2.3 Developing next-practice sustainability strategy

Next practices, those practices that only exist in our imagination, can change existing paradigms. To develop innovations that lead to next practices, entrepreneurs and innovators must question the implicit assumptions behind current practices. This is exactly what led to today’s industrial and services economy.

Can we create a carriage that moves without horses pulling it? Can we fly like birds? Can we dive like whales? These questions will once have been asked. By questioning the status quo, people and companies have changed it. In like vein, questions must be asked about scarce resources: can we develop waterless detergents? Can we breed rice that grows without water? Can biodegradable packaging help seed the earth with plants and trees? Sustainability can lead to interesting next-practice platforms.

Successful business models include novel ways of capturing revenues and delivering services in tandem with other companies. Developing a new business model requires exploring alternatives to current ways of doing business as well as understanding how companies can meet customers’ needs differently. Entrepreneurs and managers are learning to question existing models and to act to develop new delivery mechanisms.

As companies become more adept at this, the experience will lead them to the final stage of sustainable innovation, where the impact of a new product or process extends beyond a single market. You will now consider how to develop your next-practice sustainability strategy in Activity 6

Figure 2 Sustainable strategy

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The figure is a circle depicting the four perspectives or dimensions of a sustainable strategy. These are economic perspective, market perspective, social perspective and environmental perspective, all of which are presented around the inside of the circle with sustainability strategy at the centre.

Figure 2 Sustainable strategy

Activity 6 Creating a next-practice platform

Timing: Allow about 20 minutes

Listen to the following audio in which Richard Goodhead explains how Rolls Royce connect societal challenges to sustainable innovation. You will notice that it is an extended version of part of the audio which you first listened to in Activity 4. Then answer the following questions on next-practice.

Download this audio clip.Audio player: b327_openlearn_aug002.mp3

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Transcript

RICHARD GOODHEAD

Rolls Royce plc effectively provides power for use in land, see and air, whether that’s in civilian aircraft use, defence use, marine use, power generation on land, or nuclear power, but specifically my area of the business is related to civil aerospace so that’s providing engines that power aircraft that are used in commercial use, whether that is for airlines or in the relevant business aviation.

What we're looking at very actively are increasing the level of choice and flexibility in the services that we offer to match the customer's needs as they evolve.

The other thing that we are looking to do is expand our scope of service provision beyond what has been traditionally narrowed, if you like, to maintenance of the engine. So preventing unplanned maintenance, making sure the engine works on the wing and if it does, as it will, require maintenance it's done in a planned way that minimises disruption to the airline. We can expand our scope of services to not only look at maintenance so that i.e. the engine doesn’t break, but we can also look at making sure the engine is more available, i.e. it's not got niggling problems with accessories, we could predict them and fix them ahead of time. The other thing that we can do is expand our scope of services into the efficiency, not just is that engine not broken but working well, but is it working as efficiently as it possibly could and in this world it means burning the least fuel, and burning the least fuel means it's having the least environmental impact. So these are all about addressing these challenges and meeting the needs not only of the customer themselves but also, arguably, society.

Once you’ve made the assumption, in terms of societal impact, that air travel is a good thing for society, some people believe that, some people don't. Obviously, I'm biased, I believe it is, I think it's a great economic contribution to society and it connects people, not just for business reasons, but for a whole host of other reasons. People like to travel to see each other and it's that person to person contact that makes the world go around.

In providing the propulsion systems that allow aeroplanes to connect people and make the world a smaller place, then clearly we are meeting some societal needs but we have to do it in as responsible a way as we possibly can and, obviously, the way that aeroplanes are currently powered is through the use of fossil fuels, so to minimise that and make it as clean and efficient as possible is a goal that we've been striving for at Rolls Royce for many years, not least of which because it doesn’t only meet environmental requirements but because there's competition in our industry, the person with the most efficient engine usually wins so we, we've always spent lots of our research and technology investment on doing just that.

We're making sure that we are as sustainable as possible in terms of the use and manufacture of our products.

But in terms of other areas then clearly there's economic sustainability as well so that is about us being able to sell enough of our product but such that we can make enough profit that we can survive as a profit-making organisation - we aren't a charity, we are a business. And so to, the best way to do that, obviously, is to meet your customer needs more effectively than your competition and that’s the route to achieving that economic sustainability which actually is linked to the financial sustainability because being a public listed company we are floated on the Stock Exchange and, hence, we have to make sure that our shareholders see a good incentive to invest in us as a company.

Combine that with successfully selling our products to our customers and making sure they meet their needs, then that gives us adequate cash flow which funds the whole healthy cycle of investing the cash flow back into research that allows you to give you a better product which you sell for a better price, you get more cash ad infinitum.

And then last, but not least, organisational sustainability. Rolls Royce has grown significantly over the last 30 years from being, arguably, a solely British company that was selling to a restricted area of the market in terms of customers that have been for whatever reason more predisposed to choose a British product, to now a definite multi-national global company with customers all over the world. That degree of growth requires the organisation to grow with it, but in a lean and efficient way, and so there has been much effort and thought put into how we achieve that without growing uncontrollably.

From a Rolls Royce perspective the competition that we face is intense. When you consider that Rolls Royce, as big as we are, is effectively competing with, arguably, the biggest company in the world in General Electric, then that in itself clearly offers a whole host of challenges which means that adage of work smarter, not harder, and being agile, becomes really quite important.

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1. Create a next-practice platform for using the sustainable strategy diagram in Figure 2. For this, draw a blank diagram that has a shape similar to Figure 2 with clearly marked sections for economic, market, social and environmental sustainability. Next identify information from the audio about Rolls Royce which reflects each of these four components of sustainability to complete your figure. While this does not give you a definitive sustainable strategy of Rolls Royce, it provides an illustration of the types of information that constitute the sustainable strategy of an enterprise.

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2. Select an organisation of your choice and repeat the task in Question 1. This could be your own organisation (if you own one), the organisation you work for or one that you may have studied in other contexts.

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You will have written about your own specific example but one constant to bear in mind is that sustainability can lead to interesting next-practice platforms. One example written about in hbr.org [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] as far back as 2009, but which is only recently emerging, is at the intersection of the internet and energy management. It is called the smart grid – it uses digital technology to manage power generation, transmission and distribution from all types of sources along with consumer demand, with the aim of lowering costs as well as more efficient energy usage.

The concept has been around for years and the huge investments so far have recently made it a reality. The grid allows companies to optimise the energy use of computers, network devices, machinery, telephones and building equipment, through meters, sensors and applications. It also enables the development of cross-industry platforms to manage the energy needs of cities, companies, buildings and households. Technology vendors such as Cisco, HP, Dell and IBM have invested to develop these platforms, as have utilities like Duke Energy, SoCal Edison and Florida Power & Light.

Now complete Activity 7.

You will now look at how you can measure and evaluate the impact of sustainable innovation.