Drive sustainable change as part of a sustainable innovation system

An article by Alex Wolf.

In this article, we explain the concept of sustainable innovation ecosystems and illustrate how the different stakeholders, with diverse goals and needs, can vastly benefit when they become part of such an ecosystem. We also touch upon ways in which companies can contribute to building them, illustrating challenges that might arise based on our work as a transformation consultancy.?

In a world of complex challenges such as the climate crisis, the myth of executive geniuses who come up with the greatest, most innovative ideas all by themselves, is outdated. One of the key tasks but also challenges of modern leaders is therefore to leverage collaboration and collective intelligence?and subsequently contribute to solutions for sustainability challenges of the present and future. This can be done not only inside the organization but also outside it, together with partners. Sustainable innovations created within and carried out by a sustainable innovation ecosystem can be a way to prepare companies and their business models for the complexity of this challenge. Those innovations thereby also present a chance for being part of the next big shift, the shift towards a sustainable economy. ?

How do we define an innovation ecosystem?? ?

In science, we define ecosystems as a community of organisms, functioning as an ecological unit in their environment, characterized by creative complexity, as well as biodiversity. Observing those ecosystems in the natural world, scientists understood that organisms need to support each other to function and, eventually, survive.?When we grant a closer look at?balanced innovation ecosystems, we?identify diverse players, stakeholders, and actors, just as in the natural world. Practically speaking, an innovation system can incorporate entrepreneurs (start-ups), larger corporations, investors, NGOs, incubators, banks, universities, cities, policymakers, and the media (Figure 1). After all, innovation ecosystems are not a new phenomenon. Human history taught us, that complex ecosystems already existed?in times of Enlightenment, in Florence, Italy. Even then, the advantages of an innovation ecosystem laid in a network of shared expertise and resources. Today, in a world where climate crisis is affecting everyone and everything, the need for collaboration and sustainable synergies especially applies.

The challenges lying ahead are marked by incredible complexity, and therefore cannot be solved by a single actor.

Innovation ecosystems could offer a space for collaborative problem-solving, addressing the rapid changes and crises confronting us globally. This involves the climate crisis, but also war, pandemics, and the societal and humanitarian crises as a consequence of such disasters.

Figure 1:?Example of an innovation ecosystem (authors' illustration)

How can we unlock the scientific knowledge on?ecosystems of the natural world for innovation in the business sphere, to?build future-proof businesses, and how is this crucial to the sustainability challenges of the present and future??

How does sustainable innovation become a driver???

The focus of sustainable innovation ecosystems lies on the sustainable value creators, who are the stakeholders and players of the ecosystem. When sustainability drives such ecosystems, the common goal is not only to create economic value through innovation, but also to solve societal and environmental challenges. This means that the actors involved in sustainable innovation ecosystems share a mission to contribute to a prosperous?future through the innovations they co-create. At the same time, there is a second meaning attached to the term “sustainability”. A sustainable innovation ecosystem is also a resilient network of actors that masters challenges, and successfully links and balances the actors involved as well as the resources they bring to the table. Thus, when we talk about sustainable innovation ecosystems, we think of a network of actors that thrive for co-creating sustainable innovations, all while being sustainable in the way they collaborate (Figure 2).??

Figure 2: Example of a sustainable innovation ecosystem?(authors' illustration)

Innovative green start-ups, for example, paving the way forward to a more sustainable planet, benefit from the access to resources, such as capital. Usually, those entrepreneurs need to source innovation further away while building globally distributed teams. In a sustainable innovation ecosystem, a big pool of opportunities and options can open for changemakers, even globally. On the other side, those start-ups then can assist larger corporations within the ecosystem to identify useful technologies for their purpose and growth. To VCs, the sustainable innovation ecosystem might provide the help to find the best companies for their portfolio to invest in and audit the existing activity. Further, public institutions can understand the interest of private partners and vice versa. Overall, a crucial benefit lies in the open flow of information through the communication network of a sustainable innovation ecosystem, allowing capacity building from within and ongoing learning from diverse members of the ecosystem.??

Why and how your organization should be part of a sustainable innovation ecosystem?

In a sustainable innovation ecosystem, companies can benefit through transforming innovative and sustainable ideas into reality, therefore developing further in their vision and mission. This way, those companies can sustainably grow both in terms of numeric and experiential value.?Remarkably, the ecosystem approach to innovation is not only a way to leverage talent within the organization but also on the outside of it, within an?ecosystem. Innovators and changemakers can develop and launch solutions to solve real-world problems at a faster pace through sharing resources and knowledge. They collaboratively drive sustainable change. While being part of a sustainable innovation ecosystem, companies can also contribute to the bigger picture of economic stability. ?

There are different ways to bring the ecosystem approach to your organization. Leaders can think about existing ecosystems to become part of or of other, complementary actors they could team up with to build one.?To strengthen your regional entrepreneurship ecosystem, it is not needed to set up co-working spaces and incubators. Furthermore, offering financial incentives based on high risks (e.g., angel investment tax credits) is not necessary at an early stage to stimulate the entrepreneurship ecosystem. Building a sustainable innovation ecosystem, however, requires the establishment of a clear vision and goal, connected to clear metrics for further impact assessment. Additionally, an explorative mindset to experiment, a culture of acceptance towards failure, and co-creation and collaboration provide a ground for building a balanced sustainable innovation ecosystem. Companies must bring openness to trial and error while embracing the process of sustainable innovation, despite the challenges they are facing. Those are mostly the difficulty to access talent, excessive bureaucracy, and scarce reliable early-stage capital (Figure 3).?

Figure 3: Challenges to building a sustainable innovation ecosystem?(authors' illustration)

It is especially important to tackle those challenges since the way to make such an ecosystem flourish is precisely the points mentioned above. The access to scarce early-stage capital that enables reliable funding (in contrast to risk-driven financial incentives)?and employable talent, which then needs to be supported. Moreover, transparent communication between the actors of the sustainable innovation ecosystem is necessary for successful collaboration.??

How can a sustainable innovation ecosystem look like, and who is creating it???

Our consulting work as well as our work in the sustainability sphere at The Morph Company provides us with valuable insights into sustainable innovation ecosystems in practice. Therefore, we want to present the work of our project partner, the European Startup Prize for Mobility (EUSP), and the advocates for circular business models at Circular Valley in the following.?

The flourishing, sustainable innovation ecosystem of start-ups and entrepreneurs in the field of mobility in Europe that EUSP fosters, proves, that different actors within the ecosystem can find solutions together, even though they might be driven by different goals. This sustainable innovation ecosystem was established together with major EU institutions (European Parliament, European Commission, European Investment Bank, etc.) as well as with large mobility corporations and tech giants. In this case, the impact potential lies in the visibility and international recognition of the importance of innovative mobility solutions. This is critical since transport today accounts for nearly 30 percent of CO? emissions within the European Union, a problem EUSP tackles by building bridges between start-ups and EU institutions. The initiative provides a fast track to investment opportunities and innovation platforms, connecting sustainable mobility start-ups and EU decision-makers for more sustainable innovation in the mobility sector.?One of the main takeaways, for making a sustainable innovation ecosystem such as the one of EUSP work,?is to acknowledge that good conditions for community engagement are needed. There, organizations that build such ecosystems as non-profits can reach their limits when it comes to financial capacity, building lasting communities, and attracting other organizations that will bring the commitment to nourish the ecosystem collaboratively. However, a backbone organization like EUSP, to support the ecosystem, can be especially helpful to connect the dots between actors. The impact on a sustainability challenge, such as mobility in Europe,?can be far-reaching. In 2021, 600 start-ups applied for the prize, the Award Ceremony counted 300,000+ views, and the voice of 400 mobility start-ups could be raised in the Manifesto of the European Startup Prize (EUSP Manifesto).??

Another example of a sustainable innovation ecosystem is the Circular Valley, a hub based in the greater Rhine-Ruhr metropolitan area. The goal of Circular Valley is to attract interested founders from all regions of the world, establish cooperation with various organizations and companies and make revolutionary ideas of circular economy reality. Thereto, the Circular Economy Accelerator Program was created, where early-stage circular economy companies are taking part in an intense 3-month program in Wuppertal.?Since the program seeks to attract founders globally, the participants of the cohort are diverse in terms of cultural background, age, and experience. Not only students but also old hands from different industries are contributing with their knowledge and ideas to the cohort and cross share their ideas. Further, the goal of the Circular Valley is not only to keep the companies in the region, but spread those solutions globally. Following the concept of Circular Economy, the founders of the Circular Valley understood that various areas of the value chain must be tackled collaboratively and cannot be solved by a single company alone. In this case, a sustainable innovation ecosystem is needed to make circular business models work, especially globally. Therefore, larger corporations as part of the Circular Valley ecosystem are crucial, which receive inspiration for sustainable and circular business models from start-ups, and the start-ups reach feasibility in transferring their solutions into reality thanks to the bigger players. This sustainable innovation ecosystem shows that collaboration can take place across industries. ?

We need sustainable innovation ecosystems for an impactful change!?

When it comes to innovation, the exchange of knowledge and collaborative creation has always been important, however, it is especially critical now, that we live in a time of fast-paced changes, marked by multiple complex challenges and crises. We need to create sustainable innovation ecosystems that grow, adapt, and last.

Through understanding how sustainable innovation ecosystems function, we understand that the creation of value and decision-making cannot be centralized in an innovative and sustainable environment.?

Therefore, we require a joint effort in which companies can be part of the next big shift, this time a shift towards sustainability. This shift will be characterized by sustainable and circular value creation through green technologies.?The creation of ideas that become real-life solutions in collaborative action is key to tackling the complex problems of our time. So, can we as Europe become a hub of diverse pioneers for a sustainable future?

Sources

• European Startup Prize for mobility (2021). European Startup Prize for mobility. Raising the voice of Europe's sustainable mobility startups. Online: https://startupprize.eu/wp-content/uploads/EUSP-MANIFESTO-6pages-new.pdf?
• Fukuda, K., & Watanabe, C. (2012). Innovation Ecosystem for Sustainable Development. In (Ed.), Sustainable Development - Policy and Urban Development - Tourism, Life Science, Management and Environment. IntechOpen. https://doi.org/10.5772/26626
• Knittescheidt, K. (2022). Rettet uns die Kreislaufwirtschaft vor der Rohstoffkrise? Handelsblatt Green. Online: https://www.handelsblatt.com/audio/green-podcast/handelsblatt-green-rettet-uns-die-kreislaufwirtschaft-vor-der-rohstoffkrise/28367794.html
• Millard, M. (2018). What is an Innovation Ecosystem, and how are they essential for startups? Online: https://masschallenge.org/article/startup-innovation-ecosystem-explained. ?
• Osterwalder, A.,?Viki & Pigneur, Y. (2019). Why Your Organization Needs an Innovation Ecosystem. Harvard Business Review. Online: https://hbr.org/2019/11/why-your-organization-needs-an-innovation-ecosystem. ?
• Pū?is, I. (2021). Building a sustainable innovation ecosystem. Keynote by Ingmārs Pū?is / LMT. Online: https://www.youtube.com/watch?v=GoMyu6E2zEU?