I recently spent a lot of time prepping for our New York Forum, and so I’ve got a bunch of ideas bouncing around my head from all the speakers. I wanted to explore one of those ideas here, for which I need to credit my colleague, Mike Holman.
At Lux, we help innovators with structured analytical frameworks. What this means is we consistently evaluate startups (for example) on the same 10 factors and have done so across different industries for more than 10 years. Is it possible to come up with more relevant factors for startups in a specific industry or technology? Sure. But there are benefits from consistency: We have a large data set to draw on, and from that, we know which factors are predictive of startup success. We also have a set methodology to draw on when we enter a new technology space – this gives us confidence when moving into new areas of expertise.
Mike makes the case in his talk that innovators need new skills and tools to be successful with sustainable innovation. Innovation teams are already comfortable assessing the technologies, markets, and companies, but that’s not enough: Projects are failing now because of political, sustainability, and consumer sentiment factors (see the chemical recycling player Brightmark). Much of Lux’s work over the last year has centered on developing new structured analytical frameworks to help innovators assess these factors and build a plan. We presented some of these frameworks at the NYC forum: Mike presented our sustainability fingerprint, which helps innovators identify sustainability risks from early stage opportunities; Cheryl Auger presented how Lux Motivbase uses AI-powered anthropology to understand changes in consumer sentiment; and Ian Rinehart presented the policy compass, our tool to forecast policy changes. There’s a ton of work underlying these approaches — and if you went to our NYC forum, you understand how to put this into practice.
The big point I want to make about all this is that successful innovators are now forced to be stakeholder capitalists. To be successful as an innovator these days, you need to balance business with social, political, and environmental factors — this is stakeholder capitalism in practice, if not in name. Nothing has changed in innovation, fundamentally, but a combination of government policy (like the Inflation Reduction Act) and intensifying consumer sentiment have broadly aligned the business and social incentives.
There are a few takeaways worth mentioning. One, innovation is more difficult now: There’s simply more to consider and get right than there was in the past. Two, organizations that are already engaged in stakeholder capitalism will be more successful at innovation: Innovation leaders always need to get buy-in from senior management; if there’s a mindset difference, it will be tough to get things off the ground. It’s also worth noting that the pressure for stakeholder capitalism is not that high for businesses as a whole; for many (most) businesses, continuing to emit will be the best thing for shareholders. This divide in priorities will continue to challenge businesses until stricter regulations (such as carbon taxes) come into effect and bring CFOs in alignment with CTOs.