Chapter8_SBM_F_2023.pdf

Chapter 8: Sustainable Innovation Sustainable Business Management Sustainable Innovation - Introduction • Some sustainable solutions are straightforward and known: • Use of sustainable energy over fossil fuels • Replace plastic packaging with biodegradable alternatives to reduce waste è These so...

Chapter 8: Sustainable Innovation Sustainable Business Management Sustainable Innovation - Introduction • Some sustainable solutions are straightforward and known: • Use of sustainable energy over fossil fuels • Replace plastic packaging with biodegradable alternatives to reduce waste è These solutions enhance eco-efficiency in existing practices • Achieving true sustainability requires: • Different thinking and approaches • New ways to fulfill customer needs in processes, products, and services è Sustainable innovation Sustainable Business Management The pace of innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. (Wikipedia, 2023) 1. The future is no longer an extension of the present (and past) (Gerd Leonhard) • We can no longer rely on knowledge and expertise of the past to predict the future • All businesses are forced to innovate or they will be outpaced by new players on the market • New technologies are growing exponentially (AI for example) Sustainable Business Management The pace of innovation • Businesses need to change their business models to keep up • Join networks and create partnerships to be able to keep up to date with knowledge and expertise • Decisions are no longer made based on experience but based on simulations • KPIs for leaders need to change from valuing knowledge to valuing vision and agility • Ethics and privacy become more important than ever 2. Jumping to the next curve (Guy Kawasaki) • • • • True innovation happens when the playing field is redefined Example: music business Truly changing customer experience New approaches to product development and innovation Sustainable Business Management The pace of innovation 3. The “Why” (Simon Sinek) • Fulfil a fundamental need in a different way • Innovate on the reason why you offer a product • A car manufacturer needs to offer mobility • Knowing the “why” of your business will help you communicate with the customers of the future Sustainable Business Management The pace of innovation • Innovating the “What” • Creating a new product is what most companies do • • • • New version of an existing product: new BMW 3 model New product to fulfill existing needs: coke zero New service because of a new product: insurance for digital steps … • The assumptions stay the same, the product is not fundamentally changing anything Sustainable Business Management The pace of innovation • Innovating the “How” • Not only innovating the product, but also the way it is created or presented to the customer • Hello Fresh: selling ready-made meals with the pleasure of cooking your own meal • Uber: getting a taxi in an easier, more accurate way • Changing assumptions: • People don’t mind cooking themselves, they just want it easy and already prepared • People don’t mind to pay a stranger for a taxi fare Sustainable Business Management The pace of innovation • Innovating the “Why” • Fundamentally changing the way we offer products and services • Offer mobility, not cars: Poppy, Bird, Tesla,… • Offer a home, not a room: airBnB • Offer convenience, not products: Amazon • If a company innovates on the reason that they are offering a service or a product, no old assumptions are valid and innovation can be truly disruptive Sustainable Business Management Disruption • Big companies that have been succesful for years seem to be outrun by new entrants on the market that have a solution that is more adapted to current needs • Established companies tend to stick to their old ways of doing things and are replaced by a newer, more agile competitor Sustainable Business Management Disruption • Disruption is often accompagnied by a paradigm shift • When we come up with new ideas, we use a fixed set of assumptions to come to an optimal solution • When the assumptions change, we can come up with a new solution that is revolutionary è Paradigm shift • Examples: shift from ”physical” music to ”digital” music • Walkman è CD è MP3 è Streaming (ipod/itunes) Sustainable Business Management The prerequisites for sustainable innovation • Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services • For innovation to be sustainable, the changes need to result in a more sustainable product or service offer, or in more sustainable processes and governance • Transformation at organisational and/or strategic level • Shift from profit creation to value creation • Thorough stakeholder participation • Supportive regulatory framework Sustainable Business Management The prerequisites for sustainable innovation • Types of sustainable innovation 1. Profit model (Value model) • Changing the business model 2. Network • Use the strenght of its network to innovate (ecosystems) 3. Structure • Structuring the organisation to create value Sustainable Business Management The prerequisites for sustainable innovation • Types of sustainable innovation 4. Process • Innovate core processes, directly linked to the product or service 5. Product performance • Improved or completely new product 6. Product system • Providing new and innovative options to the customer to generate business Sustainable Business Management The prerequisites for sustainable innovation • Types of sustainable innovation 7. 8. 9. Service • Ensure that the product will last longer through service Channel • Delivery methods of the product and services Brand • Innovate in communcation and branding 10. Customer engagement • Enriched customer-company relationship (stakeholder engagement) Sustainable Business Management The prerequisites for sustainable innovation • Sustainable innovation needs a systemic approach • Not just in one area • True sustainable innovation does not happen in one department or even company Sustainable Business Management The impact of digitalisation on our economy - History • In the last 2 centuries, we have experienced 3 ”revolutions” • The first revolution: industrial production due to water and steam power – lasted a 100 years • The second revolution: uptake of electricity and the creation of electrical appliances – lasted 50 years • The third revolution: the use of computing and automatization to increase productivity – lasted 25 years Sustainable Business Management The impact of digitalisation on our economy - History • Today, we are in the middle of the fourth revolution or the digital revolution Sustainable Business Management The impact of digitalisation on our economy - History • Every revolution knows 3 stages: pre-age, mid-age and post-age 1. The pre-digital age • Devices had just 1 function: a camera, a radio, a TV,… • No software updates • Everything was physical: photos, cars,.. è We owned a lot of things Sustainable Business Management The impact of digitalisation on our economy - History • Every revolution knows 3 stages: pre-age, mid-age and post-age 2. The mid-digital age • Products became digitized: photos, DVD, online phone book,… • Same version of offline content was available “online” • Everything became more connected • The “middle-man” was cut out: travel agent, record label, insurance agency,… è Confusing times: different systems exist (communication channels, payment options,…) Sustainable Business Management The impact of digitalisation on our economy - History • Every revolution knows 3 stages: pre-age, mid-age and post-age 3. The post-digital age • Re-thinking the process instead of adding technology to existing systems • Not build robots that can lay bricks but come up with a new building system • Not a thermostat that you can program but one that makes your house energy-efficient • Not a digital boarding pass but a face recognition to enter the plane èPeople will not think about digital anymore, it will be as logic as oxygen or electricity Sustainable Business Management The impact of digitalisation on business 1. The disappearance of the middleman • Everyone can be online and can access all products and services that are offered by different companies • Travel agents, hotels,.. 2. New types of businesses/services emerge while traditional ones dissapear • • • • Being online has created many opportunities Big companies can no longer rely on their knowledge and expertise New companies can enter the market Online presence needs to be managed Sustainable Business Management The impact of digitalisation on business 3. Companies need to rethink their products and services • New solutions are needed that are better adapted to the digital environment • Companies that fail to do this, are pushed out of the market • Mobile banking 4. Companies need to rethink their way of organising supporting processes such as marketing, sales and HRM • Supporting processes will also be digitalised • Personalised marketing, online sales, online recruiting Sustainable Business Management The impact of digitalisation on business 5. New skills are needed in the workforce • Digital skills become more important • As AI rises, specific “human” skills such as creativity and team work will become highly valuable • As IT becomes part of the business instead of a supporting process, every employee needs to be able to offer this digital experience • Several jobs will be taken over by AI and automation in the (near) future Sustainable Business Management The impact of digitalisation on business 6. The cost of digitalisation has increased • Customers expect a 99,99% uptime so redundancy systems have to be in place • “Order now, deliver tomorrow” leads to the need of large warehouses to be able to deliver out of stock • Skilled employees are hard to find so often expensive external consultants are hired • For many companies, transformation is needed! • Come up with simple solutions that work as the customer does not care about the technology behind it • Do not digitalise old solutions, but come up with new ones • Digitalisation also means carbon emission and energy use! • The world’s ICT accounts for 2,5% of global emissions Sustainable Business Management The future of digitalisation – A look into the future 1. Humanity becomes even more important • Technology has helped us to express our humanity even more • Social media • Personalized services and products (spotify, airBnB,..) • Increased mobility to discover the world • How will we balance AI and humanity? 2. Looking into the future is more important than ever • Data science can predict things based on what we already know but true innovation is based on what we don’t know • Trends have countertrends and here lies opportunity Sustainable Business Management The future of digitalisation – A look into the future 3. No technology evolves on an island • • • • The technology of self-driving cars has a lot of consequences (see case) The existence of the smartphone created emojis Future of travelling when VR technology becomes of high quality? Impact on society when robots do our jobs? 4. Interaction with computers will become seamless • IOT will provide computers with a lot of data • “Thinking” something will be enough Sustainable Business Management The future of digitalisation – A look into the future 5. Technology will use predictions to make human life easier • • • • Google “remembers” when you drive to work Smart fridge will tell the store what you would like to order Spotify chooses the music depending on the time, weather, season,… This also leads to challenges as AI will know a lot about us 6. Privacy will be a trade • • • • Not governments but companies will guard our data Providing data will help to make better decisions Providing data will create better experiences Digital pollution has to be avoided Sustainable Business Management The future of digitalisation – A look into the future 7. Digitalization will change society • Technical experts will rule the world – balance between digital skills and people skills • Extremism will be more frequent due to the personalized way people receive information • Inequality will rise even more • AI will broaden and challenge our horizons Sustainable Business Management Artificial Intelligence • What is AI? ‘the field of computer science dedicated to solving cognitive problems commonly associated with human intelligence, such as learning, problemsolving and pattern recognition’ (Amazon) • This definition sees AI as a way to enforce the strengths of the human brain, but many tech companies see AI as a way to create unique capacities that are specific to an artificial brain (calculation, recognise patterns,…) Sustainable Business Management Artificial Intelligence • AI is no longer science fiction Sustainable Business Management Artificial Intelligence – Machine Learning • Teach a program or an algorithm to behave in a certain way • Example of the cats • Problems with machine learning: • • • • We don’t know what it learns Good results can be the outcome of bad decisions It’s based on data you have given it so if the data was biased, so is the machine It does not have common sense so it can not decide what to do with unknowns Sustainable Business Management Artificial Intelligence – Conversational AI • Conversational AI • Chatbots, messaging apps,… • Used to automate communication and improve customer experiences • Used by Facebook, recruiting agencies and Google home • Using chatbots? • Decide on your target audience: for some people personal contact is important • Improves the reaction speed towards your customers • Careful implementation: nothing is more frustrating than a chatbot that repeats the same questions all the time Sustainable Business Management Artificial Intelligence – Augmented Intelligence • Augmented Intelligence? • Using AI to enhance the human intelligence rather than replacing it • Using AI to make better decisions, having insights in complex systems,… • In an extreme view: merge man and machine • Neuralink: company founded by Elon Musk to create the first implantable brain-computer interface • Focuses on developing medical devices for paralysed people Sustainable Business Management Artificial Intelligence – Generative AI • AI that uses algorithms to generate new data • Deep learning: type of machine learning that uses neural networks to process and analyse data • ChatGPT is the most known example of generative AI • Can be used for research, writing, programming… • ChatGPT also have some challenges • • • • Bias: if the datatset contains biased language, the generated data can also contain bias Inaccuracy: responses are based on patterns and associations Lack of Emotional Intelligence Overreliance on technology: lack of critical thinking and diminished ability to communicate Sustainable Business Management Artificial Intelligence – Generative AI • ChatGPT is the most known example of generative AI • Can be used for research, writing, programming… • ChatGPT also have some challenges • Ethical concerns: privacy, data security, potential misuse (generation of fake news) • Language made humanity evolve towards a society • The use and impact of generative AI is bigger than anything before • Use of a calculator • Suicide • Ethical debate is necessary • Open letter • Inequality, future life Sustainable Business Management Artificial Intelligence – Human-Level AI • Human-level AI (HLAI)? • Will AI become as smart or even smarter than humans? • 50% of the people in the field think that it will happen in the next 40 years (A survey conducted by Katja Grace in 2022) • No consensus if it will happen or when • Many countries are working on a HLAI because the first one will have a huge advantage Sustainable Business Management The link between sustainability and digitalisation • Creating digital value can both create and erode social value • Digitalisation can lead to more free time and offer solutions for climate change, hunger, poverty,… • Digitalisation can also lead to more inequality • Digitalisation will lead to even more efficiency • Better use of resources • Less waste as problems can be monitored more effectively • Change the idea of the 40h workweek Sustainable Business Management The link between sustainability and digitalisation • Data can be used to measure pollution, acid levels,.. on a new level • Bright minds across the globe can connect • We can quantify all planetary boundaries • Digitalisation can be used to spread education • Digitalisation can even help to become more human • More spare time • We can connect more easily with friends and family • It can improve our health Sustainable Business Management Case: Self-Driving Cars (p.256-257) • What assumptions need to change for the self-driving cars to be implemented? Are there other prerequisites? • What would be the impact of the new mobility ecosystem as described above on the economy (existing businesses), society and the environment? • The current car companies will have to re-invent themselves. If you were the CEO of BMW, what would you do to stay in business? Sustainable Business Management