Innovation is a paradox. At one level, it’s motherhood. For any organisation – indeed, any living thing – to survive, its rate of innovation must be at least equal to the rate of change in the world surrounding it. Yet while everyone accepts that innovation is urgent and necessary, in many companies it is conspicuous by its absence. Why do so few companies do it routinely and well?
Part of the reason is that like other management concepts – leadership, even management itself – ‘innovation’ in the abstract is frustratingly difficult to pin down. What does it consist of, exactly? And where do you start? After all, two of the firms most often cited as innovation exemplars are Apple and Dyson. Yet Apple didn’t invent the tablet, smartphone, MP3 player or PC, and the vacuum cleaner had been around for ages before Dyson reinvented it.
“Innovation is the result of everything an organisation does to better fulfil its purpose”
There is no shortage of academic literature on the subject. But in the light of a detailed study of innovation theory and practice we believe a more helpful approach is to think of innovation as a by-product of something else – as a means rather than an end. Innovation is the result of everything an organisation does to better fulfil its purpose. It’s any change made that creates new, better or even a different kind of value for a company’s stakeholders – customers, employees, shareholders and the economies and societies in which it operates – whether in products, services or the processes that deliver them. Innovation is what a company does to move itself from A to B.
Or, in Marks & Spencer’s case, to A. M&S’s Plan A, launched by then CEO Sir Stuart Rose in 2007 with a 100-point plan including investment of £200m over five years, is the company’s bid to make itself sustainable, that is future-proof, in the medium term. Now in its sixth year, Plan A (‘because there is no ￼Plan B’) has triggered a wave of innovation across every part of the company.
Results have surpassed expectations even of its champions. Although financial payback wasn’t the primary aim, Plan A broke even in year two; by 2011 it was contributing a net £105m to M&S’s bottom line. Meanwhile, new ways of working have cut M&S’s energy use by 25 per cent, waste by 40 per cent and packaging by 50 per cent. Absolute carbon levels have been reduced by 22 per cent, and the group became carbon neutral in April 2012. One-third of its products now has a Plan-A attribute – all fish and nearly all wood, paper and packaging is responsibly sourced, for example.
“Although financial payback wasn’t the primary aim, the Plan A innovations broke even in year two”
Individual innovations, some surprising, range across technologies and sectors. They include:
- An improved diet for dairy cattle that delivers milk with 5 per cent less saturated fat;
- Suits and other garments designed for disassembly and recycling;
- A partnership with Oxfam that has yielded £8m in extra value for the charity over three years (see box on Shwopping);
- Eco- and Sustainable Learning Stores, some developed with suppliers;
- New technologies and processes for waste treatment that allowed the group to meet its target of sending zero to landfill from April 2012.
Plan A was launched from a standing start. It was an open-ended commitment with no firm business case and no obvious levers to pull to get from here to there. Yet today the programme, and the innovation it entails, is so deeply embedded that it is part of the day job for all the group’s 81,000 employees. Contributing to the group’s sustainability commitments in ways that create shared value for other stakeholders has become everyone’s job – ‘part of the way we do business,’ in the words of director of sustainable business Richard Gillies.
How did M&S bring this sea-change about? Like other high-performing companies it brought together a number of different elements to build successful innovation capacity. We identify them as:
1. Clarify the organisation’s core purpose. What end does innovation serve? M&S has always been a ‘responsible’ company, providing solid value for customers, treating its employees with respect and for many years operating as unofficial consultant to the UK manufacturers which had comprised most of its suppliers. As Gillies tells it, Plan A emerged from M&S’s realisation that in a world confronting the urgent need for 30-50 per cent more food, energy and water by 2030 just to stand still, its past reputation as a benevolent employer, however worthy, was simply irrelevant. The new conditions risked leaving today’s profligate corporate giants looking as outmoded as dinosaurs. The survivors, it reasoned, would be those that can deliver the aspirational quality that consumers want while looking them in the eye and promising to respect the planet’s needs as well. The two parts of the purpose met “Although financial payback wasn’t the primary aim, the Plan A innovations broke even in year two” ￼in sustainability. Hence Plan A. ‘Plan A emerges from our values,’ says Gillies. ‘The innovation was to take and apply them in a new expression.’
2. Identify the performance challenge that innovation must address. Being clear on the gap that innovation needs to fill and using it to create an unarguable need to find new ways of doing things helps people embrace the uncertainty and fear of the unknown that innovation often brings. Ask: where and why will we not succeed with business as usual? For M&S, the imperative was clearly articulated by Rose, who believed that M&S was losing the moral high ground, and hence trust, to other retailers. In the 1950s, notes Gillies, ‘doing the right thing’ consisted of providing staff with free hairdressing and “To make the urgency of the challenge real, Gillies deliberately set a series of impossible-looking targets from which he refused to back down” chiropody. But that was before global and financial warming and the realisation that the planet was running out of resources. In those circumstances, retaining its prized position as most trusted retailer required a righter right thing than free chiropody. To make the urgency of the challenge real, Rose and the M&S team deliberately set a series of impossible- looking targets from which he refused to back down. Solutions must meet both business and environmental requirements. For instance, when a main supplier couldn’t meet the need for poison-free paint at acceptable cost, they found a local supplier who could.
“To make the urgency of the challenge real, Gillies deliberately set a series of impossible-looking targets from which he refused to back down”
The lead supplier subsequently worked to get the cost down and was recontracted for future stores. In some cases embarking on the journey triggered unexpected benefits. The reduction in saturated fat in milk was the side-product of a change in dairy herds’ feeding regime that was originally aimed at cutting methane and CO2 emissions. Adopting LED lighting in stores slashed electricity bills, which was anticipated, but also the need for air conditioning, which wasn’t.
3. Choose the most appropriate innovation model for the organisation and its situation. What structure and process will best enable innovation in your organisation? For M&S as a large retailer, the programme involved central target setting, with responsibility devolved outwards and downwards to individual units. ‘The principle is that the programme is operationally devolved across the business, but centrally supported,’ says Gillies. ‘You can’t have one without the other’. In practice, however, although the targets were devolved, it soon became clear that in the initial model ‘there wasn’t sufficiently accurate reporting or follow-up or highlighting of deficiency or success to the highest levels in the organisation’. Appointing Gillies as director of sustainable business with specific programme management resources showed the company meant business by committing seniority and providing central access; so did linking directors’ bonuses to Plan A targets. Not welcomed everywhere, this had the powerful effect of changing commitment from someone else’s job to everyone’s. Other key elements at this stage included harmonising financial and sustainability measures and altering systems and structures accordingly. Also important was building partnerships with compatible organisations such as Oxfam (‘Shwopping’), Forum for the Future and UNICEF to develop shared value initiatives.
4. Create a top-down plan, process and structure and set of tools – in effect a strategic plan to ￼prioritise the most valuable opportunities and manage the investment with its concomitant risk and return. Plan A originally set out 100 commitments grouped in five ‘pillars’ prioritising five main goals: carbon neutrality, zero landfill, sustainable sourcing, ethical trading and healthier customer and employee lifestyles. In 2010 80 new commitments and two new pillars (‘involving customers’ and ‘how we do business’) were added. In total 138 commitments have so far been met, a large step on the way towards the stated goal of becoming the world’s most sustainable large retailer by 2015. Driving and monitoring Plan A is a ‘how we do business’ executive committee chaired by CEO Marc Bolland, meeting every two months. All corporate functions employ Plan A managers. The company has recently set up a sustainable retail advisory board, jointly chaired by Bolland and Forum for the Future founder Jonathan Porritt, to counsel on progress towards full sustainability.
5. Create bottom-up energy and activity, giving people broad direction and liberating them to act and learn. At the heart of Plan A is people. Sustainability can’t happen without the wholehearted engagement of ordinary employees, fusing the arguments of heart and head to generate the energy and passion to make the hard yards that drive the programme forward. ‘The whole point is that it’s decentralised and pushed out to the parts of the business responsible for packaging, transport, buildings, whatever,’ says Gillies. ‘Their people are the ones who are motivated and responsible for pushing it forward’. This doesn’t happen automatically. For Gillies, a key learning point was about finding the right language to express the new priorities. The initial targets were often couched CSR-style in environmental and social terms. To operationalise them meant translating the language of sustainability into business-speak, turning the high-level aims into commercially understandable actions. This also meant getting to grips with the business case for the measures, which had been notably absent in the initial public announcements.
“The initial targets were often couched CSR-style in environmental and social terms. To operationalise them meant translating the language of sustainability into business- speak”
Perhaps fortuitously (at least for the plan), the urgency of both articulating the business case and finding the right language to embed it was intensified by the downturn that struck in 2008, substantially altering the economics of M&S’s markets. In other hands this could have killed the programme on the spot, but instead the CEO at the time Sir Stuart Rose astutely used it as a catalyst to speed things up (‘never waste a good crisis’). He was partly aided by the fact that soaring raw material and energy prices made the need for finding new ways to cut costs and push through efficiencies obvious to everyone. Some early flagship successes kicked in to reinforce the spiral. ‘Not everyone will be able to quote the seven pillars, but they will know their part in recycling coat-hangers or reducing the numbers of carrier bags or the community charity work we get involved with,’ says Gillies. ‘For instance, in the last few years we may be the biggest donor to Breakthrough Breast Cancer, which is closely relevant to both staff and customers’. It’s not uncommon, he says, for visual merchandising professionals to use their skills in Oxfam shops, another partner. To co-ordinate the grassroots efforts, ‘Plan A champions’ work across the stores and offices, and in 2010 the group instituted a £10m-a-year Innovation Fund to seed small-scale experimentation and pilots.
6. Provide a clear process to innovate. For innovation to become ingrained, people need to internalise what it’s for and what it means in the specific context, what really matters to customers (not necessarily what they are given), how to use that knowledge to generate ideas for better products and processes, and having the means to put the resulting proposals into action. ‘Our process goes along the lines of: understand the things that are important to stakeholders, identify areas where the business needs to change its current outcomes, create a series of targets, devolve them to the areas of business and hold them to account to deliver’, says Gillies. ‘It’s not a lot more complicated than that, although much more goes on between the lines. But that’s what we’re doing at the moment – bringing in what customers and shareholders believe is important, which then allows us to create the next set of targets and plans’. Targets, he believes, have been absolutely critical: ‘There’s nothing like a new fixed target, publicly set and audited, to force people to innovate, because we couldn’t have got there otherwise. That’s the beauty of having targets you don’t know how to achieve. If you did know, you wouldn’t innovate.’
For Gillies, the other essential ingredients in Plan A have been two aspects already touched on, balancing decentralised execution with the right central support, and turning high-level goals into achievable targets by finding the appropriate words to express them in. Another turning point, he believes, was ‘getting over ourselves’ – in other words, getting comfortable with the idea that doing the right thing could generate a financial return. ‘There’s some sense with things that come from the philanthropy corner that if you’re seen to profit from them, it somehow devalues the good that’s being done. For us, getting over that hurdle and saying actually shared value is what we’re after and we can be so much more powerful when that’s what we do has been an important lesson for us.’
Would he have done anything differently? ‘Apart from learning everything two years sooner…’ With the benefit of hindsight, Gillies says, the company would have shed its inhibitions and started formulating the business case – still highly moot for most shareholders and many large companies – earlier. Fortified by the hard numbers of what Plan A has already achieved for its own and the planet’s benefit, M&S now wants to push further and faster down this route. The missing piece – ‘and we continue to wrestle with this, I’d have hoped to articulate it much more clearly than we currently do’ – is making the case for consumer engagement: what’s the shared value for the consumer, what’s in it for me at an individual level?
“Another turning point, he believes, was ‘getting over ourselves’ – in other words, getting comfortable with the idea that doing the right thing could generate a financial return”
As M&S’s experience with Plan A shows, innovation is not something finite and separate from the rest of the business: it’s the means by which it propels itself towards its chosen destination, in this case full sustainability. Getting to A is what the job has become, and it doesn’t end. Innovation of this hard-nosed, business-led kind is the very opposite of brainstorming or trying to come up with world-shaking ideas in a vacuum. Instead it is about getting crystal clear on what matters to stakeholders and where outcomes must change to deliver new value to them. As we have seen, to do that M&S needed to:
- Clarify the core purpose – what it existed to do and how it could best express those values in the particular circumstances of today;
- Identify the performance challenge – the gap that innovation needed to fill to enable it better to fulfil the core purpose and make it actionable;
- Find the innovation model that best fitted the business and its context – the roles, structures and processes that would embed it as part of everyone’s day job;
- Create the necessary toolkit for execution – establish priorities, plan how to meet them and manage the risks and opportunities involved;
- Unleash energy and direction and liberate people to act – in other words find the means to engage hearts as well as heads so that everyone knew their role and momentum became self- sustaining;
- Provide a clear innovation path – so that people knew where their new ideas are valued, how to put them into action and how they would be held to account.
Although perfectly aware that the journey is an unending one, the measures in Plan A have taken M&S well down the road towards its 2015 sustainability goal. Over and above that, the company is more capable, innovative and confident as a result. ‘What Plan A has done is open up a safe place for change to occur,’ asserts Gillies. ‘It provides an opportunity for people to be able to challenge the status quo in a positive way. It has made us more flexible, including acceptance of disruptive innovation. We’d like to think it’s making us more resilient.’
‘Shwopping’ is a good example of ‘shared value’: how M&S is using Plan A to create simultaneous benefit for customers, the planet and the business.
The concept originated in a partnership with Oxfam under which donors handing in old items of M&S clothing received a £5 voucher to set against their next £30 spend in a M&S store. As a result, the charity got more clothes to sell or recycle, M&S benefited from increased traffic and greater spend per customer, and customers were able profitably to prune their wardrobes without adding to the mountain of landfill (which is where 500,000 tonnes of old clothes end up every year). In five years since the scheme started it has netted Oxfam an extra £8m in revenues.
Shwopping takes the original idea a step further. Since April 2012, customers can drop off unwanted garments in recycling bins – Shwop Drops – in M&S stores. This time there are no financial incentives; on the other hand the clothes can be non-M&S, and shoes, handbags, jewellery and bras (in high demand in the Third World and therefore particularly valuable to Oxfam) are accepted too. The aim, according to the group, is not to persuade people to stop buying clothes but to ‘consume’ them in a more sustainable way: ‘We hope this project will help see a move away from “disposable” fashion where we throw away clothes when we’ve had enough of them’. M&S recently announced it was further extending the Shwopping scheme to offices and workplaces in other companies around the country.
Shwopping is a clever concept – but it took ingenuity and real innovation to make it happen. M&S undertakes that nothing handed in will go to landfill – everything is resold, reused or recycled – and every penny raised used to fight poverty. But at the time there was no such thing as a reverse supply chain for clothing back from M&S stores, and no fabric recycling industry in the UK. Every link had to be invented.
Recycling was particularly challenging. Much low-grade fibre is reborn as mattress filling or carpet underlay, but after respinning, M&S is now getting back recycled wool and cashmere from Italy at considerable cost saving over new. Last year it launched an all-wool coat made from recycled wool at half the price of raw wool from Australia. Building on its reverse supply chain capacities, the company is now designing suits for subsequent disassembly, with recycled buttons and 100 per cent recyclable lining, and more such experiments will follow.
By Charlie Dawson
The Foundation is Jericho Chambers’ Growth & Innovation Partner