Varun Nagaraj

WISE
More than CSR:
ORGANIZATIONS MUST
INNOVATION

PRACTICE RESPONSIBLE
INNOVATION

Problem of Practice: For-profit organizations are prime engines of innovation,

and even as they pursue commercial success, the onus is on them to become
responsible innovators. Hence the question that innovation-focused CXOs (CTOs,
VPs of Product Management, Product-led CEOs, etc.) should ask is: How can
my organization become a responsible innovator? Recent research by Christian
Voegtlin and team claims that such transformative goals require large-scale
innovations, which should be evaluated and governed using a set of responsible
innovation principles.1 In this essay, we outline the need for responsible innovation,
define the principles of responsible innovation, and provide recommendations on
how for-profit organizations can turn these principles into practice

THE IMPORTANCE OF CSR – AND ITS LIMITATIONS

C
manifestation and direction of the
SR today is practiced responsibility lie at the discretion of
through two distinct the corporation”. Firms that follow
models. The traditional this approach often identify specific
model, generally followed initiatives that seek to create ‘shared
worldwide, views value’ with stakeholders.3 TATA,
CSR as a desirable, voluntary and Unilever, Patagonia, and Danone are
discretionary decision by the firm. a few exemplary companies that have
That is, CSR “consists of policies and created significant and sustained
practices of corporations that reflect social and environmental impact with

Becoming responsible innovators business responsibility for some

wider societal good.2 Yet the precise
this approach of ‘doing well by doing
good’.

24 Management Practice Insights | Vol 1 | Issues 1 & 2 | May, Oct 2023 DOI: 10.59571/mpi.v1i2.1 Management Practice Insights | Vol 1 | Issues 1 & 2 | May, Oct 2023 25
 A second, alternate model views CSR as a mandatory leverage the unique business and technical strengths of
tax or spending directive. This model requires profitable the organization. For example, wouldn’t a pharmaceutical
firms above a specified revenue threshold to spend a company contribute more effectively to societal good
certain amount on philanthropic activities that are not by creating a version of their drug for the bottom of
related to the firm’s core business.4 An example of such the pyramid rather than spending money on childhood
a mandatory model is in India, where CSR expenditure is education, a noble activity no doubt, but one that is
required by the Companies Act of 2013, and has resulted unrelated to their core business? On the other hand,
in nearly 21,000 companies spending about $3.2 billion in the discretionary model, firms end up with a small
on CSR in the fiscal year ending March 31, 2021.5 The portfolio of opportunistic CSR activities, some of which
expectation was that CSR “… will push the nation towards are related to parts of their core business. For example,
achievement of sustainable development goals and one such activity could be introducing fair sourcing
public-private partnership in transforming India”.6 practices in the supply chain or reducing plastic content
in packaging. However, a firm’s portfolio of such desirable
Both modes of CSR, as Voegtlin and team observed, are but essentially opportunistic CSR activities may not take
not well suited to sustainable development challenges, full advantage of all its resources.
which are complex, fluid, extremely subjective, and
contextual. In contrast, CSR solution approaches are
usually top-down, linear, point-solution focused, and THE NEED FOR RESPONSIBLE INNOVATION
slow to react to changing realities. They conclude that
Given the limitations of traditional CSR models, THE AREA PRINCIPLES
we need to look at other approaches. When faced
with volatile, undesirable and untenable situations, OF RESPONSIBLE
When faced with volatile,
individuals and society have always relied on innovation
to transform such situations into desired outcomes.
INNOVATION
undesirable and untenable Indeed, during the COVID pandemic, governments and
organizations collaborated and responded to the crisis
situations, individuals and society through remarkable innovations (manufacturing safety
have always relied on innovation equipment, creating new approaches to last mile delivery, A powerful framework for responsible innovation – AREA, decision-making at the individual level. But this is also
reinventing work structures, developing vaccines, among as it is popularly known – calls for framing innovation true at the organizational level. Reflection at a team or
to transform such situations into others) that went well beyond the two models of CSR as a collective endeavor that requires society to have an organizational level allows the group to collect divergent
desired outcomes described above. More broadly, the COVID experience active presence in the innovation process.9 This seminal information, to identify motivations, assumptions
framework outlines four key principles that should guide and dilemmas, to connect the dots and deliberate the
suggests that embedding societal considerations into
the evaluation and governance of designing innovative meaning of the picture that emerges, and to face up to
organizations’ innovation processes may be a promising
solutions. the potential social implications of their innovation.
approach towards supplementing traditional CSR and Therefore, innovation teams and their organizations must

A
this fundamental mismatch between problem type addressing many other pressing societal challenges. is for be reflective and deliberative in their designing approach.
and solution characteristics is the reason why grand anticipation:

E
sustainable development challenges cannot be fully But, while ambitious innovation is necessary to tackle is for
addressed through traditional CSR solution approaches.7 grand challenges, many product, process or business engagement.
model innovations have unintended and unforeseen The scope and consequences of any innovation are almost
Both CSR models also suffer from underinvestment. In consequences, more so when their novelty level is always broader than the original intent. Innovations
may create new unintended consequences for intended Technology and innovation cannot be viewed in isolation
the mandatory model, the spend of individual companies high. For example, consider the consequence of global
beneficiaries. For example, a product that provides from society. Many progressive organizations already
is small compared to the massive investments that are warming from industrialization, the destruction of local
useful information may also cause anxiety. Innovations view stakeholders not just as potential suppliers or users,
needed to address grand challenges. And many firms businesses as a result of charitable gifting programs, may also have implications on those other than the but as contributors and co-creators of innovation. The
are likely to believe that they have met their societal ethical concerns associated with cloning, the rise of fake intended beneficiaries. For example, bottled water may open-source software movement is an example of how
obligations by spending the mandated CSR funds and news on social media platforms, and biases and inequity improve health in communities that do not have access innovation thrives when diverse individuals work together
they, therefore, ignore any additional CSR considerations arising from Artificial Intelligence (AI) algorithms, to to clean water, but also adds trash to landfills. Therefore, across organizational boundaries. However, given the
and opportunities. In the discretionary model as well, the name a few. Some innovations may even have terrifying innovation teams must broadly explore and anticipate potentially unforeseen first- and second-order effects of
amount spent by firms (consider the approximately $20B existential consequences, as illustrated most recently the scope, trajectory and possible consequences of their an innovation, it is important to take a broader and more
spent in 2022 by Fortune 500 firms) is a small fraction of by the naïve introduction of generative AI into society.8 solutions. inclusive view of stakeholders early in the innovation
process. Therefore, innovation teams must engage

R
the investment required for societal transformation. Therefore, if society is to rely on innovation with high
is for transparently with a broad range of external resources
novelty to supplement traditional CSR and address grand
(organizational) reflection: – both experts and laypersons – to incorporate their
Another limitation of both CSR models is under-leverage challenges, it must do so cautiously, with innovations perspectives and reactions.
of a company’s strengths. In the mandatory model, CSR is evaluated and governed by the principles of responsible
framed as philanthropy that should be distinct from the innovation. It is well known that reflection improves judgment and
organization’s core business. Such an approach does not

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A is for accountability
and action.
PRACTICING RESPONSIBLE INNOVATION

We suggest five practices that can start you down the path feature set. Ask your digital product managers to also
The essence of responsibility is taking ownership for ‘post-innovation’ regulatory situations, as governmental of becoming a responsible innovator. The first sets the develop a ‘system story’ per epic that outlines potential
one’s actions. An innovator’s work is not done when the or pan-governmental entities conduct ‘hearings’ to overarching context. The next four implement the AREA second- and third-order consequences of the feature
innovation is introduced into society. Post introduction, understand and perhaps respond to the implications of principles. set, not only for the intended user, but also for a broader
innovators need to be aware of how their creations are innovations unleashed on society. For example, consider range of stakeholders. System stories can also be built into

1.
impacting society, and should take responsibility for US Senate or EU or UN hearings on cloning, genetically the waterfall methodology commonly used in innovation
responding to the consequences. A poignant example modified food, data privacy, AI and bias, and so on. But, Build accountability by stating your projects.
from the Netflix film – The Social Dilemma – contains by this point, the genie is out of the bottle; the horse has innovation purpose and values:
an interview with the inventor of the Facebook “Like” left the barn!
button, expressing surprise and regret about how his
innovation unintentionally contributed to teen anxiety
and depression.10 While publicly admitting such regret is
admirable, responsible innovation also requires innovators
It would be better if these seemingly idealistic responsible
innovation principles were proactively embedded into
existing organizational routines by the innovating entities
Get explicit about the purpose and values that guide
innovation at your organization: What are you looking
to achieve beyond economic benefits and what are you
3. Create opportunities to reflect at multiple
levels in the innovation process:

to be accountable and responsive, and to “fix what you themselves (see figure 1). But can that be done without looking to avoid? While it is commonplace for companies Ensure that the consequences identified by your
break”. compromising their innovation engines and economic to publish their core values and mission, such statements innovation teams are discussed and deliberated at several
objectives? We believe it is possible, as outlined below. rarely include innovation-specific do’s and don’ts. An levels. 1) High-performing innovation teams usually hold
Today, these principles are applied mostly in reactive exception is Google, which tries to explicitly translate its a retrospective review at the end of the project (to review
philosophical principles such as “you can make money lessons learned) and again after the product has been in
without doing evil” into specific design principles for their the field for a period of time (to review key metrics of
engineers.11 Another example is Patagonia, an outdoor adoption and success). Teams should additionally reflect
Figure 1: AREA Principles For Responsible Innovation
clothing manufacturing company, that explicitly requires on the actual emerging effects of their innovation on
that its clothes be high quality, repairable, recyclable, and society at the second retrospective review and identify
resalable (the exact opposite of the ‘fast fashion’ trend).12 additional actions. 2) Most organizations conduct some
Building on the Facebook ‘Like’ example presented earlier, version of a ‘quarterly business / management review’,
A R E A it is likely that the world would be a better place today
if Facebook developers had been guided by a corporate
wherein senior-level executives discuss their portfolio of
important initiatives. Expand the scope of this review so
innovation purpose and values statement such as “we that the executive team also deliberates the potential and
develop engaging products that connect people without emerging consequences of their planned and completed
ANTICIPATE REFLECT ENGAGE ACCOUNTABILITY
causing addiction or social anxiety”. initiatives. 3) Responsible innovation requires making
AND ACTION difficult trade-offs between economic, societal, and

2.
environmental considerations. Adding an agenda item
Use systems thinking to to your board meetings to discuss some of these key
anticipate outcomes: trade-offs is an effective way to involve your board in the
A: Anticipate using systems thinking governance of responsible innovation.
While a clear set of values can focus innovation on the
Responsible Innovation

right things, unanticipated consequences are still likely

Raw Innovation

R: Reflect at multiple levels in the

to emerge even with the best of intentions. So, how can
innovation process
you make your innovation teams mindful to the potential
E: Engage with a broader, inclusive implications of their actions? A popular approach for
and non-obvious set of stakeholders innovation is to use design thinking principles to frame
problems and solutions from the point of view of the end
A: build Accountability and take user, who is viewed as the most important stakeholder. But
Action to make it right this approach does not adequately identify the broader
stakeholder universe and real-world dependencies.13 Some
innovators also apply critical thinking principles, routinely
asking 'why' to test logic and identify assumptions. But
the questions of 'what happens next' or 'what else can
happen' are not part of the critical thinking lexicon.
Today, the AREA principles are applied mostly in reactive ‘post-innovation’ regulatory situations. Therefore, design thinking and critical thinking should be
For example, US Senate or EU or UN hearings on cloning, genetically modified food, data supplemented with systems thinking, an approach that is
used widely in policy intervention design, but less so in
privacy, AI and bias, and so on. It would be better if they are proactively embedded into existing commercial innovation.14 For example, product managers
organizational routines by the innovating entities themselves in digital product innovation teams typically write a broad
‘epic’ and narrower ‘user stories’ to describe a product

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 CALL TO ACTION
4.
Include and engage transparently conference in the 1970s that brought together scientists
with a broader and non-obvious set of and journalists to discuss and shape the trajectory of
stakeholders: recombinant DNA. On the other hand, a tragically missed, Meeting sustainable development goals will require
recent opportunity is generative AI technology – what if contributions from individuals, government, and
You may implement systems-thinking based anticipation OpenAI had involved outside AI ethics experts from reputed for-profit and non-profit organizations. For-profit
and multi-level reflection, but the quality of these activities AI think tanks before unleashing their generative AI models, organizations should no longer assume they have met
depends on who participates in them. Conventional instead of doing so only after many well-known technology their obligations through their CSR activities. Instead,
cross-functional innovation teams (typically involving leaders raised concerns about the existential threats posed they should raise the bar, and embrace responsible
product management, technology development, design, by such AI?15 3) Non-experts individuals view the world innovation.
marketing, sales and operations personnel) are no longer differently from experts and can often provide surprisingly
enough. Consider: 1) Bringing new internal perspectives wise insights. Traditional interactions between company This is not a naïve manifesto. Certainly, there are
into the innovation process as McKinsey & Co., the and such lay individuals typically manifest as interviews and specific innovation situations where the need for
global consultancy, has: It now includes legal and human focus groups seeking to identify customer needs and wants. speed and proprietary advantage might make it
resource specialists within their innovation. Also consider But organizations that practice responsible innovation difficult to implement the principles of responsible
systematically including your CSR specialists in cross- can also tap into the wisdom of non experts to get new innovation. Involving more people, more perspectives,
functional innovation discussions. 2) Incorporating outside perspectives on the benefits and pitfalls of their planned more openness, more deliberation, and more time can
experts, since organizations are used to seeking inputs from innovations on the society. Consider constituting an certainly slow down the pace of innovation. But the
analysts and consultants on topics of competitiveness and advisory group of lay individuals for your major innovations, same argument was made against process changes
market viability. This practice could be easily expanded to and systematically incorporate their perspectives into your that sought to improve product quality, until it became
discuss potential societal consequences by incorporating anticipation and reflection activities. apparent that quality translated to long-term profit. We
think tanks, academics, and even peers in deliberative look at responsible innovation similarly – it improves
forums. An early and still relevant example is the Asilomar the quality of innovation, and it makes markets and
future profits sustainable. In fact, we would argue

5.
that you have no choice but to become a responsible
Take ownership for outcomes innovator because that is what your enlightened
and act to make it right: customers expect from you. Responsible innovation
will ensure your business’ sustainability, and if that
Organizations often respond to the impact of their innovation also helps build a sustainable society, so
innovation reactively, when faced with mounting pressure much the better.
from lawmakers, regulators, activists, public opinion, and
the stock market. Typical examples include recalls of faulty
products, eliminating child labor from supply chains, and
more recently, calls for a non-binding moratorium on the
development of generative AI.16 In contrast, responsible
organizations take ownership of their creations and
respond proactively, as Johnson & Johnson did in 1982 when RFEFERENCE:
their products were tampered with and resulted in several
deaths.17 The following practices will help your organization 3
Featured in the January 2022 issue of the Journal of Management Studies, authors Christian Voegtlin, Andreas Georg
take ownership proactively. 1) Instruct your market
Scherer, Günter K Stahl, and Olga Hawn, in their article: “Grand Societal Challenges and Responsible Innovation”,
scanning teams that routinely analyze customer sentiment
and competitive moves to also look for early indicators of determined that truly transformative societal goals were limited by traditional CSR approaches, and instead needed the
unexpected societal or environmental consequences, and to framework of Responsible Innovation.
include such information in their meetings with innovation
teams. 2) Create incentive plans that reward executives
and innovation teams for longer-term, triple bottom-line
contribution. 3) Empower product teams to continue to
You can reach out to him
tweak market offerings in the direction of desired outcomes.
4) Make it acceptable for innovation teams to recommend a [email protected]
delay in the introduction of innovative features because their
consequences are not fully understood, and 5) Consider This article may contain links to third party content, which we do not warrant, endorse, or assume liability for.
adding a section in the annual report that highlights the The author’s views are personal.
organization’s proactive accountability mindset.
If you have some inputs you would like to share, you can also reach out to us at [email protected]

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