “no waste production”;3) Reinvest in natural capital: restoring, sustaining, and expanding natural habitat systems and biological resource base;

4) Move to a service‐and‐flow business model: − Shift from traditional manufacturing to sale of goods to a

model where value is delivered as a continuous flow of services.

− Alignment of the interests of providers and customers in ways that reward for resource productivity.


Practical Method: the convictions of GDF Suez

Industrial / Functional economy ‐ the convictions of GDF Suez in www.gdfsuez.com


The Challenge environmental performance and impacts

Close‐loop technical system concept from the “Cradle to Cradle” framework.

Engaging in collaboration and information flows ‐ from “Eco‐ Innovation: when sustainability and competitiveness shake hands”, chapter 3.

Analysis of the drives of values and performancethrough sustainability diagram from the CSR Europe report.


The close‐loop technical system The Cradle to Cradle framework

Book “Cradle to cradle:remaking the way we make things”.WillianMcDonough Michael Braungart, 2002


The close‐loop technical system The Cradle to Cradle framework

Circular economy ‐ the convictions of GDF Suez in www.gdfsuez.com


Product service ChallengesEngaging in collaboration and information flows

“...the technological competency to develop and adopt eco‐innovations and use of opportunities offered by the market depends on:

− creation of relationships and formation of strategic alliances with actors across the production chain(costumers or suppliers)

− use of collaboration networks with research institutions in order to outsource the acquisition of knowledge needed for the innovation process.

“Eco‐ Innovation: when sustainability and competitiveness shake hands”, chapter 3


Product service ChallengesCreate value for Companies

Drivers of value Product service challenges Grow sales faster Innovative products to meet new customers needs.

Attract customers by corporate responsibility. Increase operating profit margin

Efficiency due to energy and waste management.

Reduce cash tax rate Possibly take advantage of incentives.Fewer fixed assets Added Value Network Improves efficiency.Less working capital Reduced inventory. Better supply chain practices as

companies work in co-ordination. Increase the period of competitive advantage

Increase brand equity by legitimacy (extension of the ‘licence to operate’)

Lower cost of capital ‘best practices' in governance lower perceived risk of the Investors.

The drives of values and performance through sustainability diagram, from the CSR Europe report, 2008


The Opportunityrelevance to the competitiveness

“Integrative Project Model” concept from the Design & Sustainability report from Green Blue + Summit Foundation

Case Study (application of the rule): Fishbein, B. K.“Carpet Take‐Back: EPR American Style” , paper article

Article “How Interface Innovates with Suppliers to Create Sustainability Solutions” signed by Eric Nelson, vice president of Interface Americas


Integrative Project ModelDesign & Sustainability report Green Blue + Summit found.

“Coordinate points of engagement throughout a system, to improve the way the various elements relate to one another and to the system as a

whole”

Combination of elements working to address specific needs and goals;

Systems view of the world and the opportunities at hand;

Engage and affect a rich set of relationships and systems;

Employ multi‐disciplinary approaches and project teams;

Take advantage of the potential of system‐wide engagement, rather than focusing solely on its inherent limitations;

Use constant feedback to improve their performance continuously;

Intensely connected with the real‐world context – the people and places.


WHY ARE PRODUCERS TAKING BACK CARPETS?“Carpet Take‐Back: EPR American Style”

Factors driving the carpet take‐back initiatives in the US:

Profit ‐ i.e. replace virgin materials with lower cost recycled nylon;

Marketing ‐ i.e. increasing “eco market share” in a competitive industry;

Demand for recycled content ‐ i.e. Provide recycled nylon for use in “eco automobile parts”;

Preempting legislation ‐ i.e. take‐back legislation, landfill bans at the state level, and procurement guidelines that require take‐backs;

Inteface Inc. advocacy ‐ highly publicized efforts of leasing and closed‐loop recycling of carpet manufacturer.


How Interface Innovates with Suppliers to Create Sustainability Solutions

“A Systematic Approach to Supplier Partnership

We developed a systematic approach to determine which suppliers had the capability and the passion to partner with us in pursuit of our sustainability goal.

In many cases, we were asking our suppliers to completely change the way they manufactured their product, ranging from the raw materials they used to the type of energy they powered their plants with.”

(“How Interface Innovates with Suppliers to Create Sustainability Solutions” by Eric Nelson, vice president of Interface Americas, in Wiley Inter Science)

Université de Versailles Saint‐Quentin‐en‐Yvelines Master “Management of Eco‐innovation” – Class 2010‐2011 Module 1: Eco‐innovation and competitiveness in a globalizing economy Instructor: Prof. Keith Culver Handled paper in complementation of presentation:

“Product Service Business Model”

By Alexandre G. Fernandes

This presentation aims to explain the product‐service business model implications and impact

for the success of sustainable business based on Eco‐innovation. The goal is to get the attention for

the product‐service business model as a key factor for the Eco‐business, focusing on the close‐loop

systems through the use of collaboration networks and structured information flows. To create the

slides for the presentation, it is intended to blend the three layers of analysis showed below:

A) The fundamentals will focus on the “close loop” technical system from the Cradle to Cradle

framework, also supported by concepts of “move to service‐flow business model” from the four key

major economical shifts to engage the Natural Capitalism and the “Integrative Project Model”

concept from the Design & Sustainability report from Green Blue + Summit Foundation. (2 min.)

B) To induce insights for strategic thinking on the product‐service applications in the “real

business” will be made an analysis of the drives of values and performance through sustainability

diagram from the CSR Europe report, to show what are the principal concerns of any company and

how it could be applied for a eco‐business. (3min.)

C) Real business will give the best vision of what has already been done and what are the

main concerns and challenges for the application of the product service business model. The paper

from Fishbein, B. K.“Carpet Take‐Back: EPR American Style” has some good practical examples of the

challenges with focus on the pioneering practices of the industry of carpet in USA and in the article

“How Interface Innovates with Suppliers to Create Sustainability Solutions” signed by Eric Nelson, vice

president of Interface Americas, will give us a good overview on the management stile of this leading

company. (4 min.)

The extracted contents selected from the bibliography are roughly shown below:

Source: “Cradle to Cradle Framework” from www.mbdc.com

Source: Eco/Industrial systems “The Convictions of GDF Suez” from http://www.gdfsuez.com

“Natural Capital refers to the earth’s natural resources and the ecological systems that provide vital

life‐support services to society and all living things. These services are of immense economic value;

some are literally priceless, since they have no known substitutes. Yet current business practices

typically fail to take into account the value of these assets—which is rising with their scarcity. The

journey to natural capitalism involves four major shifts in business practices, all vitally interlinked:

1) Radically increase the productivity of natural resources,

2) Shift to biologically inspired production models and materials,

3) Reinvest in natural capital and

4) Move to a “service‐and‐flow” business model: The business model of traditional

manufacturing rests on the sale of goods. In the new model, value is instead delivered as a

continuous flow of services — such as providing illumination rather than selling light bulbs. This aligns

the interests of providers and customers in ways that reward them for resource productivity.”

Source: Industrial/functional economy from “The Convictions of GDF Suez”from http://www.gdfsuez.com

The Drives of Values and Performance through Sustainability Diagram

CSR Europe Report

Driver of value Some examples of driving performance through sustainability.

Grow sales faster Innovative products to meet sustainability needs. Attract customers by corporate responsibility stance.

Increase operating profit margin Better workforce efficiency by treating people better – attract better people, more training, less absenteeism, lower staff turnover. Efficiencies due to energy and waste management.

Reduce cash tax rate Possibly take advantage of incentives.

Fewer fixed assets Improve efficiencies.

Less working capital Reduced waste leading to reduced inventory. Better supply chain practices as companies work in co‐ordination.

Increase the period for which the organization has a competitive advantage

Increase the period brand equity in the sustainable company. Compliance leads to legitimacy which extends the ‘license’’ to operate.

Lower cost of capital Investors perceive lower risk in companies that are compliant with ‘best practice’ governance regulations.

“A key aspect of the technological competency to develop and adopt eco‐innovations and use

technological opportunities offered by the market depends on the creation of relationships and the

formation of strategic alliances with actors across the production chain (costumers or suppliers) and

on the use of collaboration networks with research institutions in order to outsource the acquisition

of knowledge needed for the innovation process. Engaging in collaboration and informatios flows is

thus crucial to eco‐innovate...”

(Eco‐ Innovation: when sustainability and competitiveness shake hands”, chapter 3)

“A Systematic Approach to Supplier Partnership We developed a systematic approach to determine

which suppliers had the capability and the passion to partner with us in pursuit of our sustainability

goal. In many cases, we were asking our suppliers to completely change the way they manufactured

their product, ranging from the raw materials they used to the type of energy they powered their

plants with.”

(“How Interface Innovates with Suppliers to Create Sustainability Solutions”, in Wiley Inter Science)

“WHY ARE PRODUCERS TAKING BACK CARPETS? A number of factors seem to be driving the carpet

take‐back initiatives in the United States: profit; marketing; increased demand; preempting

legislation; and the example of Inteface” (from“Carpet Take‐Back:EPR American Style”)

Bibliography:

The convictions of GDF Suez in http://www.gdfsuez.com/en/commitments/sustainable‐urban‐

development/sustainable‐urban‐development/.

McDonough, W., Braungart, M. “Cradle to Cradle: remaking the way we make things”, 2002. The

“close loop” technical life cycle system assessment.

Hawken, P., Lovins, A, Lovins, L. H. “Natural Capitalism: creating the next industrial revolution”, 1999.

The “move to service‐flow business model” major shifts on business practices.

GreenBlue + Summit Foundation, 2006. The “type 1: Integrative Projects” systemic ambitions from

the report Design & Sustainability; Opportunities for Systemic Transformation.

CSR Europe report “Valuing Non‐financial Performance: A European Framework for Companies and

Investors Dialogue”, 2008. “The drives of values and performance through sustainability diagram”.

Hermosilla, J.C., Gonzalez, P.D.R., Kõnnõlã, T. “Eco‐ Innovation: when sustainability and

competitiveness shake hands”, 2009. Chapter 3, the “engaging in collaboration and information

flows” firm skills requirements.

Nelson, E. “How Interface Innovates with Suppliers to Create Sustainability Solutions”, Wiley

Periodicals, Inc. Published on line in Wiley Inter Science (www.interscience.wiley.com) Global

Business and Organizational Excellence, 2009.

Fishbein, B. K.“Carpet Take‐Back:EPR American Style”. The sections “Recycling by Fiber Producers”

and “Recycling by Carpet Mills”. ENVIRONMENTAL QUALITY MANAGEMENT, John Wiley & Sons, Inc.,

2000.

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