Business 2.0, Sustainability

Definition of shared value

This is a cross-posting of a post originally published on the IDX Backstage blog. Note that Ben from SVA has commented on the original post.

Over at the SVA Blog Ben McAlpine asks the question Shared Value – Is it worth the hype?.

Specifically, he notes a colleague asking how Shared Value is different to “smart business”.

Shared Value, is of course, smart business. But Ben’s description of Shared Value I think has an issue that I see in an awful lot in discussions about the topic. It touches on only the first of 3 pillars that are outlined in Porter and Kramer’s HBR paper that launched the term into the business mindset.

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The value of small prototypes

I was recently chatting with my friend Lopa about a variety of things social innovation-y, and the topic turned to prototyping.

One of the things that came up is that it can be easy to think that prototypes need to be a lot more than they actually need to be. That is, it can be just as valuable to prototype small pieces of the puzzle as you go, rather than thinking that you have to prototype an entire service, or complex parts of a web application etc.

As I was thinking about this on the train, I caught up on some episodes of Kevin Rose’s excellent Foundation series. In her interview, the founder of Smitten Ice Cream Robyn Sue Fisher talks about prototyping a number of times in the interview (especially in relation to her core product). But what interested me most was how she used a food cart to get her service up and running (at about 28 mins and 45 secs in):

I’ve benefited from this principle as I work through the Seasonal Saturday concept. It seems like quite a simple thing “a seasonal meal once a month”. While I’ve got a lot of thoughts about what we could do with the initiative, I felt it was important just to start doing it, as I knew things would pop up. So we bootstrapped a simple blog and invited a bunch of people to submit their recipes (one per month).

This prototype is a long way from what we’re aiming for, but prototyping early has already helped a lot in working out the logistics and some of the barriers and challenges participants might face. Like, what information do we need to include with a recipe? Are there specific attributes to recipes that we need to consider? What happens if I want to participate, but can’t do that recipe (i.e. I don’t have a slow cooker)? These may seem trivial, but as we are hoping to encourage/enable behaviour change, understanding (and addressing) these barriers where possible is important.

As a tutor in the Design Research Training unit at UWS I also saw the power of prototyping first hand. Students often came up with grand ideas and some couldn’t see, at first, how they could prototype it because they were jumping ahead to their bigger vision. Others were able to break their project down into smaller parts which they then prototyped. These students tended to do better overall with their projects, and all of them learnt a lot from this process.

It’s important, of course, to recognise the limitations and changed context of a smaller prototype. But following the lean/agile approach of prototyping early and often is a great way to help ensure that a project has the greatest chance of success.

Business 2.0, Design, Sustainability

Mind the gap

In the time I’ve been actively engaged in business sustainability, I’ve noticed that report after study after survey that shows that a majority of customers have environmental and social considerations at the forefront of their mind when making purchases. For example, this 2008 McKinsey report (free registration required to read article) highlights that “87% of consumers worry about the environmental and social impact of the products they buy”. In the Australian context, research carried out by NetBalance for the Australian Food and Grocery Council (AFGC) reports “80% consider sustainability issues when putting products in their shopping trolleys”.

Diagram outlining intention vs. action

Yet this latent desire to make ethical choices in purchasing is also shown to be missing in action, outside of a significant minority. The same McKinsey report suggests 33% make such purchase decisions (which is similar to other reports I’ve read) and the AFGC finds that only 13% of Australians buy environmentally-sustainable food and groceries from the supermarket (as an aside: this figure seems low — I’ve seen other statistics that show organic produce as being much more prevalent than this, and that these purchases would be considered “environmentally-sustainable” — something to look into further).  Trendwatching place these figures at 40% and 4% respectively (based on Journal of Marketing data).

In considering this gap, we find many stated reasons as to why intention isn’t translating into action. Most commonly cited is price — reports I’ve read (coupled with my own experience) suggest that customers aren’t willing to spend more than a 5-10% premium for “green” products, if they are willing to spend more at all. And of course products with a price premium were much more likely to feel the pinch of changing economic circumstances.

But there is more to it than that — performance is another, where “green” products are seen as inferior to mainstream products. As Joel Makower asks, why does “green” not equal “better”?  Convenience is another factor, with limited availability of green options through mainstream channels (e.g. mainstream retailers, such as Coles or Woolworths here in Australia). Each of these is noted in both the McKinsey and AFGC summaries — and each is weighted against the environmental or social benefits of the product when making a decision. The AFGC report notes that only a small number will compromise on cost or convenience for environmental factors.

So what to do? We could try to change people’s priorities, to get them to change the weighting the put on each of these factors. I suspect this won’t get very far though… As I noted in my Web Directions South presentation, a lot of successful social innovations aim to actually flip the equation — to make the more sustainable option also cheaper, or more convenient, or have better performance, rather than forcing this kind of trade-off.  Companies leading in the Collaborative Consumption space often fit this category.  Trendwatching call such products Eco-superior or Eco-easy.

Bridging the gap

But why aren’t more companies doing this? Why aren’t there more products like this in the market? I think part of the challenge is that when companies are considering sustainability factors in their products, they focus on specific attributes of products, rather than thinking more holistically. What this means is that their consideration only extends as far as lessening the impact of certain ingredients — e.g. substituting an eco-friendly alternative as a key material or ingredient in a product.

Often this results in a more expensive product that doesn’t perform as well as the mainstream alternative. But more importantly, I think it misses the bigger opportunities of taking a sustainable approach to business – the kind of opportunities outlined by leading thinkers like Makower, Gil Friend, Paul Hawken and William McDonough.

These opportunities require a more holistic approach that considers the broader context in which a product or service exists. In Natural Capitalism, Hawken, Lovins & Lovins call this “whole of systems thinking”.

For those familiar with design thinking or service design approaches, this will be a familiar theme — core to these practices is assembling multi-disciplinary teams that take a broader contextual view (informed by design research) to uncover opportunities for rethinking the role of organisations and the products and services they provide that can create whole new classes of products (or, perhaps more accurately, product service systems).

Diagram outlining how design thinking/service design can connect intention with action

The iPod/iTunes ecosystem is an oft-cited example of the possibilities of rethinking the system, rather than innovating purely on product attributes (while this isn’t explicitly for sustainability benefits, it does demonstrate the concept in practice).

In Blue Ocean Strategy, authors Kim and Mauborgne suggest a similar approach in their guide to formulating a successful product/business strategy. They reference this as an opportunity for innovation — without considering sustainability as a factor. However, it seems clear to me that the same principles are at work in books like Cradle to Cradle and Natural Capitalism, and are also cited in papers on design thinking in business (as I covered in more detail in my paper on Design Thinking and Sustainability).

This, I believe, is where design thinking and service design can play an enormously positive role in progressing sustainability. As it inherently takes an innovation frame, it is appealing to business. However, the opportunities for including the building of social capital and environmental benefits in the broader contextual frame of reference are huge — creating significant wins for business and society simultaneously.

Business 2.0, Government 2.0, Presentations, Social media & networking, Sustainability

Web Directions South 2010 – presentation and notes

Thanks to everyone who came to see the presentation at Web Directions South yesterday, and sorry we weren’t able to have a bit more discussion at the end of the session — some great questions and ideas came up that I would have liked to explore further.  I’ve posted the presentation to Slideshare:

Or you can download a PDF of the presentation, along with notes (PDF 14.4 MB), including pointers to the various sites and articles I mentioned in the presentation.

Business 2.0, Government 2.0, Presentations, Social media & networking, Sustainability, Work

Web Directions South: Creating platforms for social innovation

I’m very excited to be joining an inspiring line-up at Web Directions South in a few weeks’ time, presenting on the topic of Creating platforms for social innovation:

People are redefining the relationship they have with the organisations they interact with, empowered by social technologies.  They are seeking:

  • Human-ness: as organisations have grown in size and become more and more depersonalised, people are wanting more human interactions and personal response;
  • Trust: from greenwashing to the GFC, the market’s trust has been eroded — people are looking for organisations to say what they mean and mean what they say;
  • Co-creation: people are taking a more active role in developing the products and services that they use.  And if they don’t find what they’re looking for, they will often create it themselves;
  • Responsibility: people want to engage with organisations that are genuinely addressing the complex issues of sustainability and wellbeing.

Building a brand, service or product offering that resonates in this new “economy of meaning” requires a rethinking of an organisation’s relationship to the “market” — their customers, stakeholders and the environment.

In this presentation we will examine how innovative organisations are using social technologies and design methods to create multi-dimensional value — both for the organisational and community — and will explore the themes that underpin the examples with a view to applying them in your context.

Regular readers will note that the session is focused on a number of themes that I’ve been exploring here lately, so I’m really looking forward to connecting with other folks at the conference around these concepts.