Amanda Walker October 11, 2011 TIM 431 Section 001

Why Sustainability is Now the Key Driver of Innovation By: Ram Nidumolu, C.K. Prahalad, and M. R. Rangaswami

Summary

Many companies today are afraid of going green because they fear that it is too costly and it will not have a great impact on revenue. They believe that it will not increase their competiveness and will place them at a disadvantage to the competition. Some of these fears have some truth to them. Expenses will be greater at the beginning of the process to go green, but they will decrease expenses in the long run. The negatives do not outweigh the benefits. By increasing and implementing sustainability, companies will promote innovation with their employees. This will increase competiveness with their rivals and they will be able to enhance competencies. According to Nidumolu, Prahalad and Rangaswami (2009) Making the move to going green is not easy, it is a long road and it encompasses five distinct stages; viewing compliance as opportunity, making value chains sustainable, designing sustainable products and services, developing new business models, and creating next-practice platforms (59).

The first step is to research the environmental laws of the companys country, state and region. It is best to adhere to the more strict rules to ensure that company will not have to make substantial changes later. Companies should see the compliances as an opportunity for innovation and go above and beyond. After companies embrace change they should evaluate every aspect of the company to increase productivity. By working with suppliers and retailers the company can create eco-friendly options and reduce waste. According to Nidumolu et al.,(2009:59) Most large corporations induce suppliers to become environmentally friendly by offering them incentives. Next is to redesign operations to use fewer resources and use these resources effectively is extremely important. Designing sustainable products and services is the stage where businesses are realizing that consumers want eco-friendly products. Businesses can create a whole new market for these consumers by creating and redesigning current products and services. Analyzing products and how they affect the environment is extremely important and finding ways to eliminate these products is essential in this process. When developing new business models it is about developing new creative ways to bring in revenue and sometimes this includes partnering with other companies. Nidumolu et al. (2009: 63) uses an example from FedEx when they partnered with Kinkos to create a delivery business that helped save paper. FedEx gives their customers the option to electronically transfer the master copy to the end location and Kinkos will print it out and deliver it rather than making several copies and sending it through FedEx. It benefits both the customer for quick delivery and it is eco-friendly.

The last stage for businesses is to create next-practice platforms. This is difficult because the executives must question their current practices and determine whether or not they fit with the new innovations. By questioning their current practices a company can further develop sustainable innovations. Each stage is crucial to the development process of sustainability. A company must be willing to accept change and once they do it will happen quickly. It is also important for a company to recruit and retain the people who want to promote change and sustainability. These people will become an asset to the company.

Concepts related to strategic management

This article discusses a few applications that are necessary for strategic management in the travel industry. Sustainability is an upcoming phenomenon and businesses need to be more proactive in promoting innovation to stay current with the trends. Stage one from this article discusses how it is important to stay in compliance with laws to ensure their company is up to date on practices and regulations. It mentions how it is smart to do more than is necessary to avoid changing practices in the future. David (2011: 320) states, More firms are doing more than the bare minimum to develop and implement strategies. This is a key driver for innovation and by exceeding the current expectations the company will be better prepared for the future. Changing practices only when forced to do so leads to high cleanup costs, liability suits, and reduced market share (David, 2011: 320). Not only does the firm save money in the long

run, they can use these practices to market towards other types of consumers. Designing sustainable products and services is another aspect that this article discusses elaborately that is a key element to going green. Executives are starting to wake up to the fact that a sizable number of consumers prefer eco-friendly offerings (Nidumolu et al., 2009: 63). People these days are becoming very environmentally aware. When researching which company they want to use for their travel needs the one that promotes sustainability will stand out. They will have a stronger chance of obtaining their business. According to David (2011: 320) one the reasons why firms should go green is because many consumers, suppliers, distributors, and investors shun doing business with environmentally weak companies. In todays economy the competition is getting very tight, the smallest thing can set a consumer off and deter them from using a companys products or services. Another important factor that we must look at is the type of people a company wants in its company. Colleges need to do a better job at training and educating students on the environmental issues and teach them ways to handle situations. Failing to provide adequate coverage of natural environmental issues and decisions in their training could make those students less attractive to employers (David, 2011:320). The job market is very stiff these days and the amount of job applicants is at a nation high. Employers are going to be picky about who they hire and look for key qualities that will fit with the company. Nidumolu et al. (2009:64) states, recruiting and retaining the right kind of people is important. Companies want to hire applicants that have an eye for sustainability and those that will come up with new and innovated designs.

Missing concepts related to strategic management

Although the article touches base on a few strategic management principles, it is missing key elements. The article never mentions a sustainability record. This is a record that the business keeps to show how the firms operations impact the environment. It is good for the business to keep an updated report to disclose information to shareholders about labor practices, product sourcing, energy efficiency, environmental impact and business ethics (David, 2011:317). This will help keep the public aware of how the company is doing in regards to creating and maintaining sustainability. It is key to have this document, this will increase distinctive competencies and it will increase customer satisfaction. Another topic that was overlooked in the article is having an environmental representative on the board of directors. By appointing someone this position is will be their responsibility to the company that they address concerns, ideas, and practices that will help the company stay competitive in the sustainability aspect. David (2011) states that the company should also implement various practices such as: Conducting regular environmental audits, implement bonuses for favorable environmental results, become involved in environmental issues and programs, incorporate environmental values in mission statements, establish environmentally oriented objectives, acquire environmental skill, and provide environmental training for company employees and managers (319).

By implementing each of these issues it will better equip the company for the new and changing economy. It will take time and effort to achieve all of these tasks. Motivating employees and offering incentives will greatly increase change. Getting everyone on the same page will provide consumers with overall better products and services. That is the main goal of any travel related company, to offer products and services that will keep the customer coming back for more.

Individual assessment

This article discusses several key concepts that are applicable to strategic management. It gives a good overview of how a company can apply sustainable concepts to their current business model. Each stage in the article goes over common obstacles that most companies will face when planning to go green. By following the steps it will make it easier for a company to understand the process of sustainability. In todays economy companies are faced with a series of issues and if they stay ahead of the game by evolving into sustainability the company will obtain a competitive advantage over its competitors. Most companies have core competencies that are similar to their competitors and consumers are face with the decision of which company to purchase from. But if a company creates distinctive competencies with innovation and sustainability it will make is much easier for the consumer to decide. In the travel industry there are hundreds of options for the consumer. They are several companies that offer similar products and services. By being environmentally aware and promoting innovation consumers will respond better to a company. By using

green products in a hotel, recycling, and reducing waste a consumer will take notice and believe that this company values its environment. Of course excellent guest service has a large impact on return guests, but if you have all of the above the consumer is more likely to stay with a brand and value its products and services.

Conclusions

Overall this article explains several aspects in the process of going green. It is a bumpy road to redesign a company and create sustainable practices. It will not be easy, but if there is a dedicated and innovated staff it will make the process go a lot smoother. Each stage in the article discusses important concepts to consider in the process and by following the steps a company can change quickly and efficiently. It will take time, effort, and teamwork to create efficient sustainable practices. By educating the staff and promoting innovation a company will grow and continue to enhance its distinctive competencies. To keep its consumers aware of its practices and efforts it is important for the company to log all of its sustainable practices. By having a public record of how the company is reusing energy, how is it improving the environment, and its business ethics provides consumers and investors with information that will be pertinent in deciding to invest with the company. Any company can change and adhere to the current condition of the economy. It all depends on how much they want to keep a competitive advantage over its competitors.

References: Nidumolu, Ram, Prahalad, C.K. & Rangaswami, M. R. (2009). Why Sustainability is Now the Key Driver of Innovation. Harvard Business Review, 87:9, 56-64. David, Fred. (2011). Strategic Management Concepts (13th ed.). Upper Saddle River, New Jersey: Pearson Education.