How to consider future impacts
(1) The multiple effects of innovation
Knowing the effects of an innovation opens up new opportunities and reduces the risk of a new product or technology becoming a failure. Asbestos, thalidomide or Google glass are examples of high social follow-up costs or considerable operational losses that would have been prevented by a well-founded analysis of the effects.
The effects of innovations are manifold. To start with an example, let us look at the many effects that the use of smartphones has on all our lives:
Let us summarize the findings from this example:
- Innovations have manifold effects on the environment, people, society and economy -> It is therefore essential to take a broad view of as many different dimensions as possible and not to focus on one particular direction of impact at the outset.
- Positive effects are usually desired and already foreseeable, negative effects are often not intended and sometimes occur unexpectedly -> It is therefore helpful to use methods that help to leave habitual lines of thought and examine the less obvious.
- The effects of an innovation occur when it is used and usually at a certain distance in time, space or fact -> It is therefore important to deal with the effects of an innovation in good time, i.e. at a point in time when the respective technology, product, service or solution is already concrete enough to be able to assess the effects, but simultaneously with enough time to allow changes to be made.
- Some effects only arise in the interaction of different components, in the development of applications, in use or disposal -> Therefore, impact assessment should be carried out together with partners, e.g. with other companies along innovation or value chains, with consumers, users and other stakeholders.
- Effects can never be completely and reliably predicted. Discoveries, inventions or technologies that are still years away from an application or product often elude a complete impact assessment because the areas of application are still too unclear -> Nevertheless, impact assessment is useful because it sensitizes people to a broader perspective, trains them to think in scenarios and possible futures, and helps identify those individuals and groups who may be affected by innovations.
(2) Determining the effects of innovation
The starting point for any impact assessment is a thorough analysis of the innovation in question, whether it is a technology, a product, a service, a business model or a system. In a first step it is therefore useful to take a closer look at the characteristics of the respective innovation
- In the case of incremental innovations that emerge along existing development paths (e.g. a new version of a smartphone with three cameras instead of just one), it is possible to look at the effects of similar innovations in the past. In the case of disruptive innovations that create completely new development paths, it is much more difficult to estimate future effects (e.g. the effects of artificial intelligence, blockchain technology).
- The effects of innovations that are close to the development of products or services (e.g. a new camera) can be estimated more easily than the effects of innovations that are located at the beginning of innovation and value chains (e.g. the effects of quantum computers and nanotechnologies).
- If an innovation takes place in a delimited and stable environment (e.g. a new type of wind turbine with differently shaped rotor blades), the effects are easier to estimate than in new and highly dynamic areas that are characterised by greater uncertainty (e.g. electromobility).
- If only a few population groups are affected by an innovation (e.g. private drones as a leisure tool), the effects are easier to assess than if a large number of people and actors are involved or affected (e.g. in an urban mobility concept).
- If the effects are reversible and if they result in only minor changes in the life situation of those affected, a short and simple form of impact assessment can be used (e.g. when a new soft drink is introduced), whereas for irreversible and highly relevant effects, well-founded methods are used (e.g. for the approval testing of new drugs).
- The more the effect of an innovation depends on a single target group (e.g. the use of compostable plastic bags in supermarkets), the more market research is sufficient. The more complex the interactions between the participants are, the more difficult it is to analyse effects, as interactions have to be taken into account (e.g. innovative financial products).
- In the case of technical and medical innovations (e.g. the use of pesticides, medical agents or novel materials), scientifically sound impact analyses and tests are useful. If, on the other hand, economic or social aspects of an innovation are decisive (e.g. in the case of nutrition or fitness apps), attitudes, behaviour, habits, practices and other social factors are important as causes, parts of the innovation and as impact dimensions.
- The second step of an impact assessment is to identify possible impact paths, to examine the connections between the innovation and the respective impact dimensions. These impact paths can be graphically represented, verbally explained and provided with quantitative data (so-called Logic Frameworks or Causal Models). The following aspects must be taken into account
- Chains of effects: Effects often run along several steps, each of which should be analysed more closely. For example, the introduction of a new battery technology can lead to longer ranges and shorter charging times for electric vehicles, which in turn leads to greater demand for such vehicles, which in turn leads to bottlenecks in raw materials.
- Causality: Is the effect actually triggered by the innovation or are other influencing factors relevant (e.g. is the effect of homeopathic medication attributed to the placebo effect or greater emotional attention to the patient).
- Complexity: chains of effects can branch out, since an innovation usually does not result in a single chain of effects. However, effects can also arise from several causes, for example when several technological developments occur simultaneously. Impact analyses should therefore be as simple as possible and as complex as necessary.
- Feedback: Impact chains are not exclusively linear but can contain feedback that influences the behaviour of the overall system. For example, the control of a pest species with pesticides can lead to the disappearance of animals that have fed on them, thereby causing other pests (that have also been on their diet) to take over. Feedbacks lead either to unexpected resistance of a system to change or to self-sustaining developments ("vicious circle"). It is therefore essential to pay attention to systemic connections when assessing the impact of innovations.
- Environmental factors: Every impact occurs in an environment that exerts a decisive influence on what effects occur and in what intensity, e.g. through legal framework conditions, market prices, demand. If such environmental factors are included in the impact model, the complexity can become too high. Therefore, it may make sense to treat these environmental factors separately. However, this is at the expense of the fact that interactions and feedbacks can no longer be examined in detail and thus potentially important possibilities of influence are overlooked. The decision therefore depends strongly on the individual case.
- For the third and last step of an impact assessment, the 17 SDGs and their 169 concrete targets can offer a good orientation.
(3) (Co)design the effects of innovations
Help shape it. In most cases, a single company cannot determine all the effects of an innovation because the environments in which it operates and our society as a whole are too complex. However, companies can help shape the effects of their innovations: through early and transparent impact analyses, through cooperation along value and innovation chains, through platforms and networks, and through participation in societal dialogues on the effects of key technologies (e.g. bioethics, artificial intelligence, nanotechnologies).
Early on. If a company wants to help shape the impact of its innovations, it must address possible desired and undesired effects at an early stage. This means that scientific findings, empirical values and different positions on possible effects are collected and evaluated long before a new product or service comes onto the market. In order to keep the loss of investment to a minimum, it makes sense to do this even when the innovation is still an idea and no steps have yet been taken towards production, testing or market entry.
Alternatives. A good impact assessment is not limited to examining a single variant but aims to compare different scenarios in order to derive options for action. For example, different alternatives of the use of an innovation or different accompanying measures could be compared in terms of their effects. In any case, such alternatives are suitable for comparison: What is the current situation and what happens without the respective innovation?
Evaluate. On the basis of a well-founded analysis of the effects of an innovation, the possible effects are evaluated and compared in alternatives or variants in order to make decisions. While the analysis of the possible effects was based on the question of evidence ("Is this really so?") and causality ("Is this really caused?"), the focus is now on the evaluation, weighting and summarization of different impact dimensions. All evaluation methods therefore require a weighting of effects in order to enable an overall assessment, a comparison of alternatives and decisions derived from them.
Optimize. On the basis of the impact analysis, the alternatives examined therein, and the assessments based on them, decisions can be made to increase the positive effects of an innovation and reduce the negative ones. These changes depend strongly on the respective innovation, its use and the overall context of use. Therefore, only general suggestions for optimisation can be given here
- The innovation itself can be changed, for example, the technology, the recipe, the process, the product or the service.
- The area of application of the innovation can be changed, e.g. the target group, the regions and countries in which the innovation is to be applied, or the context of use.
- The business model behind a technology, product or service can be changed.
- The composition of the cooperation partners can be changed, e.g. the selection of suppliers, the structure of value chains or the creation of cycles (so-called circular economy).
- To enable societal decisions on key technologies, stakeholder dialogues and initiatives have been launched in many areas, in which individual companies can participate. Although this does not directly change the respective innovation and its effects, it can lead to a broader understanding and a socially accepted approach.
- If the effects of an innovation are socially unacceptable and there is no chance of adaptation or optimisation, the respective project should be abandoned. The earlier this decision is taken, the lower the costs incurred, and the resulting losses of the company concerned.
(4) Challenges of impact design
The scope of an individual company is limited by several factors. Since a company always operates within economic, social and political-regulatory framework conditions, there are certain limits to the impact of innovation:
Impact assessment costs time, which can be critical for success in innovation competition. While a company is thoroughly investigating the effects of its innovation, its competitors may already have brought the product to market. "We don't have time for that" is therefore a frequently cited reservation about well-founded impact assessment
- Those who regularly and professionally conduct impact assessments ensure continuous learning and can significantly reduce the time required. In addition, initial rough estimates can be made at a fairly early stage in the innovation process and thus be carried out in parallel with the further development of an idea to market maturity.
Companies do not act in isolation but are integrated into complex systems (e.g. in value chains, in world markets, in the financial system). Effects can be linked by more or less complex feedback loops and whether or not desired effects are actually achieved often depends on the behaviour of other actors. No wonder that individual companies quickly feel overwhelmed by this complexity.
It is important not to get lost in details, but to maintain an overview, to know the perspectives of the various actors and to integrate them into an overall picture. NGOs, interest groups and scientists can help you not to lose sight of the big picture.
While the influence of multinational corporations on the economy, society and the environment is considerable, for example, other companies have a much more limited sphere of influence due to their size, product or reach. Moreover, some inventions or technologies are so far removed from their application and the resulting effects that it is almost impossible to assess or influence them.
- To increase your sphere of influence, you can cooperate with similarly minded companies or other players in business, science, politics or civil society, launch joint initiatives or build networks.
Unwanted side effects
In some cases, both desirable and undesirable effects of an innovation are to be expected. If the positive and the negative effects concern the same group of people (e.g. in case of side effects of a drug), the decision can be delegated to this group (e.g. whoever fears the side effects will not take the drug). If different groups of people are affected, the weighing up is much more difficult (e.g. in the case of eMobility, which reduces the energy consumption of vehicles and is therefore in the interest of the vehicle owners, but requires rare earths for car batteries that are dismantled under inhumane working conditions).
- If there are currently no solutions that do not have negative effects, investments in research into new solutions are necessary or you can enter into partnerships with science and research.
The most difficult limit is that at which the current state of knowledge makes it impossible to make meaningful statements about the possible effects of an innovation. This is particularly relevant for companies that drive technological innovations and are active in young, dynamic areas. At present, this applies, for example, to the applications of nanotechnologies or artificial intelligence.
- In these cases, social dialogues on effects, risks and ethical principles are necessary. As an individual company, you often cannot initiate such dialogues, but you can participate actively and constructively in them.
Effects usually occur in a larger factual, temporal and spatial context. It is therefore often difficult for individual companies to manage all their effects.
- Together, however, the companies of a region, a value-added chain, a usage context or an entire system can shape their effects much more effectively. They then develop and produce not for an anonymous market (which is usually not able to optimise effects), but for concrete applications and users, who in turn adapt their own behaviour accordingly. Platforms, networks and dialogues can play an important role in developing joint systemic solutions.
(5) Techniques and tools for impact assessment are manifold.
Observation of trends that generate new markets: This involves the perception and assessment of relevant trends in the company's environment. Methods for recording and interpreting trends range from data analysis to interviews and ethnographic projects. Helpful questions revolve, for example, around how big a particular trend is, how long it will last, how it can develop and how other industries/actors could react to it.
Promote "out-of-the-box" thinking: Creative techniques such as brainstorming, (theatre) games, storytelling or the use of images can be used to support employees in freeing themselves from ingrained thought patterns and leaving everyday routines behind. Participants are addressed in an emotional way and encouraged to think creatively "out-of-the-box". This can help to develop a broad and diverse spectrum of ideas.
Develop scenarios: In order to be able to make strategic decisions, it is often first necessary to be clear which developments are possible at all, what is desired and what is not. With the help of one or more scenarios, images of various possible futures can be developed. A scenario is the story of a possible future development. The development of scenarios makes clear which decisions are possible and what consequences these decisions may have.