Jonatan Pinkse is Professor of Strategy, Innovation and Entrepreneurship and Executive Director of the Manchester Institute of Innovation Research at the Alliance Manchester Business School of the University of Manchester.
Professor Jonatan Pinkse, Executive Director of the Manchester Institute of Innovation Research at Alliance Manchester Business School, The University of Manchester.
This article is written as part of #CoveringClimateNow – a global collaboration of more than 250 news outlets to strengthen coverage of the climate emergency.
What the Stern Report did in 2006 for climate mitigation and the need to reduce carbon emissions, former UN Secretary General Ban Ki-moon now tries to do for climate adaptation: Show the numbers! This week, the Global Commission on Adaptation that Ban Ki-moon founded together with Bill Gates and Kristalina Georgieva of the World Bank, published its Adapt Now report, stating that investing $1.8 trillion in climate adaptation now will lead to a total of up to up to $7.1 trillion in net benefits. The message is clear, investing in climate adaptation to better cope with extreme weather and rising sea levels makes economic sense. But why are we not doing it then?
The climate emergency might be grabbing the headlines, lots of confusion remains about terms like mitigation and adaptation and the difference between them. People have always felt uncomfortable to admit the need for adaptation, as it could be seen as no longer trying to push for mitigation and reduce carbon emissions. Still, while the climate policy has long discussed mitigation and adaptation both as necessary responses, the business world has been much slower to acknowledge adaptation as a strategy to tackle climate change.
Adaptation is a confusing concept for business. Often, when managers talk about how they do adaptation, they will explain how they are improving their carbon footprint. But this is mitigation. And when you explain what we mean by adaptation, every manager will tell you that their business is always adapting to changes in the environment, also those related to weather and climate. Food producers, insurance companies, they all monitor weather patterns and analyze how any changes might affect their assets. It is part of business-as-usual.
Our research shows that the business-as-usual mindset could be a mistake. It leads businesses to underestimate the out-of-the-ordinary of climate disruptions and the need to radically change business practices to be resilient when experiencing extreme weather events. Studying oil firm responses to the Carbon Disclosure Project on climate adaptation, we found that oil firms have the tendency to see climate signals as nothing new. They don’t see a need to change their business practices because they feel prepared. Many climate signals are just considered part-and-parcel of operating under extreme conditions such as in the Arctic. We found a similar dynamic when Shell openly responded to critique via a public Webchat on arctic drilling. Shell engineers were convinced that they could handle the extreme conditions and there was no additional risk. Still, in 2015 Shell abandoned its plans to drill in the Arctic, apparently due to the disappointing discovery of oil and gas.
Why do firms underestimate the importance of climate signals and fail to see the need for a radical overhaul of their operations? We found that it has much to do with how they process climate-related information in their business. The people responsible tend to suffer from selective attention. They only notice certain signals related to climate change while ignoring others. Much of what they see as climate change depends on the source of information they consult. The IPPC reports, for example, might raise awareness but they lack the specificity needed for business to understand how climate disruptions them. The selective attention also leads to a focus on current activities only, discarding long-term developments.
What was most surprising, maybe, is that firms with well-developed risk management systems and those that frequently experience extreme weather are more likely to underestimate the need for climate adaptation. Paradoxically, being prepared now might leave them underprepared in the long run. Their risk management systems are typically based on past experiences. But, as with financial markets, past experiences do not form a guarantee for developments in the future. By relying so much on the past, firms might fail to see the need for radical measures to deal with the unexpected. The major problem of climate adaptation is that we don’t yet know what nature will throw at us, there is so much uncertainty. Businesses that seem well-prepared might therefore very well be the ones taken by surprise as well. Even if, deep down, they know radical change is necessary, they act as if current measures are sufficient. A change in mindset seems long overdue.
Over the past few months, I have contributed to several newspapers and magazines on the topics of climate change, sustainability and green mobility.
For the Telegraph, I commented on the most recent report of the Committee on Climate Change (CCC) on how to create a net-zero economy: How UK businesses can be ready for climate change
For the Financial Times, I wrote a piece – Climate change isn’t just a boardroom issue, it’s a market concern – in which I explain why business hesitates to take action on climate change. The insights are based on our article on climate inaction, published in Business & Society.
I made a similar argument in Management Today – The main excuses businesses give for climate change inaction – explaining what the reasons are behind the apparent inaction of business on climate change.
I was featured in a piece for Director magazine, on the Future of business motoring. Here I give my views on the future of green mobility such as electric vehicles.
by Aurélien Acquier, Thibault Daudigeos, and Jonatan Pinkse
The sharing economy encompasses an immense range of actors, including everything from major economic players (e.g., Airbnb and Uber) to local community-based initiatives (e.g., repair cafés or fablabs). With such a variety of players, it is difficult to clearly understand the sharing economy. In response, our article Promises and paradoxes of the sharing economy: An organizing framework, published in Technological Forecasting and Social Change, provides a framework to more easily categorize and analyze the nascent, yet booming sharing economy. Sharing as an economic activity is an age-old practice (bartering and lending). However, the current ‘sharing economy’ has grown exponentially thanks to the power of digital technology. While the term is very à la mode, there is no clear definition of a sharing economy initiative.
Is the sharing economy positive?
The term ‘sharing’ already creates an interesting question as ‘to share’ generally has a positive connotation. Yet, as exemplified by debates concerning Uber and Airbnb, the nature of the ‘sharing economy’ can sometimes be viewed negatively. We highlight that the use of the term ‘sharing’ can create a ‘feel good story’ that overlooks the darker sides of this new economy.
3 concepts to understand the sharing economy
To facilitate further discussion and analysis of the sharing economy, we suggest three concepts: (1) access economy, (2) platform economy, and (3) community-based economy.
The access economy includes initiatives that aim to share underutilized assets. Initiatives in this category tend to have two broad promises: first, to provide cheaper and wider access to services or products without requiring ownership; and second, to promote a sustainable solution for more intensive use of the capital ‘trapped’ in products.
The platform economy encompasses initiatives that focus on decentralized exchanges through digital platforms. In addition to promising broader access and resource optimization, these initiatives include secure exchange systems and promote individual economic opportunities.
The community-based economy includes initiatives built around non-contractual, non-hierarchical or non-monetized forms of exchange for products or services. These initiatives promote inclusiveness and social bonding within the community as a solution to overcome problems with traditional markets and bureaucracies.
We explain that most sharing economy initiatives can be categorized as a mix of two concepts. For example, fablabs and repair cafés would qualify as community-based access initiatives (i.e., they encourage local solidarity while promising wider access to particular equipment and know-how). Access platform initiatives include the likes of Airbnb and Blablacar. Community-based platform initiatives include examples such as Citiz, a national French network of local car-sharing companies.
- Although the sharing economy is booming because of digital technology, it is still too young to be clearly defined.
- Three concepts (access, platform and community-based economy) can help actors understand and categorize initiatives in the sharing economy.
- Maintaining a broad perspective on the sharing economy can help actors understand both positive and negative aspects of this evolution.
The research has been carried out as a collaboration between Aurélien Acquier (ESCP Europe, Paris, France), Thibault Daudigeos (Grenoble Ecole de Management, Grenoble, France) and Jonatan Pinkse (Alliance Manchester Business School, Manchester, UK).
By Professor Jonatan Pinkse
The opportunity to advance the development and prevalence of alternatively-fuelled vehicles (AFVs) has never been greater than it is now. Though technologies such as electrically-powered vehicles are not necessarily new, this is the first time that AFVs have received such a great deal of support across the board.
In addition to positive incentives such as subsidies, a significant window of opportunity has opened due to the Government’s increasing focus on policies designed to gradually phase out vehicles with an internal combustion engine.
The future of diesel cars in particular is looking increasingly uncertain, with its toxicity put into sharp focus by the recent Volkswagen scandal, where the company cheated emissions tests and covered up dangerously high levels of pollution. Moves by the Government, such as its intention to ban the sale of petrol and diesel cars by 2040, have also dampened public opinion of the fuel.
It is not just the UK that is beginning to take action, either. France is mirroring the UK’s own target, with a ban to take effect from 2040 – except in Paris, which has brought its target forward to 2030. Similarly, Copenhagen plans to ban all diesel cars as early as 2019.
The bad press for traditional fuels underlines the tremendous opportunity for AFVs to rise in popularity, and their potential to overhaul existing car fleets.
There are drawbacks, such as lingering technological barriers, the limited range of electric vehicles or the current lack of charging infrastructure, for example.
However, the advantages even now far outweigh the disadvantages. My own research has demonstrated that providers of AFVs can begin to overcome many of the initial barriers to adoption by innovating their business models, and particularly their value proposition. Rather than just offering vehicles as a product, the introduction of AFVs allows firms to provide new solutions for mobility in a much broader sense, championing mobility as a service.
Recognising the potential of AFVs as a key component of business strategy, rather than just a method of greening fleets, will be crucial for businesses as we move towards the scrapping of internal combustion engines. With the emergence of innovations such as vehicle-to-everything (V2X) and other connecting technologies, AFVs should not be seen merely as a means of reducing pollution and mitigating climate change – important as this may be. In reality, they are helping in the journey towards making all vehicles smarter and safer.
The key here is that in doing so, businesses will be able to change consumer perceptions of such technol¬ogies, demonstrating their value as a green service and simultaneously overcoming the problems inherent with new, disruptive technologies.
This is an exciting moment for AFVs. We are only seeing the tip of the iceberg in terms of the innovation and benefits they are set to bring to businesses and consumers alike in the future.
Professor Jonatan Pinkse’s analysis of the rise of alternatively-fuelled vehicles is featured in the Hitachi Capital UK Future of Fuels report, found here.
Innovation is more important than ever for firms to be competitive. However, while in the past product and process innovations were seen as key ingredients, nowadays business model innovation is considered to be crucial as well. Research from IBM shows for example that firms investing in business model innovation have significantly higher growth in their operating margin than firms focusing on process or product innovation. While the importance of business model innovation is widely acknowledged and not new per se, it is not yet clear why this form of innovation seems to drive competitiveness so much. Leading management scholars have argued that one of the main reasons for business model innovation’s strong competitive impact is that it centres on the links a firm creates between what technologies can deliver and how customers use them. If a firm manages to build unique links between key technologies and the way customers see these technologies creating value for them, the more the firm will thrive in the market. But how do firms create such links?
The key element of a business model that builds this link between technologies and customers is the value proposition: a firm’s promise or offering to the customer. The value proposition forms the linking pin between what a firm can offer technologically and what a customer is looking to get done. But innovating a value proposition is not easy because customers tend to have clear expectations of what the firms that they like so much should offer. Customers don’t necessarily like surprises. What if a well-respected firm is changing course because it wants to launch a new and potentially disruptive technology. Will customers accept this? Making a disruptive technology’s value proposition attractive for mainstream customers is very challenging.
We – René Bohnsack from Catolica-Lisbon and Jonatan Pinkse from Alliance Manchester Business School –set out to study how firms innovate value propositions for disruptive technologies and how successful they are in doing so. We chose car firms that were offering the disruptive technology of electric vehicles in the US and the Netherlands as a context to study value proposition innovation. Customers are typically very conservative in their choice for cars, so making electric vehicles attractive has proven to be very difficult indeed. Our results, which have been published in the August issue of California Management Review, were revealing.
We found three different tactics car firms use to innovate their value proposition to make disruptive technologies attractive to mainstream customers. Firms either enhance a technology’s unique advantages, they try to compensate for the technology’s disadvantages, or they ‘couple’ the technology with previously unconnected markets to tap into new sources of value. Our findings suggest that many firms only focused on trying to overcome a disruptive technology’s disadvantages by compensating for these by offering additional services. It was quite surprising that most firms rather relied on compensating disadvantages than on stressing or enhancing the novel aspects of a technology. This was especially the case for traditional car firms such as General Motors and Volkswagen who not yet seemed to fully grasp the full value that electric vehicles could offer to customers. However, those firms focussing on enhancing the technology’s unique advantages were more successful in the commercialization of their product than firms that were only compensating. Only Tesla and BMW really focused on the novel aspects of electric vehicles and had much more successful value propositions as a result. Only very few firms tried to couple their technology to new markets but this might be due to the early stages of that electric vehicle industry finds itself in.
Based on our findings we developed a value proposition reconfiguration framework allowing managers to increase the attractiveness of disruptive technologies in a cost-efficient way and to increase sales. Firms can use the framework to change their value propositions so that disruptive technologies become more attractive. The method helps managers to disentangle all the different features of a technology to see how they should repackage each feature in a novel value proposition by using a combination of compensating, enhancing and coupling tactics.
Tell us a little bit about yourself and your professional background:
“I’m from the Netherlands and I attended the University of Amsterdam where I studied my undergraduate and postgraduate degrees in the field of economics. Whilst there I branched out into the topic of environmental sustainability and this is now the driver for my research.
“My PhD looked at the issues of climate change, green energy and renewable energy. This led me to Grenoble Ecole de Management where I was an associate professor looking at economics and management. By working and researching in the innovation community, this led me to MIOIR here in Manchester. My research is about looking at different topics and perspectives on sustainability, such as technological and societal issues.”
The Academy of Management is the biggest organisation of its kind, with 20,000 members and 10,000 participants are expected to attend the Annual Meeting in Atlanta this summer. What is your role in this and how did you get involved?
“I have been active in the Academy’s ONE Division (Organisations and the Natural Environment) for some time and won the Best Dissertation Award in 2006 and the Emerging Scholar Award in 2011. This recognition brought me to the Program Team where I chaired the Doctoral Consortium and also the Professional Development Workshop.
“I was nominated to be the Program Chair for this year by fellow colleagues which is really pleasing but will not be easy. We are expecting more than 7,000 papers and symposia proposals to be submitted for possible presentation during the Annual Meeting as a whole.”
Lastly, what does the future hold both in terms of the Academy and your own research?
“I think we’re at an exciting yet challenging time in modern history where businesses can’t develop without considering their environmental footprint yet at the same time they still have shareholders to keep happy by making a profit. I’m currently looking at what the future of electric vehicles and mobility could look like but again, as this is so new, in two or five years’ time our research now may be completely incorrect – that is the challenge.
“There are emerging social issues around technology which are fascinating, such as the future of television and how we consume this industry. Others include how countries such as the UK are having issues because of obesity – how will food companies enter the debate about sugar? There is lots of uncertainty in all of these subjects but that is what makes it so interesting.”
Source: Greg Holmes for AMBS E-Bulletin