Big business’s big innovation problem
To drive the environmental change the planet needs, industrial capitalism must transform itself, radically if not necessarily rapidly. Disruptive, breakthrough innovation is needed, on a mass scale. Government is failing us. Can business step up?
Innovation is on my mind because I’m just back from the GreenBiz Innovation Forum, a two-day event devoted to “sustainable innovation.” The San Francisco confab brought together smart and dedicated business people who engaged in lots of stimulating conversation and did some fun stuff—like trying to build a tower out of uncooked spaghetti, tape and a marshmallow. There’s video, photo and print coverage here.
I came away wondering whether the emerging orthodoxy of green business – one that is willing to settle for incremental changes by big companies, and clever but insubstantial breakthroughs by small ones—is going to get us where we need to go.
Procter & Gamble sets “carbon intensity” targets, meaning that it will produce its products (Tide, Bounty, Cascade, Crest, etc) with less energy. But because of the company’s growth imperative, it will pollute more, not less, in absolutely terms. [See P&G: A bold green vision but...]
Stonyfield Farm devises a corn-based yogurt cup, which gets us closer to a zero-waste, cradle-to-cradle consumption model. But the bigger challenge is to get petroleum out of cars, trucks and planes, not yogurt cups.
These initiatives deserve applause, and their stories are worth sharing. But let’s not fool ourselves into thinking that they are the kinds of innovations that will deliver the environmental change we need.
The GreenBiz event was a reminder that big, multibillion dollar corporations aren’t good at disruptive innovation, even when they try. They don’t attract the right people; inventors and creative thinkers are repelled by cultures with lots of meetings, process, politics, budgets and bureaucracies. Big companies are slow to move. They aren’t about having fun—and as Internet mogul Tim O’Reilly noted in a lively and provocative talk at GreenBiz breakthroughs are often driven by people (the Wright brothers, the hackers who started the computer revolution, the Google guys) who want to have fun or make something cool.
Even when facing existential threats, big companies don’t cannibalize themselves, as Clayton Christensen has written. Newspapers didn’t invent Craiglist, which destroyed their classified business. The record industry tried to fright iTunes. My cool new “barefoot” running shoes (below), which challenge the business of conventional running shoes, come from Vibram, an upstart, not from Nike or Adidas. Ford and GM didn’t invent Zipcar, and BP ain’t going beyond petroleum.
I moderated a panel with Adam Lowry, the co-founder of Method, who has thought a lot about this. It’s not merely that big companies aren’t very good at disruptive innovation, he argues, but that they resist radical change. In one of Method’s businesses, laundry detergent, P&G, the market leader, was the last to come along with smaller jugs and compacted detergent. [See The Future of Laundry Detergent.] Walmart insiders have told me that P&G was reluctant to shrink its Tide packaging.
I don’t mean to pick on P&G, which has set some bold long-term sustainability goals and is doing what it can, within limits, to become more “green.” The trouble is, the status quo is OK for P&G, and maybe even very good for P&G.
“It’s plain to me that market leaders have an inherent disincentive for radical innovation,” Adam says. “Disruptive new ideas require a company to cannibalize itself. That’s incredibly risky for a business that has incumbency.”
By contrast, startups are good at innovation. That’s their reason for being. But while Method (or Seventh Generation or Stonyfield) can thrive as businesses without generating billions of dollars of revenues, they can’t move the needle on issues like climate change, water, air pollution, ocean acidification or toxics without getting much bigger.
That was one reason why my friend and neighbor Seth Goldman agreed to sell his startup Honest Tea to Coca-Cola. With more distribution and marketplace clout, he can have a bigger impact.
This space where big and small companies come together–either literally or through investments or collaborations–may turn out to be the most fertile ground for scalable, sustainable innovation.
During the GreenBiz event, Unilever’s Phil Giesler and Andrew Williamson of Physic Ventures, a venture capital fund whose strategic partners include Unilever, PepsiCo and Humana, described their work, which involves discovering and funding small, sustainable startups. One such startup, called Novomer, is developing plastics and packaging made in part from carbon dioxide, a fascinating twist on the conventional idea of carbon sequestration, which requires burying CO2 underground. This model of big companies funding startups, and driving them to scale, is a very promising one.
Other examples: GE’s work with venture capitalists to create an energy-smart grid innovation challenge, Coca-Cola’s partnership with Recycle Bank, GM’s investment in Coskata, Chevron and Unilever investing in and working with Solazyme. [See Gee whiz, algae!]
And then there is the occasional big company that is willing to take a big risk. At the GreenBiz event, Jim Hall, managing director of Waste Management’s green squad, talked about how the giant trash hauler is reinventing itself: While it still dumps lots of garbage in landfills, it is investing in recycling, composting, turning waste to energy and even helping its customers prevent waste by buying fewer materials or becoming more efficient. It’s doing so under pressure from customers like Walmart, P&G and Toyota that have embraced the goal of zero waste, but still.
The challenge for those of us who follow green business – reporters, investors, NGOs and academics – is to try to distinguish between innovations that matter and those that don’t. We don’t want to let the perfect become the enemy of the good, but we do want to be honest when good isn’t nearly good enough.
Other Posts by Marc Gunther
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