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Innovation for a sustainable future
The Economic Times - 28 Jun 2010

YC DEVESHWAR, CHAIRMAN, ITC LTD.

INNOVATION is the elixir of growth in a competitive global business environment. More so, in an emerging economy like India as new opportunities emerge from a host of growth drivers. However, the challenges that confront businesses today go much beyond that posed by competitive markets and dynamic consumer preferences.

We live in a world threatened by challenges that arise from deep-rooted poverty and widespread environmental degradation. On the one hand, social unrest and even terrorism are consequences of the wide income disparities. On the other, rapid environmental degradation aggravates the threat of global warming. Such unsustainable environments make societies unstable, and can severely impact the future progress of business and the economy. Innovation that is inspired by a vision to sub-serve larger societal needs is one of the most meaningful contributions that businesses can make and also the most fulfilling.

Going forward, it is my deep conviction that competitiveness as well as profitability will increasingly depend on a company’s ability to adopt sustainable business practices. Growing civil society awareness and tougher regulations will indeed drive this change. Therefore, the innovation challenge will be to craft business strategies that not only deliver unique customer value propositions but also enable a twin impact—of ensuring a positive environmental footprint and creating sustainable livelihoods. Our own experience demonstrates that it is eminently possible to create larger societal value with business innovations that foster an inclusive and sustainable future.

We have pursued a 360-degree approach to encourage and enable innovation in the company. As a first step, recognising the challenge of managing a multi-business conglomerate, an innovative strategy of organisation was crafted. A threetier governance structure was formed with the board of directors entrusted with strategic supervision, a corporate management committee with the responsibility of strategic management of the company and divisional management committees for executive management of each business. Based on the principles of distributed leadership, it not only enabled focus in each business but also created a structure to derive synergistic value from its diverse businesses. The foods business of ITC, for example, was able to derive unique competitive benefits from the agri-sourcing strengths of e-Choupal, recipes of master chefs from our hotels, packaging innovations from the packaging business, the knowledge of brand building and customer insights from FMCG businesses and the reach of the company’s trade marketing and distribution network.

ITC’s abiding commitment to contribute to larger societal goals is also manifest in the innovations it fashioned in its agri business as well as its paperboards and paper business. Leveraging the power of Internet and digital technology, ITC’s e-Choupal has today become an internationally acknowledged model of rural transformation benefiting over 4 million farmers. By providing farmers a rich repertoire of agri-based interventions, it not only addresses the core needs of farmers in terms of infrastructure, connectivity, price discovery and market access, but also provides a significant boost to farm productivity through customised extension services. This has helped in transforming villages into vibrant economic organisations by raising incomes and co-creating markets. Similarly, a choice of strategy to source pulp from renewable plantations, in spite of cheaper imports, have led to creating livelihood opportunities for thousands of poor tribals and marginal farmers. An intensive R&D programme in ITC developed high yielding, disease resistant clonal saplings which are today grown by farmers—even on wastelands—providing a huge green cover through forests in over 100,000 hectares. In the process, it has created 46 million person-days of employment opportunities. These innovative business models have not only enhanced the competitiveness of the businesses but have simultaneously created immense value for rural communities.

Innovation within the company is also fostered through a five-year planning process that drives each business to present new ideas to the corporate management committee. Superior and differentiated value propositions earn the right to receive both funds and management support driving new growth avenues for the company. Many of the businesses also conduct annual exercises amongst internal teams to identify innovations through a unique “Innovation to Implementation to Imitation” programme. Biennially, a companywide vision workshop for senior managers showcase and deliberate innovations for future growth.

New entrepreneurs as well as progressive companies have a great opportunity today to contribute meaningfully to a secure and sustainable future. So far, open innovation models have synergised the efforts of internal resources, supply chain participants and even customers to co-create new products and services. To my mind, the need of the hour today is to encourage innovation in corporate strategies and business models that will enable companies to co-create, with local communities, opportunities for sustainable livelihoods as well as enrichment of natural capital. At the same time, civil society including customers, investors, and media, need to be made more aware of the tremendous change they can bring about by encouraging a preference for responsible companies. Innovations will be required to devise a rating system that can provide credible information to civil society to enable them to make an informed choice. Such innovations will spur the creation of a market for responsible sustainability practices. It will also make sustainability a value proposition that companies will embed in their offerings to civil society. That will indeed go a long way in creating a sustainable economy for future generations and a secure planet that will continue to nurture and nourish the billions of its inhabitants. I do hope that future innovation will awaken the world to such a promising tomorrow.