The green imperative: innovation opportunity

Citation

Leavy, B. (2009), "The green imperative: innovation opportunity", Strategy & Leadership, Vol. 37 No. 1. https://doi.org/10.1108/sl.2009.26137aae.001

The green imperative: innovation opportunity

Article Type: The strategist’s bookshelf From: Strategy & Leadership, Volume 37, Issue 1

Brian LeavyAIB Professor of Strategic Management at Dublin City University Business School (brian.leavy@dcu.ie) and a Strategy & Leadership contributing editor.

The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World

P. Senge, B. Smith, N. Kruschwitz, J. Laur and S. Schley(Doubleday, 2008), 381 pp.

Few now doubt that we are facing a major and pressing challenge to protect our environment and preserve the conditions for life on Earth. Peter Senge’s latest book is designed to further heighten the sense of urgency, but also to offer hope and bolster our resolve. Incremental adjustments to the industrial model that has fuelled the process of economic development for more than two hundred years will not suffice. Revolutionary change is called for, “a collective awakening to new possibilities that will change “everything over time – how people see the world, what they value, how society defines progress and organizes itself, and how institutions operate.”

Time is of the essence, but the hopeful message in The Necessary Revolution is that the process of radical change is already underway and promises to become the next major fountainhead of innovation and new value creation, offering unparalleled opportunities to those individuals, organizations and economies most willing and able to rise to the challenge. GE is already one such organization. As CEO Jeff Immelt put it, “as an executive I was brought up to be totally suspicious of NGOs and the environmental movement” but in recent years “I started to see technology that I felt really, for the first time, didn’t make this about compromise, it made it more about opportunity. If we made the right investments in renewable energy, conservation, water desalination, then we could earn money and solve a societal issue at the same time.”

The central thesis of The Necessary Revolution is that a sustainable world will only be possible “by thinking differently,” with “nature, not machines” as our guiding inspiration. The systemic shift in thinking required “represents perhaps the greatest learning challenge humans have ever faced” and “will require extraordinary leadership from institutions of all sorts.”

Few are as well credentialed as Peter Senge and his associates to help in meeting such a challenge. Senge is widely known for his best-seller, The Fifth Discipline: The Art and Practice of the Learning Organization (1990), and he and his associates have since found a larger focus for their efforts: “For over a quarter of a century our work, first at the Massachusetts Institute of Technology and then through the Society for Organizational Learning (SoL) has involved helping organizations of all sorts to learn how to learn … For the past decade, however, we have begun to also see a larger answer: shaping a sustainable, flourishing world for life beyond the industrial age.”

The Necessary Revolution opens with a brief review of “how we got into this predicament,” where we are fast running out of the resources “that support our way of life, that support life itself.” The short answer is “our success, success beyond anybody’s wildest dreams.” In the context of human history, there is little doubt about the impact that the Industrial Revolution has had on material living standards in the advanced and developing economies across the globe. So it is “little wonder that the side effects of the Industrial Age success story” for so long were by and large “ignored.” However, the downsides have been accumulating over time: industrial waste; consumer and commercial toxicity; the depletion of both non-renewable resources (oil, gas, coal, minerals) and renewable resources (fresh water quality, top-soil, fisheries, forestry).

In spite all of the talk in recent years about a “new economy,” we have not yet progressed beyond the Industrial Age model. In fact, the last quarter of a century has seen the “most dramatic increase in industrial activity that the world has ever known.” Of all the environmental problems that the Industrial Age has brought, the one that is now delivering the biggest “wake-up” call is climate change. A key remedy is dramatic reduction in global carbon dioxide (CO₂) emissions, but current targets do not go nearly far enough. According to the authors, 60 percent to 80 percent reductions over the next two decades will be required to “stabilize CO₂ emissions” at levels that will minimize the treat of runaway “catastrophic consequences.” They label this “the 80:20 challenge,” and this is “the bell tolling the end of the Industrial Age.” Meeting it will require “changes in all the major global industrial systems: food and water, energy and transportation, and the global production and distribution of goods.” This will not happen without a “radical shift in the thinking that has made the industrial era so successful – and so disastrous.”

Faced with this, The Necessary Revolution reminds us that history has some important lessons to teach from looking at how once highly successful societies “all but disappeared within a generation because of environmental collapse” (For example, the Mayan civilization of Central America that fell victim to its own “slash-and-burn” agricultural techniques), while also examining how others managed to avoid a similar fate through finding solutions based on the ability to take a more systemic view of their problems (as illustrated by the approach that a 15th century rural Icelandic community took when facing acute over-grazing). The real threats of collapse “have more to do with denial” rather than “unawareness,” and the failure to take a systemic perspective. It is here that the authors invoke a very powerful metaphor often used by historians, and now increasingly part of the common lexicon – “the bubble.” During a period of expansion “two parallel realities develop, one inside the bubble and one outside. Both feel equally real to those who live within them,” and eventually “those inside the bubble become so absorbed by their reality that they literally can no longer understand the point of view of those outside.” As the authors see it, the Industrial Age is one such bubble. Because its expansion continued for over several centuries, it was easy to believe, by those within the bubble, that it would “continue forever.”

The Industrial Age is not ending because of any “decline in opportunities for industrial expansion.” It is ending because of the growing realization that the side effects “are unsustainable.” The authors point out that the Industrial Age bubble violates several major principles of the natural world:

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  For 2 billion years the main source of energy for life has been solar radiation – 90 percent of the energy within the Industrial Age bubble comes from burning fossil fuel.

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  In nature, most food is local – our food is rarely local (“the average pound of food travels some 2000 miles before being purchased by the American consumer”).

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  In nature there is no waste – the Industrial Age bubble generates enormous amounts of waste.

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  Nature favors diversity – the Industrial Age bubble has been a major force for homogenization – “destroying both biological and cultural diversity.”

So we now need to ask ourselves, “What would a way of thinking, a way of living, and ultimately an economic system look like that worked based on the principles of the larger natural world? And how do we create such a way of living in our organizations and societies, one step at a time?”

The authors believe that as more people begin to sense that the mounting sustainability crises that we are facing are interconnected, and once they begin to accept that “the deep problems that we face today are the result of a way of thinking whose time has passed,” they will also start to see the extraordinary opportunities for innovation.”

The Necessary Revolution draws on three primary case histories to illustrate how the sustainability challenge is already being addressed by those in the vanguard of global change. For most, “the endless litany of environmental and societal crises” can seem “overwhelming,” both “cognitively and emotionally.” In a chapter entitled: “Never doubt what one person and a small group of co-conspirators can do”, the authors relate the story of Per Carsted and the development of the Swedish bio-fuel sector.

A Swedish bio-fuel innovator

By 2007, 15 percent of all cars in Sweden were running on ethanol, up from just 2 percent in 2000, and today all Swedish motor manufactures now offer an ethanol-based range, including Scania, the largest truck manufacturer in Europe. Behind these statistics is a “timeless story of what historians call ‘basic innovation,’ fundamental changes in technology and organization that create new industries, transform existing ones, and, over time, reshape societies.”

Carsted, the owner of a large Ford dealership in northern Sweden, attended the Rio Conference in 1992, and quickly became absorbed in “big picture questions” about sustainability. Returning home, he asked himself, “What can one person do?” He found an answer when approached by a foundation for help in introducing enthanol cars into the Swedish market. But people said they wouldn’t work in Sweden, because the climate was too cold, there were no filling stations and there was no market. “No one had a clue about them in Europe, including Ford.” Carsted eventually found someone in Ford, Detroit in charge of a small “flexi-fuel” program, producing cars that could run on ethanol, gasoline or any blend of the two. His contact helped him to buy three such cars in 1995 and then 300 more. The Taurus was not the most suitable for the Swedish market, but it was the only flexi-fuel model available. Undaunted, he and a colleague from the Swedish Ethanol Development Foundation (later renamed the BioAlcohol Fuel Foundation) spent the next four years building up a buyers’ consortium of fifty municipalities, companies and individuals committed to buying 3000 cars. With these agreements in place, the next priority was to expand the number of ethanol filling stations. By 2002, they had 40 in the whole country, by 2004 they had 100, and by late 2007 there were 1000, which was 25 percent of the national network. As he put it, “the first 100 stations took ten years to develop,” whereas nowadays “we add 100 stations every three months!”

Carsted began his crusade when oil was still just $20 a barrel, but “existing market conditions had nothing to do with why we were doing this. Climate change was the really driving thing.” To keep the momentum going, Carsted looked around for one of the larger auto companies to take on the concept of the bio-fuel car as a strategic priority. It was not an easy mission. Eventually, he found the right allies in Saab, and in the marketing organization, not among the technical people. Saab saw the opportunity of moving early into the bio-fuel category as a potential competitive advantage. “You work with those who want to do this. You help them become winners, and they’ll help you achieve your objectives.”

Carsted didn’t stop at bio-fuel cars, but kept his mind and passion focused on the bigger picture, pursuing the goal of creating “the most environmentally friendly car dealership in the world.” This led to the creation of a block of businesses incorporating his dealership, a McDonald’s restaurant and a gas station, with interconnecting systems where the waste by-products of one could become a resource to another. For example, excess heat from the restaurant kitchen could be piped directly to heat the dealership and filling station (reducing the overall energy consumption of the integrated block by 80 percent compared with similar developments).

The two other featured cases tell the stories of the development of the LEED (Leadership in Energy and Environmental Design) rating system in the construction industry, and the “unconventional alliance” between Coca Cola and the World Water Foundation (WWF) to protect and preserve the world’s major fresh watersheds. The first is particularly significant because it is the story of the “realignment” of the industry that designs and constructs our building stock, residential and institutional, which is the greatest consumer of energy today, accounting for 40 percent of the total in the US and 60 percent globally (and responsible for almost twice the amount of CO₂ emissions attributable to the auto industry). The second exemplifies an exciting new phase emerging in the relationship between the corporate world and NGOs beyond a “philanthropic” connection to a real strategic partnership.

In all three stories the same essential patterns were seen to repeat themselves: thoughtful people see problems arising; they begin to understand how severe these problems are; the combination of deep concern and sense of possibility causes them to think differently; and different ways of thinking lead to different ways of acting. The cases illustrate how the effective leadership of systemic learning and change can be enhanced through mastery of three capabilities that have been core to the SoL work on organizational learning, and “form the underpinnings, and ultimately the tools and methods” for the fundamental shift in thinking now required. The three must be developed together for regeneration to be successful, and they are:

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  Seeing systems. In tackling the major environmental challenges that we face today, the important thing is not so much to be “comprehensive” as to be “systemic,” to “see the deeper patterns behind all these problems, which at first sight might seem unrelated.” Focusing on symptoms tends to lead to “shifting the burden” or seeing these issues as “someone else’s problem.” While systems thinking is “widely espoused today,” many organizations “lack the capacity” because they “lack the commitment to build the skills necessary and the tools to help them.”

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  Collaborating across boundaries. The “systems intelligence” needed to deal with the challenges we face as the Industrial Age comes to an end is “collective.” The convening skills – to be able to “get the system into the room,” and get all of the key constituencies working together and listening to each other effectively, seeing reality through each others eyes – are key.

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  Creating: beyond reactive problem-solving. Where problem solving is about “making what you don’t want go away,” creating involves “bringing something you care about into reality.” This is a “subtle, yet profound, distinction,” that the authors believe “will make all the difference in the future.” The “the shift from a reactive problem-solving mind-set to a creative one” is ultimately “all about inspiration.” More specifically, it’s about “taking nature as our primary source of inspiration.”

The Necessary Revolution is much more than just a further call to arms. The book provides practical guidance to those seeking to bring desired change about. Major sections are devoted to how to build the case for change within your own organization or domain, and how to go about developing mastery of the three core capabilities seen as crucial to success. All of this is supported with a range of tools and frameworks aimed at encouraging the emergence of potential leadership at any level. One that will be of particular interest to strategists is the Sustainable Value Matrix, designed to help companies see how their environmental strategies can be framed to help migrate them beyond a cost reduction and damage limitation orientation towards game-changing innovation and opportunity.

The late Eric Hofer once said: “In times of change it is the learners who will inherit the future.” Had he lived to read The Necessary Revolution, he might also have been moved to add, “it is the learners who will ensure there is a future to inherit.”

Survival response“According to archaeological evidence, we strayed from Nature with the beginning of civilization roughly ten thousand years ago. That quantum leap beguiled us with an illusion of freedom from the world that had given us birth … A wiser intelligence might now truthfully say of us at this point: here is a chimera, a new and very odd species come shambling into our universe, a mix of Stone Age emotion, medieval self-image, and godlike technology. The combination makes the species unresponsive to the forces that count most for its own long-term survival” – E.O. Wilson, Creation: An Appeal to Save Life on Earth, New York: Norton, 2006.