11.08.05: Stuart Hart, Sustainability Thought Leader, Speaks at Case

Submitted by Sudhir Kade on Thu, 11/10/2005 - 16:10.

Stuart Hart spoke before an engaged audience at the Dively Executive Building at Case November 8th , sharing a 21st century vision for a more sustainable future made possible by a paradigm shift in business which considers the creative application of disruptive technology and bottom of the pyramid (BOP) strategy.

Hart is the Johnson Chair of Sustainable Global Enterprise at Cornell University. Hart co-authored the bestseller Fortune at the Bottom of the Pyramid with C.K. Pralahad, authored Capitalism at the Crossroads and recently won the Moskovitz Prize for Research in Socially Responsible Investing. He has also consulted for numerous corporations including Abbot Labs, BP, Shell, DuPont and Proctor and Gamble.

Hart began his discourse by reinforcing the mindset that this is about inventing a new form of commerce and not just doing the right thing. Hart recalled the year 1905, one century ago, as a critical period with incredible dynamism – the automobile had just come to life and the Wright Brothers had just proven flight possible. War was considered an obsolete concept in this innovative golden era. Flashing forward 100 years brings us to the present and to a time no less inventive or dynamic than 1905. Hart described present society as ‘hanging on the edge of a precipice’ – with even greater foresight than we had a century prior. Human population has exploded – in just the past sixteen years the global population has increased from approximately 5 Billion to 6.5 Billion. And it is at this time that a monumental challenge lies before us. In a time of prevailing inequity, we need to invent a form of capitalism that lifts up the 6 billion poor, not just the 850 Million people of wealth. Hart emphasized that the catalytic force to pull us out of this situation is the private sector, which will have to embrace the concept of ‘sustainable global enterprise’. It is none other than the business world and the corporate sector that has the technology, drive and economic clout to get us where we need to go.

While businesses of the future need to be accountable and responsible for the shift to sustainable global enterprise, activist organizations such as NGOs and social agencies have an important role to play as well. Such groups must serve as a watchdog of corporate entities which employ antiquated and inefficient ‘take-make-waste’ industrial strategies. These ‘unenlightened’ organizations often derive solutions that create bigger problems than those solved and activism is a critical way to hold such groups accountable for their wasteful actions. Much of this, Hart emphasized, is due to a continuing legacy of command-and-control – one which must be dismissed in favor of grassroots, bottom-up approaches that apply capitalism as a means of uplifting the poor in a profitable way.

The greening revolution which began in the 1980’s has created a trajectory toward sustainability. A key strategy is also to not accept tradeoffs (this classical view of economics is outdated). It is very easy to define and accept tradeoffs, but what Hart says we really need to do is stop being intellectually lazy and shatter the tradeoff. A perfect example Hart cited was the Quality Management revolution pioneered by Japan which empowered workers to prevent problems proactively rather than waiting for breaks to fix. The U.S. nearly lost the auto industry to Japan as a result – why? Because the Japanese refused to accept the tradeoff that high quality and low cost are mutually exclusive. They proved that both outcomes could be successfully achieved through innovative design and processes.

In the mid 1980’s proactively changing processes was not an obvious strategy. Take-make-waste business models were dominant. The only way to get around this was to reduce waste, emissions, and pollution and still cut cost simultaneously. This wasn’t really attempted until 1986 with the advent of eco-efficiency and greening measures. Slowly it became legitimate to discuss this approach in B-schools. Attention was finally paid to full-product lifecycle, closing loops, and internalizing external costs. Every pioneering time has its pitfalls however – and at this time the notion of green products was tainted by prevailing opinions that these products were niche, expensive, 'hippie', or sub-par. Unfortunately the earliest green products were developed by sloppy thinking that capitalized on trendiness.

Products were hailed for having recycled content but were often costlier and of lower quality as a result. This initial time of eco-friendly product development was actually somewhat of a failure. We are still working to overcome this failure known as the Green Product Problem and finding answers through dedicated effort to cost-effectively create a superior environmentally-friendly product. Stakeholder engagement and full lifecycle management have helped greatly in this regard. We are, in many ways, still at the start of the ‘greening revolution’. Another flaw of this movement has been a focus on incremental improvements of existing products and processes. The problem is that there is never enough of an incremental improvement to truly sweep the globe and uplift the masses. BP’s ‘beyond petroleum’ effort has embraced this incrementalist logic – as they now focus on lowering emissions with blended fuels they espouse the tagline ‘It’s a Start’.

This point of view, Hart pointed out, doesn’t leverage the full opportunity that is there. The truly revolutionary and significant efforts toward sustainable enterprise will apply tomorrow’s technology to underserved emerging markets. It will make obsolete old ways of doing and thinking by moving to regenerative technologies rather than ultra-efficient ones. The great innovations in technology that are yet to occur represent the greatest hope for a truly sustainable future. Companies at the cutting edge have realized this and have repositioned their core processes with this very concept in mind. Take, for example, DuPont – a company largely branded as a chemical company. Few realize that over the past ten years the company has forged down a path of reinvention – divesting itself of petrochemical sectors and acquiring businesses focused on biology, information technology, safety consulting, and agriculture. Today the company that once focused on synthetic replacements for natural materials harbors one of the largest seed companies and the largest soil company anywhere. The company has embraced a new, clean technology base and has done so without sacrificing significant shareholder value.

According to Hart, disruptive innovation is what the new era in sustainability needs. This speaks to the concept of ‘creative destruction’ toward sustainability. Small pains and short term losses are often incurred when such innovations happen – but this is about transformational technologies which create far superior long term returns and breakthroughs in terms of quality, efficiency, and outcomes. Indeed, if we are to truly uplift the underprivileged masses through the creative application of technology, a sound strategy would be to fund research and development to develop technologies which can be applied to emerging markets. For example, renewable energy companies market alternative energy resources such as solar, wind, befoul and fuel cells – but since these are small scale and renewable they are disruptive to the current and prevailing systems dependent on fossil fuels to generate electricity. Despite the great opportunities, Hart and others feel quite strongly that these breakthrough innovations are unlikely to happen here in the U.S. first - given current public policy. Instead they are more likely to happen in places where there are great opportunities to apply bottom-of-the-pyramid (BOP) strategies that uplift the impoverished and create new and sustainable markets over time. Early studies have shown that this approach specifically entails collaboration between corporations and grassroots organizations which are close to and trusted by the aforementioned emerging BOP markets. This, Hart further specified, is not a linear process – and often the combination of organizations which proves most effective in delivering win-win-win outcomes is not one which is initially apparent.

In summation, the critical points delivered by Hart that will dictate future progress for a sustainable future are as follows:

  1. transcending ‘intellectual laziness' to find solutions that shatter preconceived tradeoffs (i.e. we can create high quality , low cost products)
  2. proactively designing processes to generate long term shareholder value
  3. aversion to incrementalist logic and process and welcoming transformation
  4. Successfully implementing technologies which are initially disruptive but eventually superior in quality, efficiency, and sustainability
  5. Effectively engaging with grassroots organizations closest to BOP markets to successfully and simultaneously capture new markets, benefit the underprivileged, and increase shareholder value.

Personally, I agree wholeheartedly with Stuart Hart’s philosophy – he is clearly an enlightened thinker and is working at the cutting edge of business research and innovation. It is only fitting that he was brought to Cleveland and Case by the Center for Business as an Agent for World Benefit.