Sustainable Innovation

It may have been a long time coming, but business is embracing the opportunities that sustainability and design have to offer—and business schools are rising to the challenge.
Sustainable Innovation

I had what I call my “Drucker moment” in March 2003, when I had my last conversation with business visionary Peter Drucker. I visited his home to ask his advice regarding a new research program on social responsibility that we were launching at Case Western Reserve University’s Weatherhead School of Management in Cleveland—a program that would become the Center for Business as an Agent of World Benefit (B.A.W.B.).

Excited and passionate, I talked to him about the moral argument for social responsibility; I shared inspiring stories of business acting as a force for achieving peace and eradicating extreme poverty. I argued that our research would answer the perennial question, “Can social responsibility also be profitable?”

Drucker, then 93, smiled and laughed at my misdirected enthusiasm—he told me I was asking the wrong question. It’s not whether social responsibility can be profitable to business, he said, but rather how profitable business can make social responsibility. That day, he declared to me something we should all remember: “Every single social and global issue of our day is a business opportunity in disguise.”

More businesses are now discovering the truth of Drucker’s statement, and as they do, business schools also are taking giant leaps in promoting sustainability. More programs are teaching socially responsible business leadership, driven, in large part, by three pivotal ideas:

  • Future business schools will look more like design schools—alive with design studios, interdisciplinary teams, and rapid prototyping—where managers act as designers who recognize disruptive, unexpected innovation opportunities.
  • Management is a noble profession that could be the decisive player in the world’s massive transition to a sustainable economy.
  • Sustainable value creation is the business opportunity of the 21st century.

More important, these schools are realizing that there is much to be done at the intersection of management education, sustainability, and design (See “What Can B-Schools Learn from Design?” below). The concept of sustainable value provides business schools with a unifying ideal and a much needed vision of progress. It is a new vision for management education, a field that former AACSB president Scott Cowen once said is still “in search of its soul.”

A Great Time for Business

What a great time to be a student—or a professor—of management! Factories are being designed that return more energy to the grid than they use. Microenterprise strategies are eradicating poverty through profitability. Supply chains are getting greener, and venture capitalists are pouring billions into alternative energy sources such as wind and solar. Breakthroughs in sustainability are happening in every industry: LEED-certified buildings; plug-in hybrids; organic foods; carbon offsets; nano-solar startups.

What a great time to be a student—or a professor—of management!

Sustainability, in fact, has swiftly become mainstream. Retail giant WalMart is advancing sustainable value creation across multiple industries, from the design of sustainable fisheries and farming to the advancement of organic apparel to the greening of the electronics industry. Its CEO, Lee Scott, has noted that the company intends to completely eliminate waste in its operations. Consulting firm McKinsey & Company has created a new practice in the areas of climate change, carbon, and social impact management. And Toyota, says its president Katsuaki Watanabe, plans to design “a vehicle that purifies the air we breathe.”

Students spontaneously shift their attention from the question ‘What do we want?’ to ‘How do we do it? How do we turn the social and global issues of our day into bona fide business opportunities?’

A few short years ago, each of these developments would have been scoffed at, at least from an oversimplified perspective of shareholder value or profit maximization. Today, we are finding sustainable value leaders emerging as the top-rated stars in every industry.

In October 2006, the United Nations Global Compact and the Academy of Management partnered with Case Western Reserve University to establish The Global Forum for Business as an Agent of World Benefit. The B.A.W.B. Global Forum brought together more than 1,000 of the world’s most visionary business executives, management scholars, policy makers, and young student leaders. It was a remarkable summit, which launched the global initiative creating the “Principles for Responsible Management Education” (see “The PRME Essentials,” page 18).

On the second day of the forum, we asked people to step beyond today’s innovations to imagine their ideal world of 2020. They envisioned a world that:

  • has created a bright-green restorative economy that purifies the air we breathe.
  • has eliminated the waste and toxic byproducts.
  • has eradicated extreme poverty and preventable disease.
  • is powered through renewable energy innovations.
  • has made empowered prosperity accessible to everyone in the world.
  • is supported by positive market incentives aligned with the long-term social good.
  • has eliminated “perverse incentives” that work against not just society, but business itself.
  • has inspired a corporate citizenship movement, which in turn has united sustainable design and business strategy into a positive race to the top.
  • is a globally inclusive system that respects and replenishes the health of people, diverse communities, and the wealth of nature.
  • has built its economy on a network of institutions that are trusted to elevate, magnify, and refract our highest human strengths into the world.
  • celebrates those who create sustainable value and global solutions.

In many ways, this vision reflects an unprecedented and increasingly shared global vision, one that is uncoordinated but emerging everywhere. But how can we achieve it?

In a nutshell, management will help us achieve it—the management of innovation.

An Invitation

The Second Global Forum for Business as an Agent of World Benefit, held June 3 to 6, 2009, will cover topics of sustainable design and explore the theme “Managing as Designing in an Era of Massive Innovation.” Visit www.worldinquiry.org for information about its call for papers and the list of speakers, which includes designer William McDonough and visionary economist Jeffrey Sachs.

From “What?” to “How?”

In each of my classes, I ask students to reflect on and improve the 2020 scenario envisioned at the B.A.W.B. forum. Invariably, students spontaneously shift their attention from the question “What do we want?” to “How do we do it? How do we turn the social and global issues of our day into bona fide business opportunities?”

It’s a new question. It’s loaded. It suggests that adopting sustainable practices is not an obligation for businesses—it’s a contemporary differentiator, a foundation for success. It promises to lead businesses to surprising new discoveries, stronger profits, and greater significance to society.

Recently, a group of Weatherhead students and I worked with a local Fortune 500 company to hold a 300-person Appreciative Inquiry Summit on “the ten largest global problems facing humankind.” Machine operators, C-suite executives, customers, and suppliers went to work, asking important questions: How can we use the lens of sustain¬able value creation to spark innovation in new products and operations, open new markets, ignite customer passion and loyalty, energize an entire workforce, accelerate learning, build better supply chains, reduce risks? How can we radically bring down energy costs, strengthen brand loyalty, and generate higher market cap?

Participants prototyped and showcased game-changing innovations—everything from a fuel-cell hybrid truck to factories designed to achieve radical increases in resource conservation and energy productivity. Today, this company has what it calls “the innovation room,” a space designed to encourage collaboration and inspire multistakeholder innovation.

It is essential that we enable our young people to see themselves as participants in one of the most creative episodes in management history.

I believe that students and faculty in business school classrooms and laboratories everywhere should be engaging in this kind of process, designing for a sustainable world. As Drucker noted, management’s essence is all about directing vision and resources toward inspiring the strongest joint performance and achieving the greatest results. Think of the Marshall Plan or the global eradication of smallpox or John F. Kennedy’s call to put a man on the moon. Management’s greatest moments are when the call to collective action is clearest—when we turn our attention from the question “What could we…?” to the question “How might we…?”

Our Finest Hour

Which brings us back to what Drucker said to me in 2003: “Every single social and global issue of our day is a business opportunity in disguise.” This statement leaps over and completely transcends “the great tradeoff illusion,” which holds that socially responsible firms must inevitably sacrifice financial performance. It reunites management strategy and social responsibility into a powerful and integral whole. Most important, it points to opportunities that mutually benefit society and business.

More than 20 years ago, my colleagues and I predicted that sustainability might well transform management education more than anything that has come before. We wrote about its promise to change how we teach accounting, strategy, marketing, organizational development, operations, economics, and information systems.

It took a bit longer than we had anticipated, but in 2008, we are here. Business has the technologies to redesign the world energy economy and stabilize climate change. It has the capacity to eradicate extreme poverty within a generation or two. It has new, emerging approaches to turn all of these issues, and many more, into business opportunities for tomorrow’s industry leaders.

After nearly 30 years as a management educator, I have never seen a time when our students, corporate partners, and faculty have been so excited. Management education is on a world stage and has an important role to play. Millions of students graduate annually from our undergraduate, MBA, doctoral, and executive education programs. These students will make billions of decisions each day. As business educators, our influence on those decisions is huge.

Teddy Roosevelt once said, “Our chief usefulness to humanity rests on our combining power with high purpose.” In my view, this fundamental combination is the goal of business schools today. It is essential that we enable our young people to see themselves as participants in one of the most creative episodes in management history. We can instill in them an overarching perspective and sense of purpose in relation to the sustainable value revolution.

We are on the eve of management education’s finest hour.

The Manager’s Design Library

A growing genre of management books is emerging to help business managers—and faculty—learn ways that design concepts can help them envision, create, and innovate within an increasingly uncertain and dynamic world:

Managing as Designing by Richard Boland and Fred Collopy, 2004

Artful Making: What Managers Need to Know About How Artists Work by Robert Austin and Lee Devin, 2003

Discovering Design by Richard Buchanan and Victor Margolin, 2000 

Designing Information and Organizations with a Positive Lens by Michel Avital, Richard Boland, and David Cooperrider, 2008 

Sustainable Value by Chris Lazslo, 2008

Appreciative Inquiry by David Cooperrider and Diana Whitney, 2005

David Cooperrider is the Fairmount Minerals Professor of Social Entrepreneurship at the Weatherhead School of Management, Case Western Reserve University, in Cleveland, Ohio.