bop organisational barriers to implementation

CALIFORNIA MANAGEMENT REVIEW VOL. 51, NO. 4 SUMMER 2009 CMR.BERKELEY.EDU100

Bottom-of-the-Pyramid:ORGANIZATIONAL BARRIERS

TO IMPLEMENTATION

Mette OlsenEva Boxenbaum

“The leading global companies of 2020 will be those that provide goods and services and reach new customers in ways that address the world’s major chal-lenges—including poverty, climate change, resource depletion, globalization, and demographic shifts.”—World Business Council for Sustainable Development, 20061

T he idea that corporate sustainability is not only the “right thing to do,” but also sensible from a business perspective is becoming increasingly popular. 2 However, efforts to establish an explicit link between sustainability and a company’s financial performance have

so far provided mixed results. Strategic models for sustainability rarely extend beyond intangible reputation effects or incremental cost advantages.3 As a result, the business case for sustainability remains a fairly illusive one.

One of the most promising avenues for establishing a stronger business case for sustainability is the emerging emphasis on sustainability as a driver for the creation of a new market space and a catalyst of creative destruction.4

Efforts to apply this business case in practice have primarily targeted the largely untapped market opportunities in the developing world, considered by many to be an ideal arena for integrating business with sustainability.5

In this area of research, one of the earliest and most influential schools of thought has come to be known as Bottom-of-the-Pyramid (BOP). Coined by C.K. Prahalad and S.L. Hart, the BOP concept proposes that there is a strong business case associated with the pursuit of the largely untapped purchasing power at the bottom of the world’s economic pyramid. By viewing consum-ers in the developing world as resourceful entrepreneurs and value-conscious consumers rather than as victims, Prahalad and Hart were among the first to suggest that large multinationals (MNCs) can make significant profits and

Bottom-of-the-Pyramid: Organizational Barriers to Implementation

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simultaneously help alleviate poverty by selling products to the poor. Some of the first initiatives along these lines were taken by Procter & Gamble and Unile-ver, which have developed affordable, for-profit consumer products for some of the poorest regions of the world and simultaneously targeted widespread social problems such as water pollution and iodine deficiency. For the present purpose, we define BOP as the creation of new profit-seeking market opportunities to low-income segments in the developing world while simultaneously contribut-ing to the sustainable development of these regions.

Interestingly, while both scholars and practitioners have paid much atten-tion to BOP management theory and proclaimed it to be the next big wave to hit large multinationals, few companies have as yet succeeded in implementing it. Despite the widely reported successes of early adopters like Procter & Gamble and Unilever, a more prevalent adoption has yet to manifest itself in organiza-tional practice. This contrast provokes the question: What is preventing compa-nies that adhere to the principles of BOP from adopting this new sustainability practice?

While most current debates on BOP either outline the business case for it6 or challenge its features,7 there have also been some attempts to identify bar-riers to adoption. Most of this attention has been paid to the external barriers that might be preventing a more wide-spread adoption of such ideas, e.g., lack of infrastructure, corruption of local governments, problems with distribution networks, low educational levels, and lack of buying power.8 Although external fac-tors are most certainly important, they do not account for the internal organizational barriers that, regardless of the external conditions, may affect the implementation of BOP in organizational practices. Until now, very little attention has been paid to the internal organizational barriers that, all else being equal, can pose signifi-cant barriers to the bringing of BOP from idea to action, even within the most proficient and forward-thinking MNCs. Further insight into the organizational implementation of BOP is important because this practice will often have more significant organizational ramifications9 than less radical types of sustainability practices that can be implemented piecemeal.

Our study traces recent efforts to implement a BOP strategy in the Danish biotech company Novozymes. This multinational company is the world’s largest producer of enzymes and micro-organisms for industrial use and is, more impor-tantly, widely recognized as a top performer in corporate sustainability. For the seventh year in a row, the Dow Jones Sustainability Indexes ranked the com-pany as the top sustainable biotechnology share in 2007, not only in Europe but also worldwide.10 Despite its unquestionable commitment to sustainability—and a long track record of successes in the implementation of new sustainability ini-tiatives—Novozymes encountered significant obstacles in the implementation of BOP. We report on the organizational barriers that the corporate sustainability

Mette Olsen holds an M.Sc. in International Marketing and Management and conducts research in the Department of Organization at Copenhagen Business School. <[email protected]>

Eva Boxenbaum is an Associate Professor in the Department of Organization at Copenhagen Business School. <[email protected]>


UNIVERSITY OF CALIFORNIA, BERKELEY VOL. 51, NO. 4 SUMMER 2009 CMR.BERKELEY.EDU102

unit has encountered over the past three years in its efforts to implement a BOP initiative within key business areas.

Since few companies undertake the BOP challenge in the first place, Novozymes represents a unique case. Not only is it one of the few large multi-national companies that is trying to implement this new branch of sustainability practices, it is also a company that makes industrial products and hence deals only indirectly with the end consumers that might be targeted in conventional BOP strategies.11 The empirical study was conducted in two steps. We started the study in the spring of 2007, a year after the first implementation efforts had been initiated, and followed up a year later when the initial implementation strategy had been abandoned and a new strategy was well under way.

Our study of the organizational barriers that the BOP project encountered in Novozymes sheds new light on the question of how to go about implementing new sustainability-driven business initiatives into organizational practice. This topic is a salient one for companies that desire to build or maintain a sustainabil-ity profile and to pursue new business opportunities through sustainability. The World Business Council for Sustainable Development predicts that the compa-nies that will place amongst the top sustainability performers in future years will be those who reach out to new markets while simultaneously addressing some of the world’s biggest social and environmental problems.12

Bottom of the Pyramid

BOP can be defined as the creation of new profit-seeking market oppor-tunities to low-income segments in the developing world with the simultaneous goal of contributing to the resolution of significant societal problems in these regions. A key component of the BOP rationale is the belief that there is a profit to be made from “doing good.” This is also what distinguishes it from corpo-rate philanthropy, which traditionally does not require an income-generating component. Another central element in the BOP argument is the conceptual-ization of market opportunities, which generally refers to the introduction of new products, or a reconfiguration of existing ones, that allows output to be sold above the cost of production to consumers in low-income segments.13 The emphasis on consumers in low-income segments in the BOP rationale—often living in extreme poverty under one dollar per day—distinguishes it from some of the later branches of this discourse, e.g., the notions of sustainable liveli-hoods and inclusive business.14 These newer concepts generally take a broader view of the market opportunities available to large MNCs. They propose that the people at the bottom of the pyramid should not only be regarded as consum-ers but also as producers and business partners, a line of thinking that was put forth by Karnani in his critique of the BOP concept.15 While there are potentially compelling reasons for widening the definition of market opportunities beyond consumer goods for low-income segments, we focus on the BOP concept in its original form, i.e., as a business strategy aimed at selling profit-seeking products to low-income segments while simultaneously contributing to the resolution of



significant societal problems in these regions. This definition is closely linked to the framework set forth by the United Nations’ Millennium Development Goals. These goals include hunger alleviation, universal education, gender equity, child health, maternal health, HIV/AIDS combat, environmental sustainability, and global partnerships.16 One specific target is to reduce extreme poverty to half its current level by the year 2015. According to the BOP experts Prahalad and Hammond, “the BOP initiative will not only eradicate poverty, but also cure eco-nomic stagnation, deflation, governmental collapse, civil wars, and terrorism.”17

Multinational companies, in collaboration with other global actors, are consid-ered instrumental in achieving these goals.

One of the most interesting implications of BOP is the radical impact it can have on a company’s core business model. Contrary to much of today’s cor-porate sustainability activity, a great proportion of which consists of the develop-ment and communication of corporate sustainability policies and targets, BOP requires companies to conjure up new products and venture into completely different market segments with a concrete sustainable development component. This orientation implies the crafting of entirely new business solutions related to buying, manufacturing, packaging, marketing, distributing, and advertising products. Accordingly, BOP projects cannot be executed by only a few people within the company, they must be integrated into key areas in operations where decisions on new products and markets are made and executed. For most com-panies, BOP therefore requires comprehensive organizational change and heavy involvement of key business areas responsible for new market creation—some-thing that far exceeds what is required to implement most other sustainability activities.

The Case of Novozymes

The Danish multinational corporation Novozymes is the world’s largest producer of enzymes and micro-organisms, which enable industrial producers across a wide range of industries to create better end-products while also sav-ing significant raw materials and energy consumption in the production process. The company employs state of the art genetic engineering to develop and pro-duce enzymes, biological organisms, biopolymers, and pharmaceutical proteins that substitute for more toxic or more costly synthetic chemicals that are used in the production of everyday products such as detergents, pharmaceuticals, food, and textiles. Novozymes is also the world’s largest producer of enzymes for the production of bio-ethanol, which is believed by many to be a sustain-able substitute for fossil fuel sources. Hence, in many instances the company is demonstrating its commitment to sustainable development by delivering more environmentally friendly alternatives to a wide range of industrial processes. This is also clearly stated in the company’s overall vision, which states that the company will use its biological solutions to create the necessary balance between “better business, cleaner environment, and better lives.”18



Sustainability Policies, Performance, and Structure

Novozymes has a long history of working with corporate social respon-sibility and sustainability, a past it shares with the Danish pharmaceutical company Novo Nordisk from which it demerged in 2000. Up until the com-mencement of this study in 2006, the majority of Novozymes’s sustainability activities were anchored in a corporate sustainability function whose mandate is to ensure compliance with corporate sustainability policies and to facilitate the implementation of selected sustainability activities into various areas of the business.

At that time, the corporate sustainability function reported to a sustain-ability strategy group that defined the strategic direction for the company’s sustainability activities, an organizational structure that resembles that of many large companies. Most sustainability initiatives were formulated centrally and took the form of corporate sustainability policies, targets, or management sys-tems with which specific units within the company subsequently had to comply. Examples include targets for a decrease in the consumption of water and energy within Novozymes’s production facilities and compliance to core human and labor rights principles across all areas of the business as well as in relation to key suppliers.19

To ensure accountability to the company’s sustainability policies and tar-gets, Novozymes was one of the first companies to report on its financial, social, and environmental performance in an integrated annual report. This triple bot-tom line reporting practice is supplemented by a bonus scheme that rewards employees and managers for the company’s ability to reach not only its financial targets, but also its social and environmental targets.

Novozymes consistently receives international recognition for its corpo-rate sustainability performance. For instance, in 2007, Novozymes was rated the most sustainable biotechnology company in Europe as well as worldwide.20 In 2008, Novozymes was ranked amongst the world's 99 most ethical companies by the Ethisphere Institute.21 This result indicates not only that the company is highly committed to sustainability, but also that it has a remarkably strong track record of implementing key sustainability initiatives of importance to the inves-tor community.

New Sustainability Strategy: From Risk Management to Business Opportunity

In response to new developments in the global sustainability debate, Novozymes’s sustainability strategy group launched a new corporate sustainabil-ity strategy in 2006. This new strategy shifted the focus from a risk management approach to a business opportunity orientation. While the previous sustain-ability strategy had focused primarily on the development of (and compliance with) corporate sustainability policies and targets, the new sustainability strategy wanted to shift the focus towards the creation of new sustainability-driven busi-ness opportunities. Essentially, the change consisted in conceptualizing sustain-ability as a potential source of revenue rather than a necessary expense. The



change implied a greater focus on the company’s technologies and capabilities, which in many instances required a more active engagement of the business areas that are responsible for developing and marketing new products. The new strategy therefore specifically targeted the cross-functional strategy groups and affiliated actors in operations responsible for developing new market opportu-nities within Novozymes’s existing industries. The purpose was to make these strategy groups embrace sustainability as a core parameter for profit-generating activities, including product development, marketing, and sales. As part of this strategy, two new sustainability initiatives were launched in 2006.

One initiative was to make more intensive use of the so-called Life Cycle Assessment (LCA) studies in the company’s strategic sales and marketing efforts. LCA is a methodology that makes it possible to calculate the environmental impact of the company’s products from cradle to grave. In 2006, key pioneers in the environmental group had already conducted several studies demonstrating the positive environmental impact of Novozymes’s biological solutions. A project team composed of sales and marketing representatives helped bring this idea to the cross-functional strategy groups, which define the current and future direc-tion for Novozymes’s major industries. Without any major obstacles, the LCAs were adopted as a strong sales tool and implemented into the core operating procedures in many of the strategy groups. Today, LCA represents a standard methodology in Novozymes and the studies are in high demand by the strategy groups as well as related areas of the organization, not least marketing and sales.

The other initiative that derived from the 2006 sustainability strategy related to the fundamental ideas associated with BOP and the Millennium Development Goals. It targeted the lowest consumer segment, i.e., the least for-tunate consumers in the developing world living for less than one dollar per day. This project, which we shall refer to as the BOP project, took inspiration from some of Novozymes’s largest customers, Procter & Gamble and Unilever, which at that time were already pursuing pro-poor, for-profit business activities in the developing world. The BOP initiative, which came from a segment of high-level managers represented in the sustainability strategy group, was inspired by the Millennium Development Goals. As one respondent said:

“The idea that we should do something along the lines of the Millennium Devel-opment Goals started in our sustainability strategy group, which was a layer of top managers in the company that defines the sustainability strategy for the company. It was said at that time that we should investigate the possibilities that we could contribute to the Millennium Development Goals with our technology. The Direc-tor of Sales and Marketing was a member of this group and his idea was that we could possibly find some areas where we could contribute with our technology without it being too expensive.”

Under the heading “Unlocking the potential of our technology—Creating busi-ness opportunities by solving some of the world’s biggest problems,” the cor-porate sustainability function formulated two objectives for the BOP project: to contribute to solving some of the world’s biggest problems; and to create new business opportunities capable of securing long-term revenue growth. The BOP



project was to create new products (or reconfigure existing ones) that would have a high societal impact on chosen segments in the developing world, while also establishing an opportunity for future revenue streams. A brainstorm ses-sion was held with selected people from R&D and sixteen BOP-related business ideas were generated, most of them imaginary couplings between the company’s existing technologies and one or more of the Millennium Development Goals, such as the alleviation of hunger or the reversion of the spread of HIV. It was expected that the cross-functional strategy groups would select one or more of these creative ideas and bring them to fruition with support from the sustain-ability unit. This, however, did not happen.

Although the BOP project was initiated and presented simultaneously with the LCA project in 2006, the BOP project did not receive the same warm welcome in the strategy groups. In contrast, it was largely regarded by the strat-egy groups and affiliated actors as a rather utopian business proposal. Where they could immediately envision the added value of the LCAs, they regarded the BOP project as intangible, risky, and potentially extremely costly. This remark-able difference in the reception of the two projects forced the corporate sustain-ability function to re-consider its initial implementation strategy for the BOP project. They adopted a new approach in which they themselves decided to pursue one of the BOP project proposals with the intention of making it more tangible and perhaps eventually transposing it to the strategy groups yet again. While this effort is still well under way, the BOP project has not yet been imple-mented into organizational practice today, almost three years after the introduc-tion of the new sustainability strategy. This timeline underscores the difficulty associated with implementing a radically new sustainability initiative like the BOP project. Our aim here is to explain why this particular project was so dif-ficult to implement into the operating practice of the strategy groups. We also consider the strategies used by the corporate sustainability function to overcome the organizational barriers to implementation.

Methods

We traced the corporate sustainability function’s implementation effort from early 2006 to mid-2008, a period that stretches from the initial launch of the new sustainability strategy to the more recent change in implementation strategy. During this period, the corporate sustainability function has attempted two distinct implementation strategies, a decentralized and a centralized approach, which we examined separately.

Implementation Strategy 1: The Decentralized Approach (2006)

In keeping with the fundamental line of thinking in the corporate sus-tainability strategy from 2006, the sustainability function initially sought to transmit the BOP idea to the cross-functional strategy groups and affiliated actors in operations and let them drive the project forward. In theory, this approach meant that the strategy groups would have to allocate the necessary



resources to these projects themselves, as with any other business project, and develop new products and market creation strategies on their own. The head of sustainability at that time explained the reasoning behind this decentralized strategy as follows:

“The short version is that sustainability cannot be some detached branch tended to by the corporate sustainability function while the core business does nothing at all. The idea was that we have to make money on it if we do something in the third world. We do not want to separate it because then it will turn into this reli-gious thing completely detached from the everyday business.”

The corporate sustainability function was of the opinion that line-of-business anchoring would be the best way to implement the BOP project. In line with this thinking, the sustainability managers and selected representatives from Sales and Marketing introduced the project to the strategy groups in the summer of 2006 alongside a presentation of the LCA project. It turned out that while most of the strategy groups were willing to embrace the LCA project, the BOP proj-ect was collectively rejected by these top decision organs in operations, none of whom found it to be realistic within the scope of their current business opera-tions or applicable to their specific industries.

We collected data on this phase of implementation in winter and spring 2007. Our data sources include policy and strategy documents, PowerPoint pre-sentations, and other corporate material that might in some way represent the 2006 sustainability strategy, key features of the BOP project, and the sustain-ability function’s presentation of the project to operations. We also collected data directly from employees, interviewing seven employees, two from the sus-tainability unit and five from operations, all of which were directly involved in some way with the implementation of the BOP project. A few days prior to the interview, each informant filled out a short survey about their perceptions of the BOP project, after which we interviewed each of them for about 60 minutes to deepen our understanding of their perceptions. These semi-structured interviews were conducted in person and on-site; they were tape-recorded and subse-quently transcribed.

Implementation Strategy 2: The Centralized Approach (2007-2008)

As a result of the general skepticism toward the BOP project among the strategy groups and affiliated actors in operations, the corporate sustainability function returned to the drawing board in late 2006. After some consultations and debate, they decided to temporarily abandon the decentralization strategy and find alternative solutions to implementation. As part of this process, they recruited a new employee with the specific mandate to further develop the BOP project. The decision was also made to anchor the BOP project in the corporate sustainability function where it would be developed, as in an incubator, before another attempt at transferring the project to operations. Having forfeited the idea that the strategy groups in operations would allocate resources for BOP-related project ideas, this centralized approach implied that managers in the corporate sustainability function would mobilize external and internal funds



for a small portfolio of ideas that they would develop into concrete projects in collaboration with both external and internal collaborators. Action was taken on this new implementation strategy in 2007 and 2008.

We collected data on the centralized implementation strategy in the sum-mer of 2008. Our data consist of corporate sustainability policies and descrip-tions of the BOP project contained in PowerPoint presentations from 2007 and 2008. We also interviewed two managers in the sustainability function who are actively involved with the BOP project. These interviews revolved around new initiatives to implement the BOP project and their efforts to get feedback from top management, operations, and external collaborators on these new initia-tives. Both interviews were recorded and transcribed.

Data Analysis

We wrote up detailed case study notes on an ongoing basis to facilitate the processing of the extensive amount of data. We also kept a logbook where ongoing reflections were jotted down. These write-ups and the logbook were central to the generation of more structured insights. A more systematic analysis of the interview data consisted in coding the transcripts for barriers to imple-mentation. In line with the principles of inductive analysis, we let the barriers emerge from the data rather than from existing literature or preconceived ideas about barriers to implementation. We later compared the identified barriers with theoretical constructs from the change management literature.

A common way of thinking about change management is to conceptual-ize cognition, routine, and structure as more or less discrete steps in the process of implementing a new practice. For instance, change in mental models is often regarded as a step that precedes the challenge to existing routines and struc-tures.22 However, cognitive change does not always lead to behavioral and struc-tural change. In fact, many change efforts fail, some suggest as many as 50% of them.23 Stepwise models have come under increasing critique in recent years for their inability to capture the more circular and complex nature of organizational change processes.24 Just how cognition, routine, and structure interact with each other to block the implementation of new practices remains a somewhat elusive topic.25

During the first part of the study (i.e., the decentralized strategy), we arrived at four organizational barriers by moving back and forth between data and theory (one cognitive, one processual, and two structural barriers) that seemed to have prevented a change in behavior and hence blocked the first attempt at implementing the BOP project. The first part of the case study there-fore identifies the four barriers and the mutually reinforcing relationship among them.

When revisiting the company a year later in 2008 we identified a signifi-cant change in implementation strategy from a decentralized to a centralized approach—both of which align well with approaches described in the change management literature.26 In our study of the centralized approach, we looked more specifically at how the sustainability function has tried to overcome the



cognitive, processual, and structural barriers identified in the first part of the case study.

Organizational Barriers to Implementation

During 2006, it became increasingly apparent to Novozymes’s corpo-rate sustainability managers that they were facing a number of rather rigorous organizational barriers as they sought to motivate the cross-functional strategy groups in operations to adopt the BOP project. These barriers posed a significant obstacle to implementation and ultimately contributed to the replacement of the decentralized implementation strategy with a more centralized orientation. The four barriers include a cognitive barrier of conflicting mindsets, a process-related barrier of radical change to routines, as well as two structural barriers that appeared to underpin and reinforce them, namely, project evaluation criteria and reward structures.

Barrier 1: Conflicting Mindsets

The first and perhaps most fundamental barrier to implementation relates to the dominant mindsets of key actors in operations, which seems to have deterred them from embracing the BOP project. Through a close investigation of how key actors with a close affiliation to the strategy groups in operations made sense of the BOP project, we identified two fundamentally different mind-sets: a trade-off mindset and a win-win mindset. These two mindsets, which turned out to operate simultaneously, made contradictory claims about the relationship between a company’s financial performance and its commitment to sustainability.

The first mindset, the trade-off mindset, reflects the emphasis on share-holder value as the primary (and only) purpose of any business. This, of course, resembles Friedman’s classic proposition that the only responsibility a company has is to increase its profits.27 In this mindset, any contribution to sustain-ability is seen as a cost to the company and not as a potential revenue driver. When subscribing to this particular mindset, actors in operations were therefore inclined to view the relationship between Novozymes’s financial performance and the commitment to sustainability as mutually exclusive.

On the opposite end of the spectrum, the win-win mindset resembled a far more convergent understanding of the relationship between financial perfor-mance and sustainability. This mindset seemed reminiscent of the more instru-mental sustainability discourses that have emerged in recent years and subscribe to the fundamental belief that sustainability and financial performance can co-exist peacefully and even mutually reinforce each other.28

Interestingly, when asked to indicate their view on the relationship between sustainability and Novozymes’s financial performance in the pre-inter-view survey, respondents from operations clearly indicated that both mindsets were equally dominant at the operating level. More precisely, they gave equal weight to the following two statements: “companies have to accept certain



compromises and trade-offs in financial performance in order to accommodate their social and environmental responsibilities” and “companies that serve soci-ety are automatically also serving the long-term interest of their shareholders; a company’s social and environmental responsibility and its financial performance are thus essentially a win-win relationship.” Since both mindsets seemed to be equally present at the operating level in Novozymes, they were both available to subscribe to when interpreting a new sustainability practice. The following ques-tions thus arose: which mindset did relevant actors in operations apply to the BOP project? and why did they do so?

A careful analysis of the responses revealed that the win-win mindset turned out to be applied primarily to sustainability projects that were perceived to have a positive effect on product differentiation and the company’s overall reputation. It was striking that especially key sales and marketing representa-tives with a significant influence on the final destiny of the BOP project gave more weight to the win-win mindset when it provided an additional claim or differentiator to their current sales and marketing efforts. As one such represen-tative said:

“For everyone in Marketing, if you have something where you can show an added value to your customers, well, you’ll take it in a second.”

In contrast, the win-win mindset, promoted by the corporate sustainability function, proved far less prevalent when it came to the BOP project. Selected representatives from operations tended not to endorse the statement that sus-tainability, in itself, could serve as a catalyst for the development of new prod-uct and market opportunities. In fact, when elaborating on the direct financial benefits to be derived from such opportunities, most respondents found sustain-ability and new market creation to be an unlikely combination. Accordingly, they tended to perceive the BOP project through the trade-off mindset, i.e., as a project that would detract from the company’s financial resources rather than generate them. As another respondent said:

“A sustainability case is typically something that will involve a huge amount of work, an extensive amount of resources, and a long time horizon before anything at all happens. And part of what does happen is the creation of goodwill and a good feeling and that’s just not . . . that’s not a financial thing.”

It appeared that the trade-off mindset, which has dominated much of the debate on corporate social and environmental responsibility in the past, was indeed a fairly prevalent logic in operations. Here, one representative from operations explains how such trade-offs will occur when deciding between new BOP mar-ket opportunities with a wider societal objective and a more conventional (and financially convincing) business case:

“You have a total of 10 resources and you can choose to use 5 resources on one project that gives you 500 million and the last 5 on a project that give you 400 million. Now let’s say you can now only use 3 resources for that last project because you have to use the last two for something that gives us 0 million. Come on! In that prioritization, we would always go for the first scenario.”



A clear sign that operations generally subscribed to the trade-off mindset when making sense of the BOP project was their tendency to divide corporate activi-ties into two separate categories, business or sustainability. That the BOP project fell into the latter category was evident from the informal christening of the BOP project as the “Save the World” project. This nickname, coined by key actors in Sales and Marketing who were involved in presenting the BOP project to the strategy groups, helped further the perception of the BOP project as an act of philanthropy rather than a viable business opportunity. As a consequence, the project was deemed irrelevant to the priorities of the strategy groups. As this same representative said:

“That you’re doing something that benefits the world is not relevant in our priori-tization. If it was, you’d have to be a philanthropist saying: damn it, we’re doing this! If we did a thing like this, we wouldn’t be fulfilling our mandate.”

What these findings show is that the win-win mindset through which the sus-tainability managers were perceiving the BOP project did not carry through to operations. When actors in operations made sense of the BOP project, they applied the trade-off mindset, which erected a significant barrier to implementa-tion. While the issue of conflicting mindset may well represent the most funda-mental obstacle for the BOP project, it did not operate in isolation. A processual barrier and two structural barriers prevented important actors in operations from switching to a win-win mindset in their perception of the BOP project.

Barrier 2: Radical Change to Routines

Another reason that the BOP project did not receive a warm welcome in Novozymes’s strategy groups stems from their difficulty in establishing a con-tinuity between this new sustainability practice and their existing work proce-dures. In contrast to the BOP project, the LCA project was immediately adopted by the strategy groups since it appeared to many of them as an incremental addi-tion to existing practice. The close affinity between the LCA project and their work at the operating level meant that the LCAs did not present any conflict. The only operational change required by the strategy groups and affiliated actors in operations was a communicative one, namely, that of adding LCAs to existing practice. As a respondent said:

“The LCAs are a good operational supplement to what we’re already doing today in that it can put numbers on some benefits relatively easy. That’s no problem.”

A related observation seemed to be that the LCAs simply fit better with the established way of thinking about and working with sustainability in Novo-zymes. The general perception seemed to be that Novozymes’s major contribu-tion to sustainability was to make products with a positive environmental impact within their existing industries and not to resolve a broader range of societal problems in the third world. Another respondent noted:

“You might say that the kind of sustainability we employ is the sustainability that deals with environmental impact. You could probably write a list of 40 different buzzwords like social responsibility, diversity, anti-bribery, environment, and all



that stuff. When we are talking sustainability in the hallways, we are most often discussing environmental impacts, greenhouse gasses and that stuff. . . . Should we then feel guilty for not solving all the problems in the world? No. Because we have made a better product that helps clean the world from carbon dioxide emis-sions, so we still have a healthy business and a healthy environmental profile in everything we do. . . .”

In contrast, since they could not connect the BOP project to anything familiar, actors in operations perceived the BOP project as fundamentally misaligned with their existing work processes and hence as requiring a complete reorientation of practice:

“In the [BOP] projects you would do, you’d have to take a completely different path from the way we’ve handled this stuff historically. . . . It’s separate from the way we normally sell our products so we’d have to develop a completely different business model.”

This interpretation resonated with other respondents from operations, all of which emphasized that one of the major reasons for the failed implementation of the BOP project was that they simply had no idea how to approach a project of this sort. Not only did they find it difficult to apply the company’s industrial and high-technological business model to low-income consumer markets in the developing world, they also struggled with the very notion of having to combine business and sustainability—notably the socially oriented kind—in one and the same market development strategy. As one repondent observed:

“Who even knows what the real problems are in these areas of the world? We sure don’t. We can sit and watch it on the news, but we have no clue about these kinds of famine situations and nobody we’re in business with knows anything about it either. So it would require a huge effort for us to undertake anything close to serious in this area.”

In contrast, the LCA project had been far easier for operations to translate into commercial value. As mentioned before, the LCAs were presented as a sales tool that could relatively easily demonstrate the positive environmental impact of Novozymes’s products. Not surprisingly, this feature appealed strongly to the sales and marketing organization who had a prominent role in the strategy groups and immediately recognized the LCA project as a great opportunity and willingly sponsored its adoption. It also helped that most of the strategy groups had previously encountered the LCA tool and intuitively knew how to apply it to their respective products and markets. Finally, the quantifiable attributes of the LCA project posed a sharp contrast to the more intangible BOP project. Since operations had no prior experience with BOP projects and was offered no spe-cific guidelines for how to proceed, they perceived this project as uncomfortably ambiguous and highly intangible. Accordingly, one respondent asserted:

“Here is something [the LCA tool] they can understand how to use. They feel they can do something about it and that they can use it here and now. Whereas if you take the . . . [BOP project], then what are we supposed to do about that? It’s so difficult and intangible!”



This difference in how the two new sustainability projects were received in operations clearly demonstrates the barrier of radical change to routines. While actors in operations were sufficiently familiar with the LCA tool to connect it to existing practice, the BOP project was out of reach and hence impossible for them to integrate into their work routines.

It appears that this second barrier reinforced the previous one of conflict-ing mindsets, which collectively produced a significant obstacle to the imple-mentation of the BOP project. In principle, though, obstacles of this kind could be overcome by organizational learning and training programs. However, two structural barriers added another layer of obstacles that effectively prevented such learning from taking place.

Barrier 3: Project Evaluation Criteria

The third barrier, a structural barrier, relates to the project evaluation criteria that the strategy groups in operations typically employed to assess new market opportunities. It seemed that the BOP project collided particularly with two specific evaluation criteria, respectively Net Present Value (NPV) and busi-ness risk evaluation. The NPV criterion is a common financial metric used by most companies when evaluating the value of new market opportunities. Busi-ness risk evaluation is similarly used to assess the risks associated with new proj-ects. Since the BOP project was intended as a new market opportunity, it was subject to both of these evaluation criteria in operations, just as were all other new business projects.

However, when applying the NPV financial metric to the BOP project, key decision makers in operations were not able to identify business opportuni-ties significant enough for them to incorporate BOP into their existing product portfolios. In fact, an NPV conceptualization seemed virtually impossible due to the high levels of uncertainty surrounding any future revenue streams in a BOP-related project. This outlook contributed to their collective refusal to undertake such projects within the scope of their current businesses. In fact, a common theme throughout all interviews was that the economic value that could be derived from the BOP project was virtually non-existent:

“This [type of project] does not add value. We haven’t identified any [BOP] proj-ects that add economic value to an extent great enough for us to prioritize them.”

The doubtful prospects for creating a viable return on investment result from the NPV metric, a structural barrier, yet they also reflect the trade-off mindset, i.e., the general perception that costs will always exceed revenues when pursu-ing new market opportunities in the developing world. More specifically, not only was the lack of buying power in these regions perceived as a major obstacle but so was also the high initial investment and significant amount of financial resources that would be required to succeed in such regions. One of the respon-dents from operations explained the perceived magnitude of the required costs:

“We would have to go to some of the emergency aid organizations like DANIDA. We would have to go to the World Bank or other relevant actors who are looking



at financial models for how to go about stuff like this. We might even have to go to companies like Nestlé who has an interest in doing something similar and who have a distribution network in those countries that we could benefit from. And finally, we would have to apply for funding either through United Nations related organs or through the European Union.”

To sum up, the BOP project appeared to be a complex, resource-intensive, and time-consuming affair. Worst of all, however, was the general expectation that BOP projects would produce meager financial gains at best. The prospects for more substantial gains were perceived to be extremely long term compared to conventional business projects. “This has a far longer time horizon than what we’re used to,” said one respondent.

The long time horizon of the BOP project fell entirely outside the scope of the shorter-termed NPV metric, which was meant to ensure alignment between activities in operations and Novozymes’s current market strategy. Another respondent noted:

“We have a short-term focus in almost every single one of our strategy groups. We are concerned with strategically relevant things—things that can be brought to market within four-five years. And it’s just not possible to solve the world’s pov-erty issues in five years even though somebody here might think it is.”

The other project evaluation criterion that worked against the BOP proj-ect was the evaluation of business risks. This criterion was employed to assess whether the risks associated with new projects might outweigh the opportuni-ties of carrying them out. BOP projects tended to also receive a negative rating on this assessment criterion. One identified risk pertained to price differentia-tion, a key inhibitory factor associated with the launching of a product specifi-cally for consumers or partners in the developing world. There was a general understanding that products resulting from a BOP project would have to be sold significantly below the company’s normal pricing policies. However, one concern in the strategy groups was that undertaking a project of this kind could cause resentment from existing customers in the developed world who were paying a far higher price for the exact same product. As a result, the business risk would be assessed as being high. A second identified risk consisted in causing lasting damage to the company’s reputation, e.g., if the project in question somehow backfired and caused unwanted media attention or damage to an otherwise untainted public image. As a respondent explained:

“We obviously cannot afford selling products to third world countries and then, four months after, end up on the front page of a newspaper reporting that we’ve given cancer to 700 Sudanese people.”

Both the NPV and the business risk assessments indicate that the BOP project failed to receive a passing grade. Gains were too low, risks were too high. It may well be that the BOP project would hold promising economic potential for large multinationals if it were assessed using more long-term criteria. Yet, fact remains that the evaluation criteria applied to assess the viability of new business projects in Novozymes’s strategy groups captured only the gains and



the risks that would manifest short term. Hence, the use of short-term financial metrics and an emphasis on lower-risk projects ultimately created unfavorable terms for the implementation of the more long-term and high-risk BOP proj-ect. This structural barrier had the effect of reinforcing the application of the trade-off mindset to the BOP project and of preventing learning that could have helped integrate the BOP project into existing work routines. A similar effect was produced by incentive structures and discrepant mandates of the sustain-ability unit and operations.

Barrier 4: Incentive Structures and Discrepant Mandates

The fourth and final organizational barrier gives us further insight into how structural barriers prevented actors in operations from shifting mindsets and learning new practices that would enable them to embrace the BOP project. This barrier pertains to the presence of the discrepant organizational mandates of various actors involved in the BOP project and to the incentive structures that reinforced certain behaviors in operations. These two features turned out to be pivotal in understanding what blocked the strategy groups from adopting the BOP project.

Part of the resistance to the BOP project at the operating level appeared to be rooted in different mandates assigned to two segments of the organization: the core decision makers in operations; and the corporate sustainability function. The objectives of these two segments are distinctly different and may at times come into opposition with one another. At one end of the spectrum, the corpo-rate sustainability function has as its primary role to advocate some of the latest external trends in corporate sustainability and to diffuse such ideas from the cor-porate level to the operational level. As representatives of organizational change, in this case with the BOP project, the managers in the corporate sustainability function pursued an agenda that turned out to collide with the priorities of the strategy groups in operations. At the other end of the spectrum, the strategy groups and affiliated actors in operations struggled to protect their operational efficiency in the face of organizational pressure to engage in what they perceived as costly change.

A closer look at the different mandates reveals that these mandates are reinforced in the company’s incentive structures. Employees do not necessar-ily adopt new practices because they reflect their dominant mindsets; they may sometimes do so simply because they are rewarded for it.29 The incentive system in Novozymes’s strategy groups played an important role in motivating actors in operations to refuse the BOP project. Rewards for the strategy groups and affili-ated actors in operations are allocated as a function of their key performance indicators (KPIs), which are often highly tangible financial performance targets related to the company’s performance within a given industry. With the compa-ny’s incentive structures closely tied to the financial KPIs of the strategy groups, organizational actors in operations had no incentive to prioritize projects that scored poorly on the strict criteria of KPIs. As one of them explained:



“When something can’t be measured in concrete terms then it’s not going to be valued. And I think when you’re busy and you have a deadline tomorrow, then you’ll do whatever you can to fulfill your KPIs. That’s what the KPIs are there for; to make sure you keep your focus.”

The incentive structures thus represent an extra dimension that made the strat-egy groups and affiliated actors in operations reject the BOP project. These struc-tures assigned priority to the projects that awarded actors in operations with the highest remuneration, prestige, and, not least, personal bonuses in accordance with their KPIs. As such, the incentive structures effectively protected opera-tional efficiency and discouraged the strategy groups from taking financial risks. As an unintended consequence, it became very difficult for the sustainability function to accomplish their mandate of implementing the BOP project. By blocking initiatives that would distract from operational efficiency and finan-cial performance, the incentive structures kept the strategy groups focused on achieving short-term financial gain rather than on exploring long-term win-win opportunities in the BOP project. Accordingly, the strategy groups had no struc-tural incentive to expand their horizon and to develop capabilities related to the BOP project.

The collective findings above suggest that the barriers to implementa-tion that the sustainability department faced were rather significant. They con-sisted of a cognitive barrier and a routine-related barrier that were reinforced by structures that were put in place to ensure high financial performance of the company. In summary, although a win-win mindset was cognitively available to actors in operations, the required radical change to routines, the short-term evaluation criteria and the company’s existing incentive structures effectively prevented the strategy groups from applying this mindset to the BOP project. As a result, the sustainability function had to abandon the decentralization approach that it had applied since 2006 in the hope that operations would embrace the BOP project and implement it. The decentralization strategy was promptly replaced by a centralization approach that took effect in 2007. Since this strategy is still under development in Novozymes, we report only on their recent initiatives with this implementation strategy, not on the outcomes that may eventually flow from it.

Shift in Implementation Approach

After abandoning its initial efforts to convince the strategy groups in operations to embrace the BOP project, the sustainability function reformulated its implementation strategy along the lines of a more centralized approach. This change in strategy was accompanied by a realization that top management would have to become more involved if this project were to succeed. Arguably, if top management was fully determined to implement this project, it would be possible to do so. Top management could, in principle, remove or lower the structural barriers to change in the strategy groups, e.g., by allocating the neces-sary funds needed to outweigh the initial development costs. The question thus



arises: Just how supportive of the BOP project was top management? Perhaps surprisingly, our data indicate that top management had supported this project since its very beginning. As a result, when the sustainability function asked for more resources to pursue the idea through a centralized effort, top management was forthcoming. As a respondent from sustainability noted:

“Top management has given us space in which to work, they find it interesting, and they give us time. We received generous financial support to conduct a large workshop in South Africa this past February and we have been given additional resources and have had consultants involved. So we are engaged in many activi-ties and have benefited from additional resources and more patience.”

While top management has been supportive, it has also maintained a set of strict conditions for its support, notably that it must be convinced that the BOP project can eventually realize its inherent win-win feature. As another responent stated:

“Top management does not proclaim that we simply must have this project [the BOP project] at whatever expense. They could have done so, but they did not. So it may be fair to say that we do not have the easiest of conditions for this project. We really have to believe in it ourselves, work on it ourselves, and then try to convince them—constantly, that is. I do believe that this is the right way to do it because it will generate a real organic growth rather than something glued-on that subsequently has to be integrated.”

Clearly, this criterion presents significant challenges for the sustainability func-tion because the BOP project is regarded more as a strategic intention than as a formal project with the affiliated resources. Accordingly, access to company experts (e.g., in product development, sales, and marketing) is limited. This obstacle has not, however, prevented the sustainability function from exploring other avenues. The sustainability managers have taken the initial steps to over-come cognitive and processual constraints by trying to create real evidence of the win-win business case for BOP and by building up practical experience and knowledge in this area. It has also proceeded to discuss the structural barriers to implementation and is contemplating alternative solutions in this area.

Building Experience and Providing Evidence of Win-Win

A key element in the centralized implementation approach has been to overcome some of the cognitive and processual constraints identified in the ini-tial implementation efforts. Via the centralized strategy, the sustainability func-tion is attempting to make the BOP project more concrete by pursuing a specific project track which can provide more convincing evidence of the inherent win-win potential of BOP strategies. The first step in this direction has consisted of selecting a specific product area that would help turn the more abstract Mil-lennium Development Goals into something more tangible. The sustainability manager who was hired to further pursue the BOP project after the initial imple-mentation effort had failed explains the approach:

“First I collected all the arguments and talked to our R&D people, tried to describe a possible path forward. It was probably then that we selected nutritional prod-ucts as our focus area. . . . Now we no longer talk about projects in terms of the



Millennium Development Goals, now we focus on what we call hidden nutri-tional hunger in Bottom of the Pyramid Markets.”

The sustainability function’s choice to focus on nutrition is not a coincidence. In the initial implementation efforts, the nutrition case had been the one proj-ect proposal from the initial Research and Development (R&D) workshop that resonated best with Novozymes’s technology in relation to the Millennium Development Goals. A respondent explained:

“If we target the food chain in the BOP market, it is because it is gigantic, because we believe we can make an enormous difference with enzyme technology in terms of increasing the nutritional value of basic food products, calorie-wise as well as in terms of minerals. Then we will be able to do something very good for the people who eat this food every day.”

After choosing nutrition as the overall focus area, the sustainability function decided that they needed to operationalize the project in greater depth and build up more experience and knowledge within this area. Together with a few people in R&D, they started building a potential road map which explored different market development scenarios and different partnership models in the nutrition area in Sub-Saharan Africa. As one of them noted:

“We drew up a value chain with some suppliers and some producers and some products and some recipients. We found school nutritional programs to be most meaningful, also in relation to the Millennium Development Goals and the need of these countries to develop. Then we were able to select some of our large cur-rent customers in this value chain and convince them that we could use the enzyme technology in a new way and thereby contribute to doing additional busi-ness on behalf of our customer.”

While these efforts are currently under way, it is the hope of the sustainability function that the centralized strategy will eventually lead to the initiation of a concrete BOP nutrition project, which will provide a more compelling case for the rest of the organization on the importance, relevance and feasibility of BOP strategies to Novozymes. Furthermore, this respondent noted:

“If just one project succeeds, it will reinforce the argument that other projects should be pursued more aggressively. . . . I just know that if we made a project with 22 million children spread across 10 developing countries in Africa and Asia, then it would be the first thing we would give as an example. My point is that there is employee attraction in the wider societal perspective; a brand value. I believe that a significant part of our human relations and the drive people have relate to the fact that the solutions we provide accomplish something good. Not only do we do something for the environment, we also do good for people. I think it would give an entirely new boost, a boost of energy, if we were allowed to develop such projects.”

However, building up experience within BOP and providing evidence of its inherent win-win potential are not the only elements of the centralized strategy. The centralized strategy also has a structural component.



Lowering Structural Barriers

Another key element of the centralized implementation approach has been to find a solution to the structural barriers encountered in the cross-func-tional strategy groups in operations. Even though the central implementation strategy successfully circumvents the barriers encountered in the strategy groups and, hence, allows the BOP project to be further conceptualized, it clearly also has its own shortcomings. Firstly, a centralized approach requires heavy invest-ments from top managements and external investment funds since resources are not allocated to the project from areas such as R&D, Production, Sales, and Marketing. Secondly, considering the goal to make BOP an integrated part of the company’s future market development efforts, the centralized approach is, at best, a temporary solution. Here, one of the sustainability managers explains the limits to which the sustainability function can (and should) be involved in the actual implementation efforts:

“My job is not to complete the process, I just have to make it to the point where the strategy groups say: ‘Fine, we will register this as a project and run it. We will get back to you with questions.’”

However, how can the sustainability function enable a successful transition process to the company’s operating core considering the structural barriers to implementation in the strategy groups? To address this issue, the sustainability function is currently considering two options: Either structural changes can be executed within the existing strategy groups to better prepare them for future BOP efforts or, alternatively, a whole new set-up can be created within the com-pany where projects with longer payback horizons and ambiguous, high-risk business climates would be better nourished. The sustainability manager further noted:

“Either you could tell all the strategy groups in operations to take X percent BOP projects or you could make a new strategy group reserved for BOP projects. It would have very different goals than the other groups. If you did it this way you could keep the status quo for all the other groups. This new function would then resemble what is sometimes called Front End Champions: if someone has a good idea for business but we have not yet developed the technology or we do not have any experience with it, then there are some people called Front End Cham-pions that you consult. Tiny new ideas start there, the ideas that may take 10-15 years to develop. Ideas that will take only a few years go directly to R&D.”

Since these discussions were still under development at the time of data collec-tion, we cannot report on its final form or on responses from top management. It is clear, however, that sustainability managers and top management continue to collaborate on making the BOP project succeed without compromising cor-porate financial performance. The sustainability function is therefore very much aware of the need to develop a viable transition strategy for potential projects.

What this analysis showed is that a new and more centralized implemen-tation strategy is well under way in Novozymes. While the business case has yet to be established, a number of concrete ideas are under development and an eventual transfer process has been envisioned. This centralized implementation



strategy requires significant initial investments from top management and the corporate sustainability function; investments that may prove helpful in loosen-ing the cognitive, processual, and structural grips that until now have prevented the implementation of the BOP project.

Interlocking Cognitive, Processual, and Structural Barriers

Our case study identified four barriers to implementation, the first of which was conflicting mindsets, a cognitive barrier. This barrier reflects previous research that found employees to be unlikely to implement new practices that they regard as unjustified or otherwise counter-productive for organizational performance.30 Similarly, employees are unlikely to implement new practices that collide with the deeper values and beliefs that guide their interpretations and actions.31 In contrast to some previous studies, we did not find support for the claim that employees were cynical about implementing an incessant flow of new managerial initiatives that they regarded as impediments to organizational productivity.32 Aside from the occasional ribbing about the company’s “save the world project,” employees in operations did not express a persistent sentiment of cynicism about the steady flow of new sustainability practices that they are asked to implement. However, employees may have been responsive to negative perceptions of the BOP project that were held by some managers with influence on the decision to initiate the implementation of the BOP project; such influ-ence has been pointed out as salient in the organizational change literature.33

The BOP project may certainly have come across to some managers as a poorly justified project, which is likely to be interpreted by employees as a sign that the new practice is not fully endorsed by top management and hence not that important.34

The second barrier, radical change to routines, is more processual in nature. We found that the work processes in Novozymes did not lend them-selves to integrating the BOP project in the company’s operational routines. A lack of familiarity with the procedures associated with this new type of sustain-ability practice certainly discouraged key actors in operations from adopting it. This finding resonates with the extensive research on “dynamic capabilities” and other organizational capabilities as important ingredients for organizational change and performance.35 The mutual reinforcement of cognitive barriers and processual barriers that we found in this study also reflects insights into “absorp-tive capacity,” i.e., the prior experiences and knowledge that enable a company to innovate.36 It is evident that managers and other employees in operations were poorly equipped to embrace a sustainability practice such as BOP, which was so radically different from their existing capabilities in the area of sustain-ability. However, had cognitive and processual obstacles been the only barriers to implementation, then organizational learning would have been sufficient to overcome them. The structural barriers made such organizational learning unlikely.



We identified two structural barriers that prevented a change in patterns of thought and behavior: the evaluation criteria for new projects; and the incen-tive structures and discrepant mandates for different actor groups. Managers and other employees were structurally prevented from experimenting with the BOP project in the sense that they were discouraged from taking financial and business risks if they were to fulfill their mandate in the organization. These structural barriers served the purpose of protecting the financial performance of Novozymes, but also one that effectively prevented risk-taking. The strength of the structural barriers suggests that positive perceptions of a new practice and capabilities to carry it out are insufficient to implement organizational change; changes must also be made to the organizational structures.37 In fact, the struc-tural barriers seemed to have effectively prevented the learning of new routines, skills, and capabilities that could have enabled actors in operations to change their perception and proceed to implement the BOP project.

Interacting with each other, the cognitive, processual, and structural bar-riers can inadvertently block organizational actors from changing their behavior. This interlocking system confirms the complex, systemic nature of organiza-tional change processes. 38 It further explains why the sustainability managers in Novozymes, a company devoted to sustainability, has encountered such dif-ficulty in implementing the BOP project in operations. They first tried decentral-ization, a highly recommended approach to change management,39 which failed to produce change. To circumvent the cognitive, processual, and structural barri-ers in key areas of operations, they then shifted to a centralized position by pur-suing a concrete BOP project themselves. While it is still uncertain whether the sustainability function will eventually succeed in implementing the BOP project in Novozymes’s operational routines, its current strategy of working simultane-ously on mindsets, capabilities, and structures seems to be a promising avenue for unlocking the interrelated cognitive, processual, and structural barriers that hinder the implementation of this new sustainability practice.

Avenues for Action

The new implementation strategy that the corporate sustainability func-tion has been pursuing in recent years testifies to their deepening insight into the interlocking barriers that have prevented operations from embracing the BOP project. They have become proficient in working with the cognitive and structural barriers to implementation and they have been acquiring BOP-related skills and capabilities themselves. Realizing that they had to take the initiative to develop a successful BOP strategy, the corporate sustainability function has been engaging directly in issues related to new product development and the identifi-cation of market opportunities for these products, rather unusual activities for a sustainability unit. They have learned to conceive new sustainability products in collaboration with external partners and stakeholders, to identify potential mar-ket opportunities, and to make the business case for the development of these new products together with managers in operations. In so doing, they have been developing skills and capabilities related to BOP implementation that were weakly developed in the strategy groups in operations.



The necessity of this work speaks to the radical nature of the transition to BOP strategies for companies that have not (yet) developed the capabilities required to implement a BOP project. Such a transition is presumably more dif-ficult for companies that do not sell directly to consumers, such as is the case for Novozymes. Many of the Millennium Development Goals, from which the BOP project takes its inspiration, are aimed at end users. When Novozymes ventures into the development of affordable products for disadvantaged consumers in the developing world, the company is targeting a consumer segment with which it does not have much experience. A larger leap of imagination is thus required for product developers and marketers in Novozymes than for similar employees in a company such as Proctor & Gamble that already produce goods for such consumers.

Conclusion

The companies that will place amongst the top performers in sustainabil-ity in future years will be those that have been able to turn sustainability into a key business driver. The companies that stand to profit will be those that take efficient action to overcome the identified barriers to implementation.

BOP can pose significant organizational challenges for companies that seek to incorporate sustainability into their practice. In Novozymes, these chal-lenges manifested in four mutually reinforcing organizational barriers that have collectively been sufficient to prevent the company from implementing such a project. Although our findings are particular to Novozymes, the difficulties it encountered reflect those that many other companies are experiencing. Accord-ingly, this case may contribute to a deeper understanding of why the imple-mentation of BOP in large global organizations lags behind the interest in the concept.

When companies seek to enhance their competitive advantage through efforts to implement new sustainability initiatives, they may inadvertently over-look organizational barriers that prevent the implementation of some of the most novel and promising initiatives. Structural barriers can prevent cognitive shifts and skill acquisition, which are required for organizational learning to take place, for new routines to emerge, and for BOP capabilities to develop.

A significant new challenge in corporate sustainability management is anchoring new sustainability practices in operations. Most corporate sustain-ability managers have traditionally performed their tasks in a relatively central-ized manner and, as a result, new sustainability practices often have little, if any, impact on day-to-day operations. With sustainability projects such as BOP, this implementation strategy is clearly insufficient, even for companies with a strong track record in corporate sustainability. As many companies expand from a compliance-oriented approach to sustainability to also include a market creation component, they are likely to encounter some of the same barriers that Novo-zymes encountered. Such a change in sustainability strategy requires a stron-ger link between business activities at the operating core and the work of the



corporate sustainability function. Instead of simply complying with behavioral directives and corporate sustainability policies, managers in operations must now also engage creatively on sustainability-related topics in the pursuit of new business opportunities. Similarly, the role of the corporate sustainability man-ager will increasingly consist of understanding organizational barriers to imple-mentation and subsequently facilitating the adoption of sustainability projects at the operating level.

Notes

1. The World Business Council for Sustainable Development, “From Challenge to Opportunity—The Role of Business in Tomorrow’s Society,” WBCSD, c/o Earthprint Limited, Switzerland, 2006. Publication available at <www.wbcsd.com>.

2. Sustainable development is most commonly defined as “the ability of current generations to meet their needs without compromising the ability of future generations to meet theirs.” The World Commission on Environment and Development, Our Common Future (New York, NY: Oxford University Press, 1987). The business community’s response to corporate sus-tainability is typically defined as a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmen-tal, and social developments. See Dow Jones Sustainability Indexes, <www.sustainability-indexes.com/07_htmle/sustainability/corpsustainability.html>.

3. The business of sustainability has been explored from numerous angles ranging from the benefits from “eco-efficiency” [Cf. M.E. Porter and C. Van der Linde, “Green and Competi-tive: Ending the Stalemate,” Harvard Business Review. 73/5 (1995):120-134] to the benefits of social/environmental marketing [F. Reinhardt, “Environmental Product Differentiation: Implications for Corporate Strategy,” California Management Review, 40/4 (Summer 1998): 43-73]. Based on the business case debate, Margolis and Walsh took it upon themselves to try to establish a tangible financial link. J. Margolis and J. Walsh, People and Profits? The Search for a Link Between a Company’s Social and Financial Performance (Mahwah, NJ: Lawrence Erlbaum, 2001).

4. Sustainability as a source of “creative destruction” was made famous by S. Hart and M. Milstein, “Global Sustainability and the Creative Destruction of Industries,” Sloan Manage-ment Review, 41/1 (Fall 1999): 23-33. Here they argue “that the emerging challenge of global sustainability is a catalyst for a new round of creative destruction that offers unprecedented opportunities.” For similar observations see K.N. Hockerts, “Sustainability Innovations. Ecological and Social Entrepreneurship and the Management of Antagonistic Assets,” dis-sertation, Difo-Druck GmbH, Bamberg, 2003. Also, see A.L. Larson, “Sustainable Innovation Through an Entrepreneurship Lens,” Business Strategy and the Environment, 9/5 (September 2000): 304-317.

5. Cf. C.K. Prahalad and S.L. Hart, “The Fortune at the Bottom of the Pyramid,” Strategy + Busi-ness, 26 (First Quarter 2002): 2-14. For more recent publications with a similar theme, see S.L. Hart, Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World’s Most Difficult Problems (Upper Saddle River, NJ: Wharton School Publishing, 2005); Hart and Milstein, op. cit. Also, see J.D. Sachs, The End of Poverty: Economic Possibilities for Our Time (New York, NY: The Penguin Press, 2005).

6. C.K. Prahalad, The Fortune at The Bottom Of the Pyramid—Eradicating Poverty Through Profits(Upper Saddle River, NJ: Wharton School Publishing, 2004).

7. A. Karnani, “Fortune at the Bottom of the Pyramid: A Mirage. How the Private Sector Can Help Alleviate Poverty,” Ross School of Business Working Paper Series, 2006.

8. Sushil Vachani and N. Craig Smith,”Socially Responsible Distribution: Distribution Strategies for Reaching the Bottom of the Pyramid,” California Management Review, 50/2 (Winter 2008): 52-84.

9. The notion that BOP will require a radical reinvention of existing practices is not only indi-cated by Prahalad [(2004), op. cit.], but also resonates in similar pieces describing the char-acteristics of sustainability-driven market creation. Cf. Hockerts, op. cit.; Hart and Milstein, op. cit



10. Novozymes is widely recognized for its performance in sustainability. Some of their achieve-ments include top rankings in the Nordic Sustainability Index, Sustainable Business.com, Storebrand SRI, and the FTSE4Good Index Series. Novozymes also holds the number one spot in their industry in the Dow Jones Sustainability World Indexes (DJSI World) and in the pan-European Dow Jones STOXX Sustainability Indexes (DJSI STOXX). Cf. <www.novozymes.com/sustainability>.

11. Conventional BOP literature and practice has tended to focus on the delivery of end-con-sumer products to some of the poorest people in the world [cf. Prahalad (2004), op. cit.].

12. The World Business Council for Sustainable Development, op. cit.13. It is important to distinguish between the line of thinking brought forth here and some of

the later branches of this discourse, like “sustainable livelihoods” and “inclusive business.” These concepts generally take a broader view of the market opportunities available to large MNCs by looking at the people at the bottom of the pyramid not only as consumers, but also as producers and business partners. This line of thinking was brought forth by Karnani [op. cit.] in his critique of the BOP concept and while there is definitely a strong reasoning behind widening the scope of BOP from solely looking at consumers, this article will focus on the BOP concept in its original form, i.e., as a business strategy aimed at selling profit-seeking products to low-income segments. This is due to the empirical case which follows a similar definition.

14. The concept of “sustainable livelihoods” (SL) has its origins in the UN system, particularly the United Nations Conference on Environment and Development (UNCED), and refers to a way of approaching development that incorporates all aspects of human livelihoods and the means whereby people obtain them. The concept has become popular in the World Business Council for Sustainable Development,where it refers to “inclusive business models” as a sus-tainable business that benefits low-income communities and thus contributes to sustainable livelihoods—not necessarily by selling them consumer products, but also by (for example) directly employing low-income people or targeting development of suppliers and service providers from low-income communities. See <www.inclusivebusiness.org>.

15. Karnani, op. cit., p. 108.16. <www.un.org/millenniumgoal>.17. Karnani, op. cit., p. 108.18. <www.novozymes.com/aboutus>.19. <www.novozymes.com/en/MainStructure/Investor/Financial+reports/>.20. <www.novozymes.com/sustainability>.21. <www.ethisphere.com>.22. Venkataraman Nilakant and S. Ramnarayan, Change Management—Altering Mindsets in a

Global Context (London: Sage, 2006).23. Robert E. Quinn, Building the Bridge as You Walk on It: A Guide for Leading Change (San Fran-

cisco, CA: Jossey-Bass, 2004).24. Burke W. Warner, Organization Change: Theory and Practice, 2nd edition (Thousand Oaks, CA:

Sage, 2008); Haridimos Tsoukas and Robert Chia, “On Organizational Becoming: Rethinking Organizational Change,” Organization Science, 13/5 (September/October 2002): 567-582.

25. Dennis R. Self, Achilles A. Armenakis, and Mike Schraeder, “Organizational Change Cotent, Process, and Context: A Simultaneous Analysis of Employee Reactions,” Journal of Change Management, 7/2 (June 2007): 211-229; Warner, op. cit.

26. Nilakant and Ramnarayan, op. cit.27. M. Friedman, “The Social Responsibility of Business is to Increase its Profits,” The New York

Times Magazine, September 13, 1970.28. D. Wheeler and M. Ng, “Organizational Innovation as an Opportunity for Sustainable Enter-

prise: Standardization as a Potential Constraint,” in S. Sharma and M. Starik, eds., Stakehold-ers, the Environment and Society (Elgar Publishing, 2004).

29. Cf. R.W. Scott, “The Adolescence of Institutional Theory,” Administrative Science Quarterly,32/4 (December 1987): 498.

30. Jamal Ouadahi, “A Qualitative Analysis of Factors Associated with User Acceptance and Rejection of a New Workplace Information System in the Public Sector: A Conceptual Model,” Canadian Journal of Administrative Sciences, 25/3 (September 2008): 201-213.

31. Loizos Heracleous and Michael Barrett, “Organizational Change as Discourse: Communica-tive Actions and Deep Structures in the Context of Information Technology Implementa-tion,” Academy of Management Journal, 44/4 (August 2001): 755-778.

32. Self, Armenakis, and Schraeder, op. cit.



33. Ma Valle Santos and Ma Teresa Garcia, “Organizational Change: The Role of Managers’ Mental Models,” Journal of Change Management, 6/3 (2006): 305-320.

34. Self, Armenakis, and Schraeder, op. cit.35. David J. Teece, Gary Pisano, and Amy Shuen, “Dynamic Capabilities and Strategic Manage-

ment,” Strategic Management Journal, 18/7 (August 1997): 509-533; Robert M. Grant, “Pros-pering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration,” Organization Science, 7/4 (July/August 1996): 375-387.

36. Wesley M. Cohen and David A. Levinthal, “Absorptive Capacity: A New Perspective on Learning and Innovation,” Administrative Science Quarterly, 35/1 (March 1990): 128-152.

37. Warner, op. cit.38. Warner, op. cit.39. Nilakant and Ramnarayan, op. cit.

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