Next for Responsible Business: Operational Innovation
A 2011 Cone/Echo Global poll finds that more than 90% of the world’s consumers want businesses to launch “operational innovation for the greater good.” There is more to this than a company “cleaning up its act” by, say, reducing pollutants or protecting human rights in its supply chain. It is about a company using its know-how and leverage to develop new business practices that have a positive impact on the world.
Scan the annual award lists for CSR and sustainability, look at media coverage of companies in these regards, or view the videos that companies produce to tout their own bona fides as corporate citizens: the spotlight is typically on creative philanthropy, volunteerism, and cause marketing campaigns, on making products and services that are more socially relevant and responsible, or on reducing a firm’s carbon footprint.
While it may not be as flashy or mediagenic or so easily packaged in a self-promotion video, what the public really wants today is for companies to “change the way they operate.”
Follow Marks & Spencer’s “String”
Marks & Spencer (M&S) is leading a social revolution in the mundane world of operations. The U.K.-based retailer recently signed a deal with supply chain specialist Historic Futures that gives full “raw material to store” traceability on every single clothing and home product it sells.
The program, labeled “String,” makes it possible for the company to trace where and how every product it sells is made—from ingredients to processing through to packaging, transport, up to delivery in its warehouses or stores.
You may have read (or seen on You Tube) Pietra Rivoli’s revealing account of The Travels of a T-Shirt in the Global Economy. It is a tale about the exploitation of poor farmers and their land, as well as misguided tax breaks and protectionist trade policies, all of which are seemingly beyond the purview of retailers and out of sight from consumers.
Well, not now if you consider t-shirts sold by M&S. A cotton t-shirt from this retailer traces the full “string” of production, providing information on where:
- The cotton is grown,
- The yarn is spun,
- The fabric is produced,
- The fabric is dyed, and
- The shirt is sewn and finished.
And while M&S was the first retailer to commit to full traceability for non-food products, Wal-Mart, Levi Strauss & Co., and various product certification groups are on way as fast followers.
Lessons on Operational Innovation
The String Program is not a one-off for M&S. On the contrary, it is an outgrowth of a sustained commitment to operational innovation in the environmental and social arena. The story begins with the launch of Marks & Spencer’s Plan A in 2007 which heralded the company’s aspirations and commitment to become the world’s most sustainable retailer. In past columns, we have talked about how BHAG’s (Big Hairy Audacious Goals) stimulated the social and eco-innovations of GE (Ecomagination), IBM (Smarter Planet), and Unilever (Sustainability Living). The M&S story again illustrates the importance of a bold vision in jump starting innovation in companies.
Next comes the “hothouse” phase of innovation. Under Plan A, M&S launched over 100 projects to variously reduce waste, source more sustainably, establish fair practices with its business partners, and ensure the healthiness and safety of the products it purveys. To keep things cool and focused, the company also published goals and monitored progress on each of these projects. The goals were amended in 2010, based on past accomplishments and new challenges, and new targets are in place for 2015.
This has moved the company into a new phase—where social and eco-innovation are now part of M&S’s operating system. Consumers understand that the company is serious about its commitments to sustainability and will be accountable for its results—both the good and the less so. Partners, such as Oxfam that works alongside M&S in its recycling programs, are in it for the long-term. And employees know that innovation and accountability under Plan A are covered in their annual performance reviews.
Consumers, business partners, and employees everywhere are justifiably suspicious when companies jump on the sustainability bandwagon and issue “greenwashing” communications. M&S’s Plan A, by comparison, embodies a genuine commitment to continuous innovation and reinforces it through measurement, transparency, and accountability.
Elements in Innovation
When you look at the innovation engine in M&S, and in other companies that are “changing the way we operate,” some common innovation elements stand out:
- Bold. Inertia is the enemy of innovation. To breakthrough, companies need to make a strong commitment to the new—and to something purposeful and worthwhile. BHAGs are one motivator. As important are the personal commitments of top leaders and a strong, measurable stake-in-the-ground that says “we’re serious” about social and environmental performance. There is little strategic advantages today for small incremental changes in today’s highly charged and quickly changing marketplace. Bold leads and differentiates.
- Comprehensive. A program of social and eco-innovation cannot be launched in piece-meal fashion or conducted as a “trial.” Plan A of M&S takes a comprehensive approach, involving all areas of the business and deliberately thrusts the company into tough issues where half-measures and half-hearted commitment are guarantors of failure. Fragmented efforts are often sidelined by competing priorities and remembered as the “flavor of the month.”
- Incremental. That said, companies also err by taking on more than they can digest. Social and eco-innovation involves organization learning. It takes time to build the commitment and confidence to sustain a program of innovation and to develop the organization muscle to innovate continuously. Creating a sustainable supply chain is a complex undertaking and setbacks are inevitable. Innovation in this area is necessarily incremental and informed by missteps.
- Stakeholder Engagement. Social and environmental innovations cannot be achieved without deliberate linkages to and engagement with key stakeholders—including customers, suppliers and employees. A more bottom-up approach to innovation is especially important when it is customers, suppliers, and employees who will actually do the innovating!
- Transparent and Accountable. Finally, measurement of progress toward goals cements commitments and provides the information needed for a company to learn from its innovative efforts. Transparency helps ensure that companies practice what they preach.