By: Pablo Álamo, Professor at CETYS Graduate School Of Business@pabloalamocoach

Globalization and new markets present increasingly demanding conditions that require  consciously designed responses in order to maintain high levels of competitiveness. Yet it is all too common for there to be deep schisms between organizations’ business objectives and their management paradigms. Could it be that these organizations’ management paradigms are fundamentally incompatible with their strategic objectives? Is there an accurate and reliable path to follow in these times of high complexity, uncertainty, and volatility?

Today, a large cross-section of organizations, including non-profits, operate in global environments and in demanding markets that force them to incorporate innovation into their strategic processes because it is a source of differentiation and value creation. Furthermore, the pandemic, of which much has been written, has only further complicated the ways of doing business and the demands for innovation and competitiveness. 

Although the business objective of having good professional practices has a direct effect on innovation, competitiveness, and sustainability, this is not always well-perceived, appreciated, and executed by organizations in ways that add value to their businesses. In fact, in a lot of cases, the opposite can occur. How, then, can business leaders genuinely incentivize sustainable innovation? Based on my experience as a business consultant and the many interactions with my MBA students, I believe that the answer lies in transforming the management paradigms that serve as the foundation of modern management.

The key problem, as suggested, has to do with the way management paradigms which hinder genuine innovation. It does not make sense, for example, for boards of directors to ask their managers to be more innovative and, at the same time, require them to manage under the paradigm of cost reduction. Cost reduction seeks to increase profits and consolidate business growth in the face of competition by reducing operating costs. While this is a legitimate objective, if innovation is also a desired objective then prioritizing both at the same time may not lead to optimal results since these principles can potentially conflict. It’s not that they are guaranteed to, but it’s widely recognized that they can.   

The same happens with other managerial paradigms that few directors and managers question today, at least in practice, because it’s seen as simply being part of the way of running the company. For example, listening to the customer and seeking customer satisfaction at all costs is widely preached, but it can often be counterproductive and end up resulting in poor and highly risky innovation due to excessive focus on short-term gains and incremental changes instead of pursuing bold, new ideas that might not immediately appeal to customers.

What alternative does a company have in the face of the traditional yet obsolete paradigms that are present in the managerial style of most companies? In my view, the grand paradigm that should guide the action of all others is sustainable value creation, which can be specified in various ways. One way that we have successfully applied in a number of organizations has been the proposal of the Sustainable Development Goals (SDGs), a very effective tool to promote innovation via the paradigm of “adding value to all stakeholders.” As is well known, the SDGs were developed by the United Nations and are a framework for public and private action that encourages greater social and environmental responsibility for the four main types of actors (governments, businesses, civil society organizations, and individuals). But the most important point about the SDGs framework to be made here is that it stimulates, motivates, and fosters more awareness, investments, partnerships, and collaborations toward sustainable and scalable innovations.

For example, while working with a company in the aerospace sector, we ran an exercise to link the SDGs with the company’s corporate social responsibility (CSR) strategy. The SDGs that were most closely linked to the company’s business model were SDG 12 (Responsible production and consumption) and SDG 7 (Affordable and clean energy). However, after conferring with stakeholders, the company decided to promote and work on SDG 10  (Reduced inequalities) , 5 (Gender equality), and 1 (No poverty).

Naturally, this meant implementing some high-value organizational changes. One of the new goals that were set was, “Gender equality, both within the company and in its relationship with the community,” guaranteeing equal wages in jobs of the same rank, regardless of gender or nationality. By doing this it managed to change dynamics and customs that were deeply rooted within the organization.
Organizations need a paradigm for innovation that encourages change. This adds sustainable value, in the comprehensive sense of the term: economic, environmental and social value, emphasizing the solution of global problems that threaten the sustainability of the planet and human dignity and quality of life. We have witnessed that the SDGs are an effective tool to encourage change with high shared value.