Sustainability-Oriented Innovation: The More the Merrier

This blog post is the third in a four-post series on Sustainability-Oriented Innovation (SOI). See the first post, “Sustainability-Oriented Innovation: A Bridge to Breakthroughs,” for our definition and overview, and the second post, “Why Sustainability-Oriented Innovation Is Valuable in Every Context,” for a discussion of different types of SOI and the ways companies are using it. Our work builds on Accelerating the Theory and Practice of Innovation by Jason Jay and Marine Gerard. In this post, we address the wide variety of roles for SOI, why complex challenges require diverse networks, and the idea of SOI centers of excellence (CoEs) and SOI communities of practice (CoPs) to facilitate the establishment of those networks. We hope to catalyze our idea of developing a global network of CoEs and CoPs at MIT’s upcoming Sustainability Summit.

It takes a combination of fortitude and ingenuity to tackle sustainability issues. Not only are sustainability issues technically complex, requiring a knowledge of systems thinking, they are also managerially and socially complex. Sustainability-Oriented Innovation (SOI) involves managing a diverse set of stakeholders often not associated with other forms of innovation. Because of this, SOI leaders may benefit from centers of excellence (CoEs) and communities of practice (CoPs) that will help navigate that complexity and stakeholder diversity.

The typical innovation process is driven by stakeholders seeking to solve a private problem. For example, key players in the high-frequency trading industry were the first to invest in new microwave technology that shaved 2.3 milliseconds off order-transmission time between New York and Chicago.1 That innovation gave these early adopters a tremendous competitive advantage over the rest of the industry. With the development of laser transmission a few years later, the industry’s technological arms race bolted forward again.2

The SOI process, however, is not only limited to private-problem stakeholders. Because it involves consideration of the social and environmental impacts of the innovation across its life cycle and its wider systemic effects, it also includes public-problem stakeholders.

Consider the example of 1366 Technologies, a company that aims to increase the efficiency of multi-crystalline solar photovoltaic (PV) wafer manufacturing. Their work targets a 50% reduction in the cost of solar wafers and reduction of energy use in manufacturing. This could dramatically expand the reach of solar PV technology and its ability to mitigate greenhouse gas emissions. An innovation like this yields public and private benefit, which means many more diverse stakeholders are involved. For 1366, this attracted $49M of non-dilutive capital from the U.S. Department of Energy, the Japanese and German governments, and large corporations, each of which came with its own strings attached.

SOI differs from conventional innovation because it addresses public problems as well as private problems. This dual-solution approach means that more stakeholders, challenges, and success factors are involved in the SOI process.

MIT startup Spoiler Alert illustrates why a wide array of stakeholders is necessary for solving big public-private challenges. Emily Malina and Ricky Ashenfelter were inspired to create Spoiler Alert because they understood that technology held great potential to solve America’s food waste problems.4 In this sense, they were Sustainability-Driven Innovators, motivated by a systemic problem.

Organizations like the Natural Resources Defense Council (public-problem stakeholders) had already helped identify and quantify the food waste challenge and opportunity. Indeed, in 2010, America threw away 31% of all its food, or 133 billion pounds.5 This figure has increased to about 40% each year.6 This translates to $161.1B and 1,250 calories per capita per day in lost dollars and in human energy, statistics that suggest a substantial opportunity for addressing both public and private needs.

Malina and Ashenfelter used their MIT and other proximate resources to launch a technology venture to address the problem. Although they had effectively identified the problem and need, they still needed to identify a starting point.

Help came in 2014, when the Massachusetts Department of Environmental Protection (MassDEP), another public-problem stakeholder, passed a commercial food waste ban. The ban affected 1,700 statewide supermarkets, manufacturers, distributors, and other commercial operators who were generating at least one ton of food waste per week.7

This new statewide regulation framed the public problem in concise and actionable terms and helped Malina and Ashenfelter narrow their focus. They knew they had to generate effective technology solutions that would solve the public problem and create a viable business, so they turned their attention to the food waste private-problem stakeholders in greater Boston. This would be their target market.

They began by prioritizing wholesale distributors and manufacturers by scale, location, and willingness to adopt new technologies.8 Then, they estimated how much they could save these companies in taxes by donating the food they would otherwise use for landfill.

They corroborated their findings with other studies that estimated how much revenue could be generated by diverting the spoiled food in new creative ways — like freezing leftover bananas and selling them for ice cream production, for example. These savings were in addition to the cost savings that could be generated by optimized hauling and by the additional revenue they anticipated from offloading surplus food to other commercial players, such as distilleries. They also knew that an online marketplace for surplus food would optimize efficiency for these private-problem stakeholders and create a compelling value proposition that the retail food industry could not ignore.

Guided by the EPA’s food waste hierarchy, Malina and Ashenfelter began to develop a delivery platform. They connected the generators of wasted food to their receivers — food banks, processors, and farms. After additional advice and validation from the vice president of the Greater Boston Food Bank and the former president of Trader Joe’s, they developed a mobile and web-based online marketplace. Although during the pilot phase their technology successfully redirected 10,000 pounds of otherwise wasted food to receivers, more research is required to determine whether the technology offers a profitable, scalable solution.

As needs are fulfilled and problems solved, SOI contributes to the sustainability-oriented transformation of society. The objective of the four major steps of the SOI process is to simultaneously solve public and private problems.

There are many cooks in the kitchen that can either steer it toward success or bog it down. Along with the public- and private-problem stakeholders described above, universities, nonprofits, suppliers, investors, the general public (through crowdsourcing), and accelerators and incubators, like MassChallenge, were all stakeholders in supporting the SOI process. Bringing together such diverse networks is no easy task and requires extraordinary patience and persistence.

Sometimes innovators — even startup companies — have to take it upon themselves to spur public-problem stakeholders into action. For example, Opower, the energy management company, fought for new utility-metering regulations in Texas even before it had a working product. Once legislation on energy reporting was passed, the Opower team was able to begin work quickly with the utilities to capture the new energy management market they had created.

The participation of multiple actors and stakeholders is one of the main characteristics of SOI. As such, open innovation and the involvement of actors outside the organization becomes an important mechanism in SOI.

To more effectively facilitate and accelerate the complex process of SOI, we suggest two key methods: SOI centers of excellence (CoE) and SOI communities of practice (CoP). Their role is to facilitate new connections among diverse networks, train new SOI leaders, and promote cross-disciplinary innovation.

In the Spoiler Alert case, think of MIT as a potential “center of excellence” for SOI. A CoE works to increase quantity and quality of SOI solutions generated through three means:

• Convening and connecting diverse stakeholder networks — corporations, financiers, technology providers
• Training entrepreneurial and entrepreneurial SOI champions
• Developing knowledge and generalizable insights about the SOI process and resulting tools and best practices to support new generations of SOI leaders

A CoE’s role is the equivalent of a “super-champion,” simultaneously overseeing all four steps of the SOI process. The reality for the Spoiler Alert founders, however, was that they had to laboriously cobble together these networks and resources themselves.

Unlike a CoE, a CoP focuses on one particular set of stakeholders — corporations, for example — to promote learning. The CoP’s role is the equivalent of a private-problem stakeholder “roundtable,” representating diverse perspectives and a larger population of similar stakeholders who can learn from each others’ experimentation in technological, organizational, institutional, and social innovation.

SOI is challenging, whether it’s done through internal R&D and corporate venturing or through external investment and venture capital. A corporate CoP would mitigate this challenge by acting as a central platform, allowing companies to learn about SOI approaches from multiple industries and provide quick access to best practices for overcoming internal barriers to the approach.