C.K. Prahalad: Sustainability Can Lead to Innovation

Tuesday, November 10, 2009

He’s going green. After core competence and the bottom of the pyramid, the world’s best-known management guru of Indian origin, CK Prahalad, is talking sustainable development. Why? Because, as he argued in a recent article in the Harvard Business Review, “Sustainability is the mother lode of innovations that yield both bottomline and topline returns”. In an exclusive interview to ET Now , the Paul and Ruth McCracken professor of strategy at Stephen M Ross School of Business at the University of Michigan, talks about sustainable development, the bottom of the pyramid, and his own intellectual journey. Excerpts:

You say that for companies there’s no alternative to sustainable development. That’s a sweeping statement to make.

I am just recognising the inevitable. If you look at the water shortage, high commodity prices and certainly global warming, then the need for sustainable development is obvious. So, my starting point is, don’t deny the obvious, get on with it and innovate.

But most companies today are fighting for wafer-thin margins. So, what’s the incentive for them to invest precious capital in sustainable technologies or processes?

If you deeply understand sustainability, then it’s just like the quality movement some 30 years ago.

If you recall, there was a lot of debate about whether quality will increase cost. What did we find? That if you deeply understand quality and you put methodology in place, costs automatically come down. I believe sustainability can be the next quality challenge. It’s going to drastically reduce costs and increase consumer acceptance. Don’t look at sustainability as compliance and regulation, but as an opportunity for breakthrough innovation.

India can argue that it’s not a big polluter compared to developed countries, so the companies here don’t really need to start thinking of sustainable development. What would you tell such companies?

In India, you don’t have to start (on sustainable development) because you are a big polluter. You can start because there’s a shortage of resources. If I look at a washing machine that recognises when electricity was cut off and starts the wash cycle from there and not the beginning, then it saves energy, it saves water and it is acceptable in India because it is sustainable development and it’s good business. The beauty of this is, if you innovate here, you can take those innovations back to the US.

You also talk about consumers at the bottom of the pyramid. But the irony is, if we create consumers out of millions of poor people, we are putting greater stress on the environment. How does this marry with your argument on sustainable development?

That’s an important question. As you start including additional 4 billion people into the process of globalisation, you are going to put a lot more pressure on sustainable growth. Therefore, inclusive growth and sustainability are joined at the hips. In fact, what inclusive growth and sustainability force us to do is to recognize how to do more for more people with less. And this is the organizing principle I am proposing.

Source: Economic Times (link opens in a new window)

business case