The key role of networks between companies in spreading sustainable innovation

Published on 2022-04-22


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Shyaam - PhD in economic sociology from the University of Milan and an expert in innovation for the circular economy - in his latest research he focused on the role of embedded social and cultural dynamics within the networks between companies that adopted sustainable innovations.


I've been working in the field of sustainability for about 10 years. I first started in sustainability consulting in the US, and then entered into the circular economy topic in Europe where I worked in Amsterdam. Throughout my career, I've seen that there are a lot of incredible innovations when it comes to sustainability, circular economy, and a lot of these innovations have incredible potential. But many of them, unfortunately, do not make it to a level of scale where they're able to realize some of that potential. So I always had this question: how can we sort of scale up these innovations? What sort of prevents these innovations from really achieving that potential? 

That's how I sort of got to my PhD research topic. I became interested in understanding what are some of the social and cultural dynamics that could be preventing innovation adoption and the spread of these new technologies, new processes.

What I was particularly interested in is the idea of sort of the network's effects: over the past couple of years, we've seen the influence of social media, the ability of sort of influencers to spread new ideas, viral marketing, etcetera. I was wondering if some of those concepts could be applied in a business context.

Is there sort of enterprise influencers or companies that are embedded in their networks in such a way that they can influence other companies to change their behaviours, adopt new technologies, adopt new innovations? 

That was the core focus of the research: is there a way to take a sort of network of companies? Is there a way to target and identify specific companies that will accelerate the adoption of sustainable technologies, circular innovations, more than others? And so, how do you sort of find these people and how do you help companies identify who these influential organizations are, to spread their innovations faster?

The influencing organizations are not always the biggest ones

Research on this topic always talks about companies with lots of connections. So companies that are usually bigger have a lot of different connections in their supply chains or in their networks, are usually better to target for incremental innovation - the very small changes that you make. 

To maximize your reach, of course, you think about the big companies you want to go after. But if you think about the disruptive innovations - innovations that take a lot of investment, a lot of time - it's not always the big companies that are going to make the change.

What we found in the research is that it's always better to find one company that can adopt these technologies and is interested in being more progressive. These are not always the big companies: it could be a small SME, it could be an unknown company in the supply chain, etc.

But once you have them on board, using them as ambassadors of innovation and connecting them with their neighbours, with their partners, will allow you to slowly raise awareness of innovation and have a better chance of success in spreading that new technology or a new idea that can be disruptive in the industry. 

Key factors for identifying the innovation ambassador company

The kind of criteria that allow us to recognize the ambassador depends on two kinds of key factors. 

The first is a sort of likelihood of adoption: if you take a new technology or new process, for example to what extent is the company able to implement that innovation. So do they have the resources, do they have the willingness, the cultural leadership: all these kinds of qualities that make them a good sort of target for adoption and they have a high percentage of actually implementing it. 

And the other factor is not only the number of connections they have but more importantly the quality of the connection. It doesn't matter if you are, for example, a company like Unilever, where you have thousands of connections. What's more important is to find maybe a small SME or a company that is closely working with their suppliers, closely working with their partners and has a very good trustworthy relationship. And those are the companies that are more important because once that company adopts, they'll have a much easier time convincing their partners to also consider becoming circular, becoming sustainable, adopting these new ideas, etcetera.

Extending sustainability in the supply chain: the power of networking 

As part of the research, I looked at the case study of Jaguar Land Rover, the car company. They implemented a really interesting initiative a few years ago called "Real Car" where they essentially took waste material from the production of cars and recycled it.

They developed a new alloy so that they made cars using this specific material and the waste is then recycled back into the production process. So you can make cars from waste scrap that usually gets thrown away and that often is about 30 to 40%.

Now they have to convince their suppliers to go ahead and do it. But many of them don't understand sustainability, don't know what the circular economy is: this is very new to them. 

For Jaguar Land Rover to reach that impact and get the sort of returns on investment that they spent on this process, they needed all of their suppliers to get on board.

For a lot of these suppliers, indeed, they don't have that sustainability mindset, but they do care about having Jaguar land Rover's business. And so, to maintain that business relationship and keep in contact with a customer that they've had for years, many were sort of willing to implement these processes to collect the waste, sort it, and give it back to Jaguar Land Rover’s partners, to then recycle it for new material.

Even if a company is not necessarily progressive when it comes to sustainability, if it comes from a sort of close partner or trusted partner there is more of an incentive for them to think about these kinds of issues because they know that one of their close partners in the supply chain is considering these things.

How to find the right list of potential customers

I think the main challenge that I was trying to address with the research, but also more in general, how can this research be utilized by organizations, is linked to what I mentioned earlier with a lot of these innovations that are emerging. And particularly, if we think about startups and SMEs that are coming up with these amazing new circular economies, materials, technologies, processes, etcetera. Many of them when they sort of start out or try to scale up a particular innovation, kind of take this approach where they go after anybody willing to pay, essentially any kind of customer.

They usually have very long sort of business development lists, prospect lists that are thousands of companies long and then they just go after each one of them in the hopes that they become a customer. All of this takes a lot of time and resources and effort, which many companies don't have to spend.

What I was trying to see is how these companies can be smarter about who they talk to. 

So, suppose you have a list of a thousand companies: can you shortlist it to the 10 most important companies we need to speak to? Because if you manage to get them on board as a customer or involved as a partner, you have a much better chance of convincing the rest of the industry market to pay attention, to be aware, to consider adopting or implementing a particular innovation. That's what I've been trying to do in terms of translating my research into something more practical.

I've been working on this sort of tool to do so: it's called network BD and the idea is to use a sort of network analysis to consider network effects in the business development and growth process of companies with innovation. To help them understand how they can be smarter about their business development and growth strategy, to find these kinds of influencer companies who might be able to help them accelerate their growth so they can achieve their potential and create greater impact faster. 

It's usually addressing startups or could be also scaled up, SMEs, etcetera: companies with a sort of innovation that they're trying to expand, whether that's going into new markets, going into new territories or just they have something completely new that they're trying to test to see what is the right product-market fit.

So it really will help them identify who are the right customers they should be going after from a list of prospects and who would be the best to devote your resources on to get them on board to accelerate growth.

How to choose the company that will maximise your growth

There have been some interesting requests that I've gotten to look at the investor side as well: who might be the right investors to speak to, because of the way that they're connected within the sort of investor network? 

I know many sorts of platforms like " crunch base" and "deal room" do that, but I haven't seen so much on the company side, specifically with sort of network effects so trying to understand how these companies are connected. 

The company provides a list of prospects, so the companies that they're considering to go after in their sales efforts or their business development efforts. What the tool does is takes those list of companies and then uses public data to understand what is the size of the company, what is the age of the company, to what extent are they interested in sustainability issues, innovation issues, based on what they mentioned in their website and it tries to calculate a sort of score for how interested they might be in a particular product or service or innovation. 

Then it also searches on LinkedIn and on the company websites to find out how these companies are connected: are there partnerships that company A and company B have engaged with? Are there employees that have gone from one to another? Board of directors that are similar?

It creates a sort of network map by mapping the connections between these different companies searching how strong are these links between companies, how many links are there, etcetera. 

The tool runs simulations on this data: it runs thousands of simulations to identify what would happen if you talked to company A first, how would the other sort react? What if you talk to company C first, how would the others react? 

By doing this a thousand times, it helps to identify which companies are better to talk to early on in the business development process because they'll help you maximize your growth later on through network effects. So it helps sort of prioritizing: out of the list of a hundred or a thousand companies that you're considering which ones should be prioritized because they can maximize growth and due to the network effects that they generate. 

Criteria to consider when choosing your potential customers

There's sort of a standard list of criteria that's more generic and obviously for some of the other companies - that I've tested it with some startups and SMEs - a few more context-specific criteria depending on the industry that they're in or the kind of specific product or service that they're providing.

There are nuances to tweak and there are other criteria that take a lot of different variables into account. It also depends on what the startup or SME wants to prioritize. 

So for example I mentioned things like the age of the company and the size of the company and, in general, some of the considerations are that older companies typically are not as innovative as younger companies or bigger companies usually have more resources, so they're typically a better partner. The generic version of the model takes those kinds of considerations into the analysis. But for a specific context, it could be that older companies are the target for a particular innovation, or it could be that smaller companies are the target for a particular innovation.

The weights and the kind of calculation steps could be tweaked and modified based on the kind of customized criteria or the context for the companies and startups that I'm working with. 

Cases of companies that have leveraged the network BD to increase their potential

I've tested the tool with about five or six different startups: one is for example a company that provides digital services to law firms and lawyers to help them manage cases with their companies; one of them is a kind of blockchain startup that enables supply chain transparency. That was a really interesting case that helped them realize, for example, that for their solution they needed to expand the number of companies that are on their platform because their blockchain solution works more effectively if there are more companies on the platform so things can become more transparent, there's more data generated and that helps everyone get insights. So the idea of thinking about it from a network perspective was really interesting to them because it helped them identify which company they need to talk to next. After all, if they get it onboard their platform, it helps them bring more of their supply chain onto the platform.

I've been working with them on some initial understandings of the networking process and I hope to work further with them to integrate that sort of networking thinking into their product development process and into some of the conversations they've had with some of their investors.
It seemed to be the strategy to grow the company. So already I'm seeing some very interesting conversations based on this idea of using networks and understanding networks of companies to be more focused on how you grow.

With a lot of these other companies, there's been this process where the insights are there and now they're in the process of implementing some of these strategies and some of these ideas. I guess the sales and development cycle is quite long, so hopefully, in the next couple of months, we can see what the results of some of these implementations are to see how effective they have been.

The great thing about the tool is that it can be replicated and repeated any number of times. So, of course, with some of these tools trying to predict or understand different dynamics in the market, there might be some slightly unexpected situations or deviations from what the tool predicts. But the nice thing about the process or the methodology is that it can be repeated, given new information, new contexts, new developments, so that there is a way to be constantly updated in terms of who is the best set of customers to target, given the current situation.

About the author

Shyaam Ramkumar

Over 10 years of experience in sustainability and circular economy, scaling sustainability and circular economy-focused innovations using network theories and models.