Sustainability can lead to breakthrough innovations

Sustainability can lead to breakthrough innovations
The Economic Times, November 10, 2009, Page 1

Prahalad Says There’s Business For Indian Firms In His Eco Theory

HE’S going green. After core competence and the bottom of the pyramid, the world’s best-known management guru of Indian origin, CK Prahalad, is talking sustainable development. Why? Because, as he argued in a recent article in the Harvard Business Review, “sustainability is the mother lode of innovations that yield both bottom-line and top-line returns”.

In an exclusive interview to ET NOW’s R Sridharan, the Paul and Ruth McCracken professor of strategy at Stephen M Ross School of Business at the University of Michigan talks about sustainable development, the bottom of the pyramid, and his own intellectual journey over the years. Excerpts:

You say there’s no alternative to sustainable development for companies. That’s a sweeping statement to make.

I am just recognising the inevitable. If you look at the water shortage, high commodity prices and certainly global warming, the need for sustainable development is pretty obvious. So, my starting point is don’t deny the obvious, get on with it and innovate.

But most companies today are fighting for wafer-thin margins. So, what’s the incentive for them to invest precious capital in sustainable technologies or processes?

If you deeply understand sustainability, then it’s just like the quality movement some 30 years ago. If you recall, there was a lot of debate about whether quality will increase cost during that period.

And what did we find?

That if you deeply understand quality and you put methodology in place, costs automatically come down. I believe sustainability can be the next quality challenge. It’s going to drastically reduce costs and increase consumer acceptance. Don’t look at sustainability as compliance and regulation, but as an opportunity for breakthrough innovation.

India can take innovations to US

INDIA can argue that it’s not a big polluter compared to developed countries, so the companies here don’t really need to start thinking of sustainable development. What would you tell such companies?

In India, you don’t have to start (on sustainable development) because you are a big polluter. You can start because there’s a shortage of resources. If I look at a washing machine that recognises when electricity was cut off and starts the wash cycle from there and not the beginning, then it saves energy, it saves water and it is acceptable in India because it is sustainable development and it’s good business. The beauty of this is if you innovate here, you can take those innovations back to the US.

you also talk about consumers at the bottom of the pyramid. But the irony is if we create consumers out of millions of poor people, we are putting greater stress on the environment. How does this marry with your argument on sustainable development?

That’s an important question. As you start including additional 4 billion people into the process of globalisation, you are going to put a lot more pressure on sustainable growth. Therefore, inclusive growth and sustainability are joined at the hips. In fact, what inclusive growth and sustainability force us to do is to recognise how to do more for more people with less. And this is the organising principle I am proposing.

Finally, what next from CK Prahalad?

If you look at my work, they are centered around four areas: globalisation, role of connectivity, inclusive growth and sustainability. Nobody has looked at all four of them and said what are the linkages. So it’s this intersection of the four that’s going to create the next big opportunities for management, the next big opportunities for humanity in general.