Innovation, Ethics, and Business

Innovation, Ethics, and Business

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Description: The Business Roundtable Institute for Corporate Ethics is an independent entity established in partnership with Business Roundtable—an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4 trillion in annual revenues—and leading academics from America’s best business schools. The Institute brings together leaders from business and academia to fulfill its mission to renew and enhance the link between ethical behavior and business practice through executive education programs, practitioner-focused research, and outreach.

 
Author: Kirsten E. Martin, Anne M. Mulcahy (Senior) | Visits: 565 | Page Views: 685
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Contents:
Bridge Paper



Innovation, Ethics,
and Business
Kirsten E. Martin

Featuring a Thought Leader Commentary™
With Anne M. Mulcahy, Chairman and Chief Executive Officer,
Xerox Corporation

© 2008, Business Roundtable Institute for Corporate Ethics
www.corporate-ethics.org
Distribution Policy: Bridge Papers™ may only be displayed or distributed in
electronic or print format for non-commercial educational use on a royaltyfree basis. Any royalty-free use of Bridge Papers™ must use the complete
document. No partial use or derivative works of Bridge Papers™ may be
made without the prior written consent of the Business Roundtable Institute
for Corporate Ethics.
A PDF version of this document can be found on the Institute Web site at:
http://www.corporate-ethics.org/pdf/innovation_ethics.pdf



Bridge Papers™ Uniting best thinking with leading business practice.

Contents
Foreword . ...................................................................................................3
Introduction ...............................................................................................4

Ethics of Innovation ..................................................................................4
Rules of Innovation ...................................................................................4
Case Study: Google, Inc. in China ............................................................9
Background
Assessment of Google, Inc. in China
How to Innovate Ethically.......................................................................11
.
Conclusion ...............................................................................................12
Thought Leader Commentary™ with Anne M. Mulcahy.......................14
About the Authors . ..................................................................................17
End Notes . ...............................................................................................18

Foreword
The Business Roundtable Institute for
Corporate Ethics is an independent entity
established in partnership with Business
Roundtable—an association of chief executive
officers of leading corporations with a combined
workforce of more than 10 million employees
and $4 trillion in annual revenues—and leading
academics from America’s best business schools.
The Institute brings together leaders from
business and academia to fulfill its mission to
renew and enhance the link between ethical
behavior and business practice through executive
education programs, practitioner-focused
research, and outreach.
Institute Bridge Papers™ put the best
thinking of academic and business leaders
into the hands of practicing managers. Bridge
Papers™ convey concepts from leading edge
academic research in the field of business ethics
in a format that today’s managers can integrate
into their daily business decision making.
Innovation, Ethics, and Business is an Institute
Bridge Paper™ based on the research of Institute
Fellow Kirsten E. Martin, Ph.D., assistant
professor of business and economics at The
Catholic University of America. Martin’s research
empowers executives to make better ethical
decisions by giving them tools to recognize
potential ethical conflicts with innovation.
The accompanying interview with Anne
M. Mulcahy, chairman of the board and chief
executive officer of Xerox Corporation, takes up
some of the key issues in innovating ethically in
business. This piece addresses challenges such as
ensuring that inventions ‘match’ the needs of the
market, monitoring and adjusting for unintended
consequences of innovations, and assessing the
overall impact of innovations.

BRIDGE PAPER™: Innovation, ethics, and business



Introduction
The words innovative and innovation
are bantered about in the media, in
business, and in our everyday lives. The
words evoke a feeling of progress with
technology moving us upward and
forward while simultaneously pushing
aside existing, soon-to-be-outdated,
technology. How does business handle
this disruption? How can we think about
the responsibility for the innovation and
the associated wake of changed beliefs,
behaviors, and relationships?

...innovation includes making
a match between a solution
and a community.
As innovation researcher and bestselling author Harold Evans notes,
“It has been said that a scientist seeks
understanding and an inventor a
solution, to which we might add that an
innovator seeks a universal application
of the solution by whatever means.”1 For
Evans, the difference between invention
and innovation is profound: innovation
includes making a match between a
solution and a community. As with all
business decisions, however, innovations
carry ethical implications which must be
addressed.

Ethics of Innovation
Innovation has never been without
scandal. From the steamboat to the
camera phone, innovations push
communities to the frontier of their
knowledge and their comfort zone.



Before embarking on the telegraph
(itself the ire of the Pony Express),
Samuel Morse was forced to defend his
innovative photographic technology
from an assault by the painting
community. In another example,
some declared the steamboat to be an
abomination against God for bringing
together fire and water.2 Businesses that
shepherd innovations are left to deal with
the aftermath of their ground-breaking
technologies.
The view of innovation offered here
incorporates the inventiveness of the
technology with the impact on the
community and addresses the ethics of
innovation, often overlooked when solely
focusing on the technology.
As demonstrated below, viewing
the innovation as a combination of
technological invention within the
context of a community helps frame
the issues, praises, and complaints
common to the process of innovation.
The key rules of innovation should
guide managers as they make important
decisions about their innovations and
help their business create innovations
that are both good for their organization
and good for the community. As we
see through countless examples, such
mutually beneficial innovations are
sustainable.

Rules of Innovation
1. Innovations are new to a community.
The fact that innovations are new
is not a novel concept. However, it
is necessary to be more precise—the
newness comes from a new technologycommunity relationship. Innovators
marry an invention with a community,
thereby making an invention innovative.

Business Roundtable Institute for Corporate Ethics

Edison recognized the
importance of an invention
reaching the market, or a
broader community, as a sign
of its innovativeness.
Perhaps the Internet provides the
best example. The initial development
and use of DARPNet (the current
Internet) was for military use. Slowly, use
of DARPNet filtered over to academics
within universities to work on large
projects simultaneously yet across great
geographic distances. The Internet as
an innovation was recognized only
when it reached a larger, more general,
community. Historians talk about the
Internet as a disruptive force or marketchanging in relation to its use by the
non-academic, non-military community.
And the disruptive force of this
technology persists as new technologycommunity relationships are continually
innovated.
Evans refers to many innovators
as democratizers—innovators who
are constantly taking new inventions
to more varied communities. Thomas
Edison is credited with inventing the
light bulb; however, Edison focused on
taking inventions (created by himself
or a coworker) to new communities
and societies. He measured an
innovation’s success by its proliferation
in a community: “Anything that won’t
sell, I don’t want to invent. Its sale is
proof of utility and utility is success.”3
Edison recognized the importance of
an invention reaching the market, or
a broader community, as a sign of its
innovativeness.
BRIDGE PAPER™: Innovation, ethics, and business

2. Many people are affected by and have
an effect on an innovation.

We tend to focus on the user or
the point of purchase when assessing
a technology for market. Many more
people, however, are affected by and
actually affect an innovation. Sometimes,
the end user is not the person making the
buying decision (e.g. large organizational
purchases, governmental contracts,
minors with adult purchasers).
Separate from the organizational
stakeholders, an innovation relies upon
users, ancillary materials, technologies,
and organizations to survive. When the
camera phone was initially introduced
in Asia, 14-year-old-girls were the
assumed users. Their needs (colors, ease
of use) were incorporated into the design.
As the innovation was absorbed into
the community, unintended uses and
consequences began to emerge. Middleaged men took hold of the innovation
and began using the silent, small camera
to take voyeuristic pictures of women.
Camera phones were used in corporate
espionage. At times, the innovation
was banned at the corporate offices
of the very companies that developed
them. Assessing the stakeholders of the
technology minimizes such damaging
and unintended (yet foreseeable)
consequences.
For innovative technologies,
identifying the specific names and faces
of stakeholders who are impacted by and
impact the technology not only helps to
circumvent unintended consequences and
uses of the innovation, but also allows the
business to create a community around
the innovation that previously did not
exist. This community or network of
stakeholders reinforces the use of
the technology and will increase the
longevity of the innovation.


For example, both Linux for its
operating system and Macintosh for
its personal computer created strong
ties between members of their user
and stakeholder communities. Even
with initially small market share, these
innovations continue to flourish. The
Internet facilitated collaborations
between stakeholders and innovators
through community bulletin boards,
thereby supporting a sustainable
innovation that fits within its community.
3. Innovations disrupt the status quo.

The goal of innovations is to upset
current beliefs, behavior, relationships,
and technologies for a given community.
The automobile disrupted the horse and
buggy system. The telegraph disrupted
the Pony Express. Linux interrupted
the proliferation of Windows®. As
technologist Langdon Winner points
out, innovations such as the tomato
harvester necessitated the hardened
tomato to withstand cultivation, and
the bridges to Jones Beach in New York
facilitated the discrimination against
public transportation and its riders
because they were structurally too low for
buses.
Economist Joseph Schumpeter
refers to this phenomenon as “creative
destruction.” While Schumpeter was
concerned primarily with existing
technology, innovations can also destroy
existing systems of technology and
individuals. Jobs can be lost as was
the case with both Winner’s tomato
harvester and McCormick’s mechanical
reaper. McCormick’s mechanical
reaper was an amalgamation of existing
inventions yet was particularly effective.4
Innovations change people’s lives with
both short- and long-term impacts.
The loss of jobs to the reaper and the


harvester freed labor for use in a more
productive and less labor-intensive
manner—sometimes literally—as in
the case of slaves in the South and
the indentured servitude of illegal
immigrants in the West.
The implications of innovations are
understood within the surrounding
community. As has been well publicized
over the past decade, the issues faced by
Nestle with infant formula in Africa

The goal of innovations is to
upset current beliefs, behavior,
relationships, and technologies
for a given community. The
automobile disrupted the
horse and buggy system. The
telegraph disrupted the Pony
Express.
were completely different from those
faced in the United States. While the
technology (supplemental feeding for
infants) was identical in each location,
the community-technology relationship
worked in the United States but failed in
Africa.
Infant formula within the United
States became an integral part of
parenting and allowed many who could
not breastfeed adequate nourishment
for their children. In Africa, however,
the introduction of formula to new
mothers created a continuing reliance
on safe water (which was not available)
and education (which was not provided).
Its introduction not only dissuaded new
mothers from breastfeeding but made
such activity physically impossible. When

Business Roundtable Institute for Corporate Ethics

mothers did not use their breast milk, the
quantity available for feeding naturally
diminished.
The implications of such disruptions
must be assessed within the community
of the innovation. The tomato harvester,
low-lying bridges, and infant formula:
each innovation produced different
reactions dependent upon the context of
the community.
4. Innovations are a shared
responsibility.

By viewing the innovative process
as bringing together technology and
communities, the innovation and
its consequences become a shared
responsibility. The community has a
responsibility to use the technology
within a given range of permissible
behaviors and to incorporate rules
and norms to support the technology.
The innovating firm, however, has
a responsibility to understand the
community into which the innovation
is being introduced.
In the case of the camera phone,
acknowledging the responsibility of
the organizations that introduced
the camera phone for their role in
allowing the technology to be used for
surveillance and voyeurism does not
diminish the responsibility of the spy
or observer. In fact, acknowledging the
shared responsibility might have led to
incorporating appropriate modifications
when the camera phone was later
introduced into the United States.
Instead, design modifications, which
could have alerted people to the potential
of being photographed, were never
introduced.
Business involvement in Nazi
Germany and Apartheid South Africa
drew similar criticisms for supporting
BRIDGE PAPER™: Innovation, ethics, and business

dangerous regimes through innovative
activity. While not responsible for
the decisions of the government,
U.S. companies who marketed their
technologies drew criticism for allowing
their technology to be a party to the
illegitimate behavior of the respective
governments.

The innovating firm,
however, has a responsibility
to understand the community
into which the innovation is
being introduced.
Alternative views place the
responsibility on the technology by
declaring the communities of users
and stakeholders as beholden to
the dictates of the innovation. The
community is assumed to be too ignorant
or incapable of modifying the new
technology. Others declare, “Let the
buyer beware”—usually when they are
not the buyers or in the community
of the novel innovation—placing sole
responsibility on the community to
use the innovation appropriately. This
argument, however, ignores the newness
of the innovation in the new community.
Those knowledgeable (the innovators)
have a shared responsibility to shepherd
the innovation as it is introduced into
new communities.
For example, in its efforts to take
responsibility for the environmental
impact of its products, Xerox has worked
to achieve “chain of custody” certification
for its distribution centers, whereby all
products are certified as having been
produced in livable working conditions
and by preserving forests, wildlife, and


waterways.5 In doing so, Xerox has
taken on a role to ensure that all parties
throughout the production process
meet its standards for sustainability. Not
only is Xerox focused on its suppliers
and distributors, but the organization
“is greening its own operations,
recycling its copying machines and
helping its customers achieve their
environmental goals.”6 Xerox is being
proactive in sharing responsibility for the
environmental impact of its products and
services.
5. Successful innovations require
continual modifications.

avoid unintended uses (or non-uses!)
of a disruptive innovation.8 In doing so,
Xerox modified its product—in this case,
paper—to make it reusable after noting
that 40% of paper at a customer site is
thrown away. As Xerox’s CTO Sophie
Vanderbroek states, an “innovation is
only innovation when the creative idea
makes a difference to our customers,” and
retaining a connection to the customer
allows Xerox to make modifications to its
product to meet its customers’ changing
needs.9

As Evans notes in his book on
innovators in the United States,
“Nothing works the first time.” Those
innovators who have the tenacity to
remain engaged with the community to
both understand their needs, norms, laws,
and beliefs and modify their innovations
to meet the community, increase the
longevity of their technology while
continuing to take responsibility for their
portion of the innovation.
IBM designed its marketing
and pricing around this idea. When
Roosevelt opened the government coffers
with the introduction of the New Deal,
IBM was “uniquely able to satisfy the
requirements of the bureaucracy in 1935.
A sold machine was out of sight, out of
mind. A rented machine required IBM
technicians to be on hand, repairing and
updating, and inevitably they acquired
an awareness of present—and future—
needs. This liaison, developing into a
partnership, was very much to the benefit
of both sides.”7
Similarly, Xerox retains sociologists
called workplace specialists to match
the innovation to the needs of the
customer and the way they work and to


...user needs, context, and
stakeholders change over the
lifespan of an innovation.
Remaining engaged allows businesses
to help shape the innovation as both
unintended uses and unintended
consequences erupt during its continued
use. In this way, innovators are able to
share responsibility for the ultimate
impact of their innovation. Furthermore,
user needs, context, and stakeholders
change over the lifespan of an innovation.
Maintaining engagement in the ongoing
relationship allows innovators to
continue to innovate, addressing those
changes as is demonstrated by IBM’s
ability to meet the needs of its customers.
6. Features matter.

Finally, small design decisions make
a difference in the use, consequences,
and sustainability of an innovation.
Many times these differences in features
set apart the successful from the
unsuccessful innovations.
For Otis elevators, not requiring
central power for the operation of

Business Roundtable Institute for Corporate Ethics

the safety elevator acknowledged the
circumstances of most building operators.
For Ford and the Model T, moving the
steering wheel to the left side of the
automobile was a design decision that
anticipated a driver’s need to focus on
other drivers rather than ditches on the
side of the road.
And these design decisions often
have moral implications—particularly
for innovations where users and other
stakeholders do not have the experience
or knowledge to modify by definition the
new technology. In previous examples,
the camera phone without a warning
sound allowed unsuspecting objects
of photography to have their privacy
violated, and the height of bridges along
an overpass became a discriminatory
technology.

and filters Internet communication.
Google, Inc. maintained a certain
distance from the fracas by only
developing a U.S.-based, Chineselanguage version of its technology
without filtering of search results or
relations with Chinese authorities.
After Chinese authorities, however,
made Google’s search technology
inaccessible for Chinese users, Google,
Inc. decided to look into developing a
search engine within China, therefore,
abiding by Chinese regulations. After a
year of consultation with China-Internet
experts, NGOs, and business leaders,
Google, Inc. decided to deploy its own

Background

Google, Inc. took considerable
time and effort to understand
how its search technology
would work within China
and made adjustments
accordingly.

To illustrate the importance of context
in understanding innovations and
technology, consider the case of China
and the Internet. The introduction of
search engine technology to China has
not gone smoothly for any U.S. company.
Yahoo! has come under fire for releasing
the name of a journalist/blogger to
Chinese authorities thereby providing
the evidence necessary to send the
dissident to a prison camp. Microsoft
took down a blog at the request of
Chinese authorities for this person’s
writings about China. Cisco Systems
came under congressional inquiry during
hearings for providing the technology
to develop the vast Chinese Firewall by
which the Chinese government monitors

innovation within China by developing
a Chinese search engine complete with
filtered results to appease the censors.
Additionally and substantively different
from their competitors, Google, Inc.
decided to maintain all personal
information associated with e-mail and
web logs outside Chinese territory and
the jurisdiction of Chinese authorities.
For this decision, Google, Inc.
received a tremendous amount of public
scrutiny. Its “Do no evil” slogan has
been ridiculed, and it was called before
the U.S. Congress (along with Yahoo!,
Cisco, and Microsoft) to defend its
decision to work in concert with Chinese
authorities. Many pointed out the

Case Study: Google,
Inc. in China

BRIDGE PAPER™: Innovation, ethics, and business



similarities between these U.S. Internet
companies’ involvement with China and
previous issues in Nazi Germany and
South Africa. The search technology was
being used in concert with a totalitarian
regime’s efforts to monitor and control its
citizens.

Assessment of Google, Inc. in
China
Google, Inc. has come under fire for
following in the footsteps of the rest of
the industry. When Google’s innovative
search technology is assessed in light of
the innovation rules discussed earlier, the
differences between Google’s innovation
and others’ innovations become clear.
First, public outcry, opinion columns,
and congressional hearings demonstrate
the importance of context in assessing
an innovation. While the Cisco
representative defended his company’s
actions by declaring that the technology
implemented for Chinese authorities
is the same as that implemented
everywhere else, the defense fell on deaf
ears. The routers, while commonplace
within the United States, are an
innovation within China and need to be
assessed within their new environment.
The same holds true for search
technology, and Google, Inc. clearly
understands this phenomenon. Google,
Inc. took considerable time and effort to
understand how its search technology
would work within China and made
adjustments accordingly. Rule #1:
Innovations are new to a community.
Second, China’s Internet system
is a complex network of people
and organizations that needs to
be acknowledged when assessing
Google’s search technology. Multiple
governmental agencies, cyber cafes,
10

cyber police, regulated content providers,
regulated access providers, NGOs,
reporting fellow citizens, users, users’
families and friends, and even villagers
without electricity impact and are
impacted by Google’s search technology,
Google.cn.
The Chinese government has an
interest in keeping dissent at a minimum
and protests nonexistent. The authorities
feel the impact when more and more
information is traded among their
citizens, therefore, increasing their
regulation of Internet providers and
their surveillance and arrests of citizens.
NGOs and dissidents attempt to provide
access to unfiltered information by
developing ways around the government
filters. By taking into consideration the
many stakeholders of its technology,

News of SARS, contaminated
rivers, AIDS, jailed dissidents,
Tiananmen Square, or Tibet
is no longer controlled by
Chinese authorities.
Google, Inc. was able to balance its
goal of providing as much unfiltered
information as possible with the Chinese
government’s goal of filtering search
results and monitoring the use of the
Internet. Google, Inc. identified more
than just the end user when assessing
(and continuing to assess) its decision
to enter China. Focusing on the market
when assessing China would leave
many important stakeholders out of the
equation. Rule #2: Many people are
affected by and have an effect on an
innovation.

Business Roundtable Institute for Corporate Ethics

Third, the reaction of the Chinese
authorities to the introduction of search
technology illustrates the degree to
which innovations can disrupt the status
quo. The proliferation of uncontrolled,
unfiltered information throughout its
citizens has led Chinese authorities to
invest incredible time and money into
a robust Internet surveillance program
consisting of over 30,000 Internet police,
propaganda, monitoring technology, and
regulations in an attempt to recreate the
status quo. News of SARS, contaminated
rivers, AIDS, jailed dissidents,
Tiananmen Square, or Tibet is no longer
controlled by Chinese authorities.
Rule #3: Innovations disrupt the
status quo.
Fourth, as evidenced by its lengthy
deliberations before the introduction
of search technology into China and
its public comments in its aftermath,
Google, Inc. acknowledges its role in
the innovative process. Google, Inc.
participated in congressional hearings
and was the only company to respond
to Xiao Qiang, U.C. Berkeley professor
and well-known China-Internet scholar,
who went to investment firms to track
companies and their involvement in
China. Google, Inc. has remained
involved in the discussion around
Internet search technology and China;
it has not merely thrown the technology
into China and attempted to walk away.
Rule #4: Innovations are a shared
responsibility.
Fifth, Google, Inc. has made it clear
that its current decision is constantly
under review and will be reassessed
over the coming months and years.
While Cisco’s John Chambers stated
that the company does not “see the
implementation that is done by the
user,” Google is staying involved in the
BRIDGE PAPER™: Innovation, ethics, and business

implementation and use of its innovation.
Co-founder Sergey Brin stated, “I think
it’s perfectly reasonable to do something
different. Say, OK, let’s stand by the
principle against censorship and we
won’t actually operate there…. That’s an
alternative path. It’s not the one we’ve
chosen to take right now.”10 Google’s
decision was “based on what we know
today and what we see in China”11 and is
something that is under review.
Rule #5: Successful innovations
require continual modifications.
Finally, Google, Inc. decided to
develop a physical presence closer to the
actual Chinese user, and thereby, is not
obliged to the Chinese government’s
own filters sitting at the Chinese border.
Google’s Gmail and web logging services,
however, reside outside the Chinese
border where Google can best protect
the identity of its users. This brings us to
the sixth point: design decisions matter.
The decision to split the technology
into search, e-mail, and blogging with
different rules and locations for each suits
the context of the Internet in China.
Such differentiations are not necessary in
the United States. Furthermore, Google,
Inc. has attempted to notify users of
filtering based on governmental rules.
This differs from those search engines
that simply do not list the filtered results,
leaving the Chinese user ignorant to the
presence of filtering. Rule #6: Features
matter.

How to Innovate
Ethically
Coupling the outlined framework with
the case example of Google, Inc. in
China leads to questions that guide the
development of ethical innovations.
11

o Community. Innovations happen
within communities possessing
existing and changing norms,
knowledge, relationships,
technologies, and beliefs. During
innovation we begin to ask the
question: Are we assuming a new
community will react similarly to
a community currently using the
technology? What are the lessons
learned from the technology’s current
use?
o Stakeholders. Users are but
one stakeholder to innovations.
Innovators should seek to analyze
the community impacted by their
innovation. How is it different from
the current users of the technology?
Who will be impacted by this
innovation? Who will impact the use
and continuing development of this
innovation within the community?
o Disruption. Ethical implications exist
whether we acknowledge them or
not. It is important to ask: Who is
adversely affected by this innovation?
Are we effective at achieving the
given task? Are we maintaining
the rights, autonomy, and dignity
of the community by not treating
stakeholders as mere means to the
goals of the technology?
o Responsibility. Responsibility is

Defining innovation as
the relationship between a
technology and a community
accounts for the many times a
technology can be innovative
as it is deployed to different
communities.
12

shared and cannot be placed solely
in the hands of either the technology
or the community. As innovators,
we must understand our part in
the ongoing use and misuse of the
innovation. How can we make sure
we can rectify eventual issues that
arise from the innovation?
o Modifications. Innovations have
a lifespan, while the needs of
stakeholders change. How can we
design and deploy the innovation
so that we stay involved with the
innovation?
o Features. Features matter for
stakeholders, technological
longevity, community impact, and
innovative sustainability. How can
we accommodate the many needs of
the stakeholders in the design of the
technology?

Conclusion
Innovators are matchmakers who
introduce an invention previously used
in another market, a lab, on a patent
application, or in someone’s head, to a
new community. An innovation is novel
to someone or some people. It is applied
in reference to a community of users and
other stakeholders not familiar with a
technology. Defining innovation as the
relationship between a technology and a
community accounts for the many times
a technology can be innovative as it is
deployed to different communities.
This focus on the relationship also
highlights the shared responsibility for
the consequences of the innovation.
Many may question whether
acknowledging the ethics of innovation
would make the technology less
scientific or objective. Ignoring the moral
implications of an innovation, however,

Business Roundtable Institute for Corporate Ethics

does not make the implications go
away. The suggestions for developing an
ethical innovation are just good business.
Sustainability in the market, a goal for
most innovators, requires acknowledging
the relationship between technology and
community with its ethical implications,
shared responsibility, and mutual goals.
Business has a tremendous role in
being the engine of innovation for many
communities. Acknowledging that role
and the responsibilities it carries will
allow businesses to create value for
themselves and their many stakeholders.
Ethical innovation produces a
sustainable competitive advantage for the
organization, creating good technologycommunity relationships.

BRIDGE PAPER™: Innovation, ethics, and business

Business has a tremendous
role in being the engine
of innovation for many
communities.

13

A Thought Leader Commentary™ with
Anne M. Mulcahy, Chairman and Chief Executive
Officer, Xerox Corporation
Q: One unique aspect of Xerox’s
approach to innovation includes
sending in a team of work practice
specialists (psychologists, ethnographers,
anthropologists, sociologists) to assess
the customer’s needs. How has this
strategy helped to bridge the gap
between invention and innovation?
Anne M. Mulcahy: That question sounds
much more clinical and formulaic than
what I think we actually do. We simply
try our best to understand what the
customer wants and needs, and we try
to do so in a way that takes us and our
customers beyond what they simply
think they want and need. The scientific
elements you reference are transitioned
from scientific studies at our research
centers, such as Palo Alto Research
Center (PARC), and are comprehended
in some of our service offerings, such as
Office Assessment Services.
Ethnographers are basically
anthropologists who study the current
state of affairs. Rather than digging
through ruins, artifacts, and documents
of ancient societies, the ethnographer
engages in direct, live observation of an
existing society or community. In our
case, that society is the customer’s work
environment. It gives us an opportunity
to study and analyze how customers
actually do their work. With the addition
of some basic psychology and sociology
overlays, we can map out the existing
workflow and design new, smarter, and
perhaps more innovative ways for the
customer to work.
14

Anne M. Mulcahy
The bridge between invention
and innovation, therefore, is understanding which of our technologies,
our inventions, is the best fit for
the customer’s unique needs and
circumstances. We can then deliver the
best solution—something innovative—
for the customer.
Q: How does Xerox assess the overall
impact of its innovations?
Mulcahy: I think it was said best by
Thomas Edison, as referenced in this
paper, that the true measure of success
for innovation was its acceptance and
proliferation in the marketplace. When
Xerox introduced photocopying to the
marketplace nearly 50 years ago, the
transformation of the office environment
was unimaginable. Yet today, we can
Business Roundtable Institute for Corporate Ethics

scarcely imagine a world without the
innovation unleashed by this invention.
As for assessing the impact beyond
economic viability and success, you’re
basically talking about what we call
corporate social responsibility (CSR)
today. Well-implemented CSR trains you
to look at any issue, impact, or innovation
from multiple perspectives—essentially
through the eyes of all stakeholders.
The added nuance with innovation,
however, is that none of your existing
stakeholders may have the insight to
imagine and anticipate unforeseen and
unknown applications or misapplications
of your new technology. I think the
best you can do is ask yourself if there
are other stakeholders not currently at
the table who should be considered,
including undesired stakeholders, such
as those who would intentionally misuse
new technology for their own gain and
unintended purposes. In our situation,
it’s typically counterfeiters who take
advantage of the quality of color printing
to unlawfully reproduce currency, tickets
to events, etc. We know how powerful
our technology can be in this regard, so
we work with government agencies like
the Secret Service to help counteract
counterfeiters, often catching them
at their own game while ensuring we
protect and maintain the privacy and
confidential data of legitimate users and
customers of our technology.
That’s just one example of why, with
any invention, you need to look at the
possibilities through a wide scope and
understand the desired and not-sodesired implications for all stakeholders.
At the end of the day, we want Xerox
innovation to help our customers do
better work, making it easier, less costly,
faster, and more adaptable. And we want
BRIDGE PAPER™: Innovation, ethics, and business

to do it in such a way that we continue to
live our values as good corporate citizens.
Q: Rather than trading off the creativity
of engineers with the needs of customers,
what does Xerox do to ensure its
inventions ‘match’ the needs of the
market?
Mulcahy: Market research certainly
plays a role, but consider the fact that
there was no research to tell Chester
Carlson to invent xerography. The
brilliance of unconstrained creativity
is that it often leads to inventions we
never knew we wanted. Certainly Apple’s
iPod is a great example of that today.
Xerox is currently working on selferasable paper. Innovation is brewing in
our research labs from other work we
perform on paper. Then, there was an
‘a-ha’ moment that started transitioning
the creative thoughts into invention.
Xerox researchers often tell me that the
vast amount of invention and innovation
comes through accident. And that tells
me that they need to have a certain
amount of freedom to explore and to
innovate so that accidents can turn into
market-making inventions for which the
research then has even more value.
Q: In addition to Xerox’s leading
practices in innovation, it has long been
known for its strength in leveraging
diversity. How do these two values
reinforce one another?
Mulcahy: I can hardly imagine two
more complementary forces. Innovation
will best be maximized by foreseeing
and capitalizing on as much potential
as possible. You need to assess standard
applications, hybrid applications,
15

mainstream markets, niche markets,
mature businesses and customers, and
evolving or developing markets. There is
simply so much diversity that needs to
be comprehended when bringing a new
product or service to the marketplace.
What better way to ensure that
marketplace diversity is truly recognized,
considered, and valued than building it
right into your own infrastructure.
Q: This paper argues that companies
have an ethical responsibility for
ushering in new innovations and for
monitoring and adjusting for unintended
consequences. Has Xerox ever introduced
a new invention that ended up having
unforeseen consequences, and if so, how
did you manage that issue?
Mulcahy: Well, way before my time,
when the first photocopiers were
introduced, some of them would
occasionally catch on fire, due to the
fuser that embeds the toner on the paper
being so hot. A high volume of copying
could cause the fuser to overheat and
ignite the paper, especially if there was
a paper jam in the fuser area. Xerox sent
out free fire extinguishers with many of
those first copiers along with appropriate
warnings and labeling.
Today, photocopying, scanning, and
printing have all evolved way beyond
fire hazards. The output of a copy or
print is so good that it rivals the original.
This of course makes it susceptible to
misuse, such as counterfeiting or digital
alteration. We have added technology
to many of our high-end color products
that can detect when users are trying
to scan and/or digitally alter certain
original documents, such as currency,
stock certificates, even car titles. If you
try to photocopy a Connecticut car title,
16

for example, the copy looks identical to
the original except for the word ‘VOID’
in one-inch high gray letters printed
generously in the background that is not
visible on the original document.
Q: Xerox’s primary stream of research
focuses on the nexus between the
paper and digital worlds and making
the transition from one to the other as
seamless as possible. How does this focus
create value for your customers and for
your shareholders?
Mulcahy: We really focus on the
document itself and the intended uses
for it. Who is involved in the creation
of the document? Editing? Reviewing?
Reading? Actioning? Filing and storing?
The document has many phases to its life.
And considering all these users, we ask:
Who needs it on paper versus the digital
world? Our focus is manifold when it
comes to the document. If you need it
on paper, we ensure that each print is of
the highest quality the first and every
time. We ensure that paper, ink, toner,
and energy are used efficiently. If you are
working digitally, we help ensure that
you can find the document you need
when you need it. We enable effective
and responsible document creation,
editing, processing, and archiving. And
finally, we can assess your work flows and
identify when it is necessary to move
between paper and digital. Helping our
customers to be more productive is our
business, and good business is good for
our shareholders.

Business Roundtable Institute for Corporate Ethics

ABOUT THE AUTHORS
Innovation, Ethics, and Business

Thought Leader Commentary™

KIRSTEN E. MARTIN is an assistant
professor of Business and Economics
at The Catholic University of America.
Martin received a B.S. in Engineering
from the University of Michigan
and an M.B.A. and Ph.D. from the
University of Virginia’s Darden Graduate
School of Business Administration.
Martin’s research is within strategy
and entrepreneurship and focuses on
technology, innovation, and ethics. She
is a Fellow at the Business Roundtable
Institute for Corporate Ethics.

ANNE M. MULCAHY is chairman
and chief executive officer of the Xerox
Corporation. In addition to the Xerox
board, Mulcahy is a member of the boards
of directors of Catalyst, Citigroup Inc.,
Fuji Xerox Co. Ltd., The Washington
Post Company, and Target Corporation.
She also chairs Business Roundtable’s
Corporate Governance Task Force
and serves on the Advisory Council of
the Business Roundtable Institute for
Corporate Ethics.

BRIDGE PAPER™: Innovation, ethics, and business

17

NOTES
1. Harold Evans. They Made America. from the Steam Engine to the Search Engine: Two Centuries of Innovators. (New
York: Back Bay Books, 2004), 6).

2. Evans, 6.

3. Evans, 180.
4. Evans, 89.

5. Marc Gunther, “Does Green Make a Difference?” Fortune (13 December 2007) http://money.cnn.

com/2007/12/12/magazines/fortune/gunther_xerox.fortune/index.htm (accessed 17 March 2008).

6. Gunther, “Does Green Make a Difference?”
7 Evans, 451.

8. Geoff Colvin “Xerox’s Inventor-in-chief,” Fortune (9 July 2007) http://money.cnn.com/magazines/fortune/
fortune_archive/2007/07/09/100121735/index.htm (accessed 17 March 2008).

9. Colvin, “Xerox’s Inventor-in-chief.”

10. Quoted by Joel Rothstein, “Google Co-founder Says Company Is Staying in China,” (9 June 2006) http://www.
reuters.com (accessed 6 March 2007).

11. Congressional Testimony before the Committee on House International Relations Subcommittee on Asia and the
Pacific, “The Internet in China: A Tool for Freedom or Suppression?” February 15, 2006.

18

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