Download - Alternative Energy Source Development
2003 Bell ConferenceEcosystems and Environment:
Perspectives on Education for Sustainable Business
Alternative Energy Source Development
Andrea LarsonDarden Business School, University of Virginia
July 17-19, 2003Florida Atlantic University’s Fort Lauderdale Campus
The Ingenuity Project
Approach: INNOVATION AT THE NEXUS OF BUSINESS AND NATURAL SYSTEMS
Methods: Interdisciplinary/Collaborative•Research•Publications•Curriculum development•Workshops, conferences•MBA program•Executive program•Distribution of teaching materials
Purpose: Integration of Sustainability Issues Into Management Education
FUEL CELLS
ENERGY MODULE
COURSE CONTENT
Innovation, Entrepreneurship and Natural Systems
Fuel Cell Material Useful in Courses On…
• Strategy• Environment• Innovation• Entrepreneurship
Environment
is “out
there” –
separate
Social Responsibilit
y
Ethics
Costs and Compliance
Altruism
Externality
Luxury for Good
Times
Only Big Companies Can Afford
Only Small Companies Can DoRisk
LiabilityRegulation
Perceptions and/or Assumptions
Course Topics
• Entrepreneurship (Schumpeterian)• Innovators and innovations• Future products and services• Opportunity• Competitive Advantage• Business and individual leadership
Sustainable Business: Opportunity and Value Creation
The search for sustainability can lead to innovation that yields cost savings, new designs, and competitive advantage. Like the quality gurus who called for zero defects, the early adopters of the sustainability perspective may seem extreme in calling for waste-free businesses in which the nonproduct outputs become inputs for other products or services. But sustainability’s zero-waste goal offers a critical, underlying insight: environmental and social issues offer opportunities for businesses.
Sustainable Business: Opportunity and Value Creation
• Sustainable business is environmentally and socially aware business strategies and operating practices that guide firms to a cleaner, healthier, more equitable (and hence more stable world) - AND offer an avenue to profitability and competitive advantage.
• Sustainable business entrepreneurs understand that sustainability (or “triple bottom line”) opportunities represent a wide open frontier for creativity, innovation, and the creation of value.
Evolution of the Sustainability Focus in the late 1990s Parallels the Evolution of Quality Programs in the early 1980s
1. Resistance and lack of understanding at the outset2. Seemingly unrealistic goals (zero defects, now zero
waste/emissions) become standard operating practices3. Initiatives lead to product and process innovations (not just
incremental improvements)4. Both movements require – leadership and an educated and
engaged workforce5. Success extends efforts into value chain management and
further improvements and innovation
Sustainable business movement is best understood in relation to the quality movement and sustainability builds logically from the platform of successful quality programs. Parallels to quality include:
Peripheral to strategyFocus on the firm
Pursuing incremental changeReturns to stockholders
Integrated into strategyWider focus on networks of firms across the value chain
Positioned for breakthrough innovationTriple bottom line
Waste streams to landfills (linear)Piecemeal analysisWaste is inevitable and costly
Opportunities in product recovery and remanufacturing (cyclical)Systems thinking
Waste can be minimized Waste is a resource
Cost burdenAltruismFocus on complianceEnd-of-pipe filters and treatmentSide issue
Reactive managementIsolated activityProfit or Environment
Innovative, anticipatory, entrepreneurial managementOrganization-wide frameworks, tools, and programsProfit and Environment and Equity
Opportunity for efficiencyOperational excellence and strong financial performance
Focus on competitiveness and strategic advantageProduct and process design criteria include the environment
Quality initiatives encompass environment
1980 2000
Managerial Mindset
Definition of the Issues
Perception of Waste
Strategic Orientation
The Evolution of Corporate Response to Environmental Concerns: 1980s, 1990s and Beyond
The Change in Perspective on Environmental/Social Issues
Traditional Thinking Sustainability View• Rhetoric Operational excellence
• Cost burden Efficiencies
• Compliance Cost competitiveness and strategic advantage
• Doing good Strong financial performance
• Peripheral Core
• Technology solutions Yes, but only with frameworks, tools, and programs
• Reactive Innovative, anticipatory, entrepreneurial
Key Questions to Be Addressed in the Course
WHY the Concern?
WHAT Does It Mean?
HOW Are Firms Implementing?
Student Learning Objectives:
• Gain perspective and insight into a rapidly expanding arena of entrepreneurship and innovation
• Explore the why, what, and how of “sustainable” business
• Understand the history and context for sustainability ideas and practices
• Comprehend and apply frameworks, concepts, and terms
• Learn from multiple examples of firms integrating sustainability principles into strategy/operations
Methods:
• Discussion and analysis• Articles, book chapters• Case studies• Technical notes• Mini-lectures• Guest speakers• Videos• Student reports• Final Papers
Frameworks and Concepts
Schumpeterian innovation Entrepreneurship Environmental management and sustainable
innovation• EI=P x A x T• Earth Systems Engineering and Management• Industrial Ecology• The Natural Step• Natural capitalism• Cradle to cradle• Green chemistry• Nature’s services• Biomimicry• Precautionary principle
5 Schumpeterian Forces of Creative Destruction
• Discovery of…– New technologies– New products– New markets– New processes– New organizational forms
SchumpeterEntrepreneurship as “New Combinations”
• Existing technology + new processes• New technology applications + new
organizational forms• Enhanced products + new processes +
expanded markets• New technology + new markets
Time Orientation –Past & Present
Time Orientation –Present & Future
The Traditional Economy
The Entrepreneurial Economy
New Paradigm…
Entrepreneurship: A Frontier of Innovation
Schumpeter’s “creative destruction”• New technologies,
products, markets, processes, organizational forms
PAST PRESENT FUTURE
Conventional Products, Services(power, transportation, materials, food, shelter)
Wind turbinesFuel cellsHybrid carsBiodegradable plasticOrganic food
Buy function, not productReverse logisticsZero wasteZero emissionsMarkets in nature’s services
Creating the Future Through Innovation
NewProducts
Sustainable Business Innovation and the Traditional Economy
Traditional EconomyTraditional Economy
Entrepreneurial Sector
Sustainable Business Sustainable Business SubsectorSubsector
The Impact of the Entrepreneurial Sector
The force of one period’s entrepreneurs becomes the next generation’s business paradigm, therefore entrepreneurship trends can be seen as a leading indictor of business change
Entrepreneurship
“At the core of entrepreneurship is the question of why and under what conditions opportunities for [Schumpeterian] innovation and creativity exist.”
– Venkataraman, 1997
Source: Living in the Environment, Tenth Edition, G. Tyler Miller, Jr., 1998
161514131211109876543210
Billions of people
Black Death - the Plague
Hunting and Gathering
Agricultural Revolution
Industrial Revolution
2-5 million years
8000 6000 4000 2000 2000 2100Time B.C. A.D.
Population Growth
UNLIKE NATURAL SYSTEMS, MODERN HUMAN SOCIETIES PROCESS RESOURCES IN A LINEAR FASHION, CREATING WASTES FASTER
THAN THEY CAN BE RECONSTITUTED INTO USABLE RESOURCES.
On average 94% of the raw materials used in creating a product ends up as waste; only 6% ends up in the final product.
6% Product
94% Waste
Source: National Academy of Engineering
Changing Character of Natural Resource Challenges in the Last 25
Years
LocalSpecific
Short DelayLow Complexity
Society Impact Low
GlobalDiffuseLong DelayHigh Complexity
Societal Impact High
Major Environmental and Resource Problems
Air Pollution• Global climate change• Stratospheric ozone
depletion• Urban air pollution• Acid deposition• Outdoor pollutants• Indoor pollutants• Noise
Water Pollution• Sediment• Nutrient overload• Toxic chemicals• Infectious agents• Oxygen depletion• Pesticides• Oil spills• Excess heat
Biodiversity Depletion• Habitat destruction• Habitat degradation• Extinction
Food Supply Problems• Overgrazing• Farmland loss and degradation• Wetlands loss and degradation• Overfishing• Coastal pollution• Soil erosion• Soil salinization• Water shortages• Groundwater depletion• Loss of biodiversity
Waste Production• Solid waste• Hazardous waste
Major Major EnvironmentaEnvironmenta
l Problemsl Problems
Source: Living in the Environment, Tenth Edition, G. Tyler Miller, Jr., 1998
Human Health• Childhood diseases• Cancer• Asthma• Immune system deficiencies• Reproductive system problems• Endocrine system disruptions
Changing Conditions
Natural Resource Services(amount, quality, assimilative capacity)
Public opinionNGOsMediaInternational protocol
1900 Demand for Natural Resources(population, consumption, technology)
The Economy
1970
Innovationand Opportunity
Innovation: Creating New Competitive Space
The Economy
Customer demandRecruitment and retention
Material cost, availabilityWaste disposalRegulationHealth issues
Fines LiabilitiesInsuranceBank creditRisk
80% of global warming pollution is from use of fossil fuels
10% of global carbon dioxide pollution is from the U.S.
99% of total U.S. oil use is U.S. oil imports
66% (or 2/3rds) of U.S. oil imports are used for transportation
"Only few megatrends exist that are of special importance to the future of the automotive industry. Sustainable mobility is one of them, and fuel cells are a key technology for it."
Prof. Klaus-Dieter Voehringer, President of the Shareholder Committee of XCELLSIS and
President of Research and Technology of DaimlerChrysler
Fuel Cells“UTC Fuel Cells: Innovation Inside a Large Firm”“Fuel Cell Technology and Market Opportunity”
Case Teaching Note
Earth Systems Engineering and Management
Climate Systems
FUEL CELLS
ENERGY MODULE
COURSE CONTENT
Corporate Response
Earth Systems Engineering & Management
Climate Changes• Glaciers melting• Extreme weather• Flooding• Drought• Warming
Teaching Materials• Articles on ESEM, video• Telework at AT&T• Atlantic Energy• Fuel Cell Technology and Market Opportunity• UTC Fuel Cells – Innovation Inside a Large Firm• Teaching Note
• Telework• Emissions trading systems• Fuel cells 2004
HYBRID VEHICLESMultimedia Case
Corporate Transparency
Regulation
EfficiencyBank Credit & Insurance
Health National Security
Risk Management
Competition Fiduciary Responsibility
Energy Module
Expected U.S. Fuel Cell Market Growth
Source: Freedonia Group 2002
U.S. Fuel Cell Market Size
2006
2010
$3.3 $3.3 billiobillio
nn
$23 $23 billionbillion
Case Discussion
1. Entrepreneurship Framework Analysis– Team– Opportunity– Product– Resources– Strategy
2. UTCFC Evaluation– Pre-1997 and 2002
3. Corporate Environmental Policy: Beyond Compliance to Innovation
Conversion Efficiency of ICE (Internal Combustion) Vehicles is 20-25% (with CO2 emissions)
compared to
55% Conversion Efficiency of FC (Fuel Cell) vehicles (with water and heat as the only emissions)
Total Relative Emissions from Vehicles
Sulfur DioxideNitrogen-Oxygen CompoundsVolatile Organic Compounds
1.2
1.0
0.8
0.6
0.4
0.2
Gasoline Engine
Natural Gas Engine
Hydrogen Fuel Cell Electric
Methonol Fuel Cell Electric
Source: http://www.sandiegometro.com/1999/sep/coverstory.html
Fuel CellsAdvantages• Smaller engine unit size• More interior space, better visibility• Improved ride, handling, stability• Quiet• Skateboard chassis• Twice the efficiency of ICE• Pure hydrogen fuel → zero emissions• Integration of fuel cell with electronics (steering, braking, etc)• Reduced reliance on oil imports• Competition in energy, pricing
Obstacles• Durable on-board hydrogen storage technology (300 miles)• Interim fuels• Refueling infrastructure• Chicken-egg challenge
Small R&D Shop Cost Center
Market-facing High-growth Profit Center
Challenge to UTC
Two Separate but Interlinked Corporate Arenas of Activity
• Environmental Management
• Sustainability Innovation
Sustainability as a Next Step in Total Quality Management
• Safety = zero injuries• JIT = zero inventory• TQM = zero defects• Sustainability = zero waste and zero emissions
A Framework for the Process of Entrepreneurship
EntrepreneurEntrepreneur OpportunityOpportunity
Product Product ConceptConcept ResourcesResources
Number of people (P)
Number of units of resources used per person
(A)
Environmental degradation and pollution per unit of resource used
(T)
Environmental impact of population
(I)
=
Environmental Impact Model
Source: Living in the Environment, Tenth Edition, G. Tyler Miller, Jr., 1998
Sustainable Business: Opportunity and Value Creation
Sidestepping the need for sustainability may prove difficult. Population growth rates and related higher levels of waste guarantee environmental concerns will grow in importance. The government and the public are increasingly concerned with the extent and severity of air, water, and soil contamination and the implications of natural resource consumption and pollution for food production, drinking water availability, and public health. As environmental and social problems increase, public health concerns are likely to drive new approaches to pollution prevention and new regulations encompassing previously unregulated activities. As concerns and regulations increase, so will the market power of sustainable businesses.
From Patagonia, Tom’s of Maine, Ben and Jerry’s, The Body Shop to…
• Interface• Mitsubishi Electric• Scandic• Electrolux (Frigidaire)• IKEA• Xerox• AT&T• Weyerhauser• Alcoa• Ford• UTC
• Allied Signal • 3M• Collins Pine• Visteon Automotive Systems• Suncor• Harley-Davidson• Johnson & Johnson• Royal Dutch/Shell• Conoco• BP• Shaw
Lens Adjustment
• Engineered world• Systems: Cells to atmosphere/biosphere
Sustainable Business: Opportunity and Value Creation
The ideas of sustainable business are positive, visionary, and strategic. Companies that do not develop capabilities in sustainability will risk becoming less competitive as the more innovative firms committed to sustainability forge ahead.