 Hello and welcome to MBA 604, Innovation and Sustainability. I am so excited. We are in lecture seven and that is lecture seven of eight. So we have one more after this one. We are diving deeper into unit three, going into Learning Outcome 3B. I am Choni Roberts. I'm the Vice Program Chair and Consulting Professor for Sailors MBA Program. All right. So unit three, we are talking about integrating entrepreneurship with innovation and sustainability. If we just go back a moment to one of our course learning outcomes, we're lining this up with incorporate elements of innovative sustainability to a specific business or sector by developing a hypothetical entrepreneurial startup organization. I think by the time we cover unit seven and unit eight, you all will be in very good shape to be able to do that. All right. As we have learned in this course, and you may have noticed just by observing what's going on in the world, we have many problems for sustainability, and that can maybe feel overwhelming or maybe even terrifying. However, many problems in the world of entrepreneurship, means many opportunities. Let's think about Steve Jobs for a moment, and about opportunities to create the future. In our last talk, we went through a lot of things about thinking different. What does thinking different mean? Let's go and take a look at the guy who made this particular phrase famous in recent times, and he narrated this commercial in 1997, and I'd like to point out that that was Apple's 20th year in business, and he came back as a return to be the CEO of Apple with this campaign, and it really set Apple off into a fantastic direction, and the company is what it is today, largely because of this turning point and all the work they've done for 20 years already in technology. His narration of his commercial for think different is, here's to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes, the ones who see things differently. They're not fond of rules. You can quote them, disagree with them, glorify or vilify them, but the only thing you can't do is ignore them because they change things. They push the human race forward, and while some may see them as the crazy ones, we see genius because the ones who are crazy enough to think they can change the world are the ones who do. Let's reflect on that for a moment because 1997 was 25 years ago from now. It already been in business for 20 years, and let's compare that to sustainability. We've talked a lot about what can happen in 10 years time, right? We've given some scenarios to that throughout this course. Now imagine what can happen in 25 years. If we stay on this path of sustainability, where will it be 25 years from now? Think about the Apple computer through all of its iterations throughout its lifetime. Think about the beginning of what a computer looked like. Think about the 20-year point and think about that today. We can imagine how sustainability and all the innovations happening can change the way we do things, and that's by thinking different. Now, let's think about all of the things we do and use that once were not the norm. Well, that is just about everything. So change is constant. And when you are leading change and innovating and being crazy enough to try things out, you can truly change the world. So humanities come quite a long way. Next, we want to think about in what ways do sustainability entrepreneurs approach need identification and problem solving differently? When it comes to opportunities, we have differences between traditional entrepreneurs and sustainability entrepreneurs. So traditional entrepreneurial thinking still applies. You need to think about what are the conditions that have created a marketplace opportunity for my idea? What do people want and need new at this point in time? What are the factors that have opened up the opportunity? Will this opportunity be enduring? Or is it a window that's open today but likely to close tomorrow? If you perceive an unmet need, can you deliver what the customer wants while generating durable margins and profits? All of that thinking still applies in the sustainability entrepreneurial world. However, you ask a few more questions. You ask, how can you meet the need by including human health and well-being? By including societal impacts on communities with the smallest ecological footprint possible and with material and energy choices that enhance the environment and natural systems and by reducing negative impact and improving the larger system outcomes whenever and wherever possible. So here are some ideas, ways to integrate sustainability ideas. We are going to look at five different elements that open up new vistas for creativity. These are systems thinking, molecular thinking, weak ties, outside ties, collaborative adaptation, and radical incrementalism. Let's see what this means. Well, in our earlier lecture, lecture three, we did talk about systems thinking. And we talked about the change from a linear economy to a circular economy. So this is a slide from that lecture where we saw the linear economy as compartmentalized and the take, make, waste. And how's that profit-driven focus, right? They just consider materials from extraction to end of life. And it's this short-term thinking, profit-driven agenda, and it represents the product design and development and usage of the industrial revolutions of the 19th and especially 20th century and especially the recent 50 years. And now we know that systems thinking, this is again from lecture three, is dynamic and complex and that we recognize that business exists within the context of society and the environment. Business is not compartmentalized from those things. So it's a system of components that affect one another and form a large pattern that's different from any of the individual parts. Now, earlier in our lecture series, we had the coffee cup example. Today, we are going to imagine a river to explore systems thinking. All right, in your mind, imagine the river and ask yourself, what do you see? Do you see a winding line on a map? Do you see a favorite fishing spot or perhaps a tumbling rushing water? Do you also include the wetlands and the wildlife both visible and microscopic? Do you see human communities along the water? Do you see the impacts on the river from this human activity? Do you see the ultimate end points of the water flows to estuaries, to deltas and the sea? Do you include the water cycle from the ocean through evaporation, raining in the mountains, regenerating the headwaters of the river? So in other words, do you see the river as its component parts or as an integrated living system? If you think only about the fish or the single stream, you miss what makes the river alive. You miss what feeds it and what it feeds. Well, that's systems thinking. So how can this make a difference for us in innovation and entrepreneurship when it comes to product design and strategy? So the more you are aware of these systems and their relationships to your company, the more rigor you bring to the product design and strategy development and the more sophisticated your analysis is on how to move forward. So when systems thinking guide strategy and action, the collision between business and natural systems becomes a frontier of opportunity. We can look at Shaw Industries in Dalton, Georgia. They make flooring, in particular carpet. They make all sorts of flooring and they radically transform their business with systems thinking and innovative product design. They underwent a profound strategic reorientation and redesigned as products, carpets, not in the traditional linear make use waste model, but in a sustainability inspired circular strategy. Shaw now takes back products at the end of their useful life, disassembles them and remanufactures them as new carpets. And today, 88% of products Shaw manufacturers are cradle to cradle certified. So that is fantastic. They are a remarkable success story in an industry that was not known for circularity in modern times. Remember pre-industrial era and use of, particularly petrochemicals, most everything was circular. We don't see a lot of leftover housing or equipment or clothing from previous centuries, do we? That was made of products that just went back into the earth for the most part. And so that's what we're trying to get back to, but in a modern context. How do we do that today with the current state of our world and technology and how far we've come? How do we make that circular again? We're kind of getting back to how nature naturally works and operates. Another way, all right. So that was systems thinking. Another way is molecular thinking. So think like a molecule. What does that mean? It's actually doing systems thinking on the micro level. And some of our most urgent environmental health problems are caused by not the things that we can see, but by microscopic and perhaps nanoscale compounds. And these tend to be persistent contaminants that remain invisible in the air, soil, water, and subsequently accumulate inside our bodies and through ingestion of food and water. And same for animals. And if you eat animals, you are most likely ingesting all of that through animals as well. So molecular thinking can reveal innovation opportunities that address hazardous materials, exposure problems. And a subset of this is green chemistry and looking at toxicity prevented at the molecular level. And we're moving from those petroleum based products to a bio-based economy. And we can see the application of molecular thinking and green chemistry in all sorts of products like adhesives, cleaning products, chemicals, fuels, energy, paints, coatings, pesticides, pharmaceuticals, plastics, and on and on. Well, there is another idea for you to think about when you're coming up with your own innovative entrepreneurial idea. Another is looking at weak ties, also known as outside ties. And this means thinking about people that you could collaborate with for idea generation or knowledge sharing. And we can compare this to strong ties. So strong ties are the people and organizations you see often in which you frequently turn to for input. Perhaps these are like industry associations, professional groups, experts that you rely on in your industry. And the longer the duration of strong ties between two entities, the more similar your perspectives become. And people from the same circles tend to share the same pools of information. That might maybe okay, right? You may want that information. Yet to change things up, to think different, we need to consider going with weak ties. And weak ties are with unconventional partners who can provide new and diverse information that link strategy more coherently with broader systemic forces. So this is still getting into systems thinking and getting outside of your own bubble and thinking beyond and meeting with people who are in other fields and other sciences and other professions. So weak ties bridge the corporation to outside world events and stakeholders. This triggers innovative thinking with fresh ideas and viewpoints likely to diverge with internal leaders. So be ready for that. Internal leadership may not grab onto the ideas quickly and you may have to be the one who's thinking differently for a while until you can convince other people to see the value in this way of approaching a problem. And something to consider is that the most innovative ideas for success may come from those most critical of the business. This can be like activists and protesters, those that are speaking out against the way you are doing business. And a weak tie would be to engage these people, engage these groups, hear what they have to say. And maybe you can't find a better way to solve problems and do business. Another way is through collaborative adaptations. So these are value-added networks, also called VANS. And VANS are composed of closer and stronger ties within your firm and its inner circle of collaborators. But these tend to be the untapped, underappreciated resource for ideation and feedback and adaption. So VANS can offer a wealth of creativity and innovation in the iteration and implementation process. Okay, so VANS are more successful in implementing sustainability innovations and companies already open to change and no one to be culturally innovative. That's important. Your internal culture needs to be one that enables innovation, that enables creativity and ideation. And now companies are like that. And innovative companies, though, need to intentionally create a culture where innovation can happen. And people can share ideas and you want to move past the status quo in the way things have always been done. And that takes the right leadership to do that. So sometimes all that is needed to catalyze a van is asking the right question. And this is so important because sometimes we forget to ask people around us for feedback. And this could be maybe a long-term supplier. And you just have a supplier relationship, but maybe you never asked, can we do this better? And how can we do this better related to environmental and sustainability attributes? And you may be surprised at how many ideas they have that they just never shared because they were never asked and didn't know you were interested. So you can engage stakeholders and partners along the supply chain as well. Another way is radical incrementalism. So we have sort of a conservative approach to this and a radical approach to incrementalism. And it can involve small, carefully selected steps that result in learning and that in turn reveal new opportunities. And this can mean like taking marginal steps, doing integrated progress, yet leading to more ambitious sustainability goals. So what happens here is that you get a feedback loop for learning and product improvements for sustainability and you keep on this path of continuous improvement at the incremental level. And then these smaller changes add up to a big change in time. A more radical approach to this is a deliberate strategy for business operations. And you can see this a lot in information technology in which a series of small changes are enacted one after the other resulting in radical cumulative change in infrastructure or in product design and in services offered. And the feedback gained along the way will accelerate alter and inform next action. So you just get going and you just keep making it better and you do this a little bit more quickly. And this results in an iterative and adaptive learning process. Last week, when we talked about the entrepreneurial process, the iterative process is a big part of that. And that means you keep learning from your first design and improving that to make your second design. And then you learn from that and you go to your third design, this iterative process. So do not wait for perfection. Get your, as they say, minimum viable product. Make sure that your minimum viable product is worthy so you're not creating undue waste, right? You don't wanna scale up a minimal viable product that becomes waste right away, not in sustainability world anyway. You wanna be more careful about what you scale. But, and so this kind of approach can help you get your best product before going into widespread scaling. Now let's look at traditional strategy tools like you've heard them, PESTL, SWAT. How can these help entrepreneurs identify sustainability needs and opportunities? These are the classic tools for evaluation of market needs and opportunities. We know PESTL is the political, economic, social, technological, environmental, and legal factors and they're at this macro level. And then we have four is five forces which brings it to the industry level. We look at these horizontal relationships, threat of substitutes, rivalry amongst competitors, threat of new entrants, and the vertical relationships of the bargaining power of buyers and suppliers. So let's think about, these are these classic models, but how do they evolve when integrating sustainability practices? How, what happens now? And this is open. I'm open to hearing what you all think about this too. If you wanna post in discussions or in the comments. Myself giving this some thought, I see it as at the macro and the industry levels, these factors are out of the direct control of the firm, right? You can't directly control those. Yet sustainability is a way for a business to bring stability to these factors by reducing the risk, right? So sustainability reduces risk and you can influence and in a big way, the macro level factors. You can influence through your product design and your services and the way you run your business and organization, the way you engage people in society and communities, you can strongly impact social factors and environmental factors, but not as a passive, this is what's happening in the world and we just have to take it, but as an active influencer of change that shapes the world to be more sustainable and reduces risk. Environmental factors, environmental risk is really high right now. The more we go down the path of unsustainability, the greater that risk is, the more expensive it is for businesses to fail. All right, same with social factors, the more inclusive we are, the more diverse voices we include in our businesses and the more equity we create in this world, the less risk there is towards societal upset, right? And activism related to that. So that's another way of looking at this. When it comes to economic factors, we know that sustainability is an evolving design of commerce and sustainability entrepreneurs shape that. You're creating and shaping the future. We talked about political factors, absolutely. You can be reactive, which is, remember the thumb sound, you can be interactive or you can be even better proactive and set the standards by being the example of what can be done. So so many things at that macro level that I think in business, we used to just sit back and go, oh, there's nothing I can do and just be all reactive to it and respond to it to a certain degree that's true. Yet an engaged business will be more than that. They'll be interactive and proactive and shaping those factors and those trends. That's a different way of thinking about these models for sustainability. If we even wanna talk about bargaining power of buyers and suppliers, I mean, we do talk about increasing value in your supply chain through sustainability practices and developing more robust relationships with your key suppliers and investing in them. Helping them be more sustainable, which is also responsible and also builds on your brand as well. So we can even think about power of suppliers and buyers shifting a little bit there with sustainability initiatives becoming more collaborative and stronger in the relationship dynamic. Right, what about analysis? Wow, I think we all heard this from Bachelors on up. And it's a classic model. It's actually a very effective one. I think it's a great one. And then we also have the Toe's Matrix, which is a spot in action, basically is what you could say. And then we have RIO, which is about firm strategy. So let's think about these classic models and think about how do they evolve when we're doing sustainability? Well, the spot analysis, we know in strengths and weaknesses, the internal ones that is what an organization has the most control over. Their internal strengths and their overcoming their internal weaknesses and the external opportunities and threats can also be very much related to sustainability. Gosh, we talked about in the very beginning of this lecture, many problems equals many opportunities. So out there in the world, there are many opportunities and unsustainability can certainly be a threat to organizations. Now, when we get into the Toe's Matrix, this is just where you wanna leverage your strengths to take advantage of opportunities and overcome threats. And you want to mitigate weaknesses by taking advantage of opportunities while minimizing the potential threats. Now, RIO, so what are we looking at here? We are looking at competitive strength of a company and their firm's strategy to see if their competencies are valuable, rare, inimitable and exploitable. So how do we think of value and sustainability? Is the resource valuable to a firm because it helps it take advantage of opportunities or eliminate threats? Let's think about value, value's shifting, isn't it? It's more about shared value. It's more about creating value and being a value-driven, purpose-driven organization as well in aligning to your values. So is this resource something you're creating a service of product valuable to a firm because it helps it take advantage of opportunities or eliminate threats? All right, rarity, is this competency or this resource product service idea rare in that it is controlled by or available to relatively few others? Well, that gives your business the opportunity to be durable and it's profit. So that is important in all companies. Immitability is a resource difficult to imitate so it can retain advantages over those who might try. So that's that question. Is this a sustainable competitive advantage using sustainable as in the way of enduring? Will this advantage last? You need to know that. So you know that your product isn't here today, go on tomorrow and you need to balance that with the sustainability leadership practices of knowledge sharing. And you need to build an industry that's sustainable and you need to do that for your own success as well. Just briefly think about electric vehicles. Well, think about Elon Musk. Why did he share so much about the electric vehicles and some of the proprietary information of Tesla and some of the competitive advantages, some of the design aspects of electric vehicles with the rest of the automotive industry? Well, yes, generous also for its own survival. You have to create an industry that's durable as well for your firm to be durable. If you're the only EV in the whole world, well, how likely is it you're going to get all the infrastructure changes that are needed for electric vehicles and charging stations and all of that, right? The whole supply chain too. So you have to balance that in sustainability, especially when you're creating new industries. Organization, this means are the resources useful because the firm is organized and ready to exploit them? Can you bring this product to market? Do you have the capital? Do you have the know-how? Do you have the technology manufacturing people, all of that to be market ready and do what you need to do? So I think we can see how these traditional tools for strategy and product development have value in sustainability, but sustainability takes them in a little bit different direction, a little bit stronger direction in my view. Actually can lead to more opportunities and competitive strengths, competencies and advantages. All right, another thing. Oh, when it comes to creating value, here I have creating values with a circular economy, right? It's a new way, a new economy, a new way of creating value. All right, another topic we're covering in this lecture for unit three is the balance of responsibility and opportunity. Like how can you find opportunities as a responsible business and even taking on responsibility of other businesses? Well, what does all this mean? All right, so a business is responsible for itself and it has a responsibility for itself and it has an opportunity for others. So responsibility is doing business, doing well by doing good. So making positive externalities in the world and all businesses have that shadow side, that pollution waste and creating lots of problems. I mean, that's why we are where we are, but companies can improve their sustainability performance because they are their stakeholders, see them as having a responsibility to manage their own social and environmental externalities. The problems they could be creating are maybe the solutions out there for people on the planet. So the drive is to create more positive and less negative externalities. So taking that responsibility for itself and putting in innovative processes and programs and solutions to take care of its own externalities, its own polluting problems. However, companies can also see opportunities for profitable growth by addressing social and environmental externalities for which they do not necessarily have a responsibility. Right, so all companies have externalities. Not all companies are responsible for their externalities. So not all companies are being responsible for itself and this can create an opportunity to innovate for sustainable solutions for others externalities, right? Okay, it's a different way of looking at these problems. And there are many opportunities, entrepreneurial opportunities for this concept, responsibilities and externalities. Right now, today and into the future, this is a big area and you'll continue to see a lot of this. You can watch the video Responsibility and Opportunity that's in our course learning content and to get a little bit better idea of what all that means. So we are going to wrap up Unit 3 Lecture 7 Learning Outcome 3B with Steve Jobs and part of that quote we mentioned earlier in our talk. And he said, the ones who are crazy enough to think they can change the world are the ones who do. All right, so I wanna know, not what's your good idea? I wanna know what's your crazy idea? And go ahead and post in the course discussions and in the comments below, what sounds like a crazy idea today as Peter Diamandis would say is, I don't know, what's the rest of this quote? Like, what seems like a crazy idea today becomes a radical breakthrough, right? It becomes the next uniform billion dollar startup. So think a little bit crazy. Think way outside of the norms of today and try and be like someone like Steve Jobs who didn't look at today for his solutions. He looked to the future and he came up with products and designs that people didn't even know they wanted yet. People couldn't even visualize or verbalize the desire for the things that Steve Jobs and the team at Apple created for the world. And now what? We can't go anywhere without our phones. And so think different, be a little crazy and I'm gonna leave you with that for this lecture and to review the learning outcomes. We have the study guide resources and I also listed some additional resources from our learning materials and course. Now these links, I'm noticing I cannot promise that these links will always be working out there in the internet world, but they will always be in the course. So I strongly encourage anyone who is watching this video who has not signed up to take the OpenEd MBA program at Sailor Academy to do so and then you have full access to everything in there in a consistent and durable way. All right, well, thank you so much. And I look forward to seeing you in our next lecture eight, the final lecture. See you there.