Archive for the ‘GE’ Tag

Create categories and profits

Many CEOs grapple with a fundamental problem:  how do you profitably build revenues in low growth, hyper-competitive markets?  Grabbing business from a competitor is a difficult and expensive proposition.  Raising your prices — unless delicately handled — can be risky.  Driving incremental product innovation is a common strategy but one with low odds of success when the value-add is minor and the product remains comparatively undifferentiated.  There is a better approach to reigniting growth:  create your own category.

Pursuing incremental innovation is a tough road to travel.  Various estimates put the success rate of each new product or upgrade at only 10%-20%, resulting in wasted investment, unhappy customers and damaged careers.  However, there is a superior alternative for exploiting innovation.  It is called Category Making (CM).  This proven innovation approach combines cutting-edge product and business model innovation to create an entirely new offering, which by itself establishes a new category. There have been many successful examples of CM including ultra-low-cost, portable ultrasound machines for the Chinese market (GE), Minivans (Chrysler), Xbox Live Gaming system (Microsoft), Greek-style yogurt (Chobani) and iTunes/iPad (Apple).

According to research published in the Harvard Business Review, category makers generate much higher financial returns than incremental innovators.  Specifically, 13 ofFortune’s 100 fastest-growing U.S. companies between 2009 and 2011 were considered category creators.  They alone accounted for 53% of incremental revenue growth and 74% of incremental market capitalization growth of the top 100 over those three years.

Category creators do many things right to produce their industry-leading returns.  First and foremost, they appeal to consumers by:

  • Providing a unique offering that delivers compelling packaging, convenience, functionality or experiential benefits.  Xbox, for example, enables friends to play each other over the Internet.
  • Creating a new pricing model that is attractive to consumers.  For example, iTunes allows consumers to buy only what they want (i.e. individual songs) at a low price.
  • Re-engineering how a product is delivered and distributed.  Consider how Netflix revolutionizes the delivery of movies by leveraging internet-based, home delivery.

Secrets of their success

As a go-to-market strategy, pursuing CM innovation makes a lot of sense for companies:

Less competition

Most incremental innovations launch into existing categories — and right into the teeth of competition.  Category makers seek to outflank competition by introducing a new product into new market space.  This enables the innovator to secure ‘first mover advantage,’ thereby rapidly attracting customers while establishing barriers of entry around distribution, brand image and business partnerships.

Differentiated value

Incremental innovation often comes up short because it does not add enough extra value (or incentives) for consumers who are typically reluctant or unwilling to change behaviour.  On the other hand, category makers rely on a novel customer offering and value proposition. These products can more easily get the market’s attention and deliver compelling benefits previously unavailable.

Better use of scare capital & time

Often, the scope of innovation is dialed back in order to minimize capital outlays, limit market risk or because of managers’ risk aversion.   This  “penny wise and pound foolish” approach can hamper the initiative, reducing its chances of success. Category makers see risk but cope with it differently.  They focus on fewer but bigger ideas, and make sure they are properly supported by the organization’s culture and systems.  Raising the internal stakes ensures adequate investment, diligence and management attention.

Making it work

Becoming a CM requires firms to alter their visions, change the way they view risk, and allocate sufficient resources and capital.   Not surprisingly, they will look at innovation in a comprehensive fashion.  For example, category creators:

  1. Use financial, distributional or technological constraints as a catalyst for breakthrough thinking (GE)
  2. Investigate offerings that exist at the intersection of different but complementary technologies and business models  (Apple’s iPad).
  3. Look beyond existing consumer requirements to explore unmet or emerging needs, future trends and adjacent segments (Chobani, Chrysler, P&G).
  4. Seek out the best delivery and distribution model, either by building in-house, purchasing another company or partnering with a complementary firm.  It is not uncommon for organizations to leverage all three (Microsoft)
  5. Think creatively around how they generate profitable revenues without alienating consumers (Apple iTunes)

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Co-create products with your customers

Contrary to what your parents told you, it often does pay to follow the crowd.

Many companies are using crowd sourcing strategies to gather new ideas or provide operational support.  Crowd sourcing involves the harnessing of dozens if not thousands of people through specialized techniques and intermediaries to address a specific business opportunity or solve a research problem.  Some leading companies have taken crowd sourcing to the next level, collaborating with customers and key stakeholders to co-create new products or troubleshoot perplexing problems.  This new approach can spark breakthrough innovation and solve difficult technical challenges much faster and at lower total cost than deploying expensive R&D teams or buying risky start-ups.

Co-creation is well suited to better deliver on customer needs, at lower product development costs and risks.  Some notable examples of co-creation (as highlighted in the Harvard Business Review) include:

FedEx

Problem: How to ensure on-time, zero-defect delivery of live tissues for organ donation.

Solution:  With external medical staff and suppliers, FedEx developed a sophisticated logistics technology that manages key variables like location, temperature and pressure.

General Electric

Problem:  How to extract Alberta’s heavy oil in an environmentally friendly, low-cost way.

Solution:  GE, government officials and customers collaborated at a shared innovation centre to develop a new water filtration system that reduced water consumption.

Microsoft

Problem: How to improve the performance of a call centre.

Solution: Working with customers and call centre agents, Microsoft redesigned the customer experience to make it more personal and responsive.

A variety of innovation projects have used co-creation in diverse areas such as new product design, content creation, software development, video games and mobile app development.  Interestingly, some companies and entrepreneurs are using new crowd sourcing models like Kickstarter or Indiegogo to finance new products and TV and movie production.

To exploit co-creation’s potential, firms must pay attention to five key ingredients:

1.   A willingness to open up and interact

Collaborating with customers and stakeholders is not easy for many companies, even ones that purport to be customer-centric.  Since Co-creation is a creative and problem-solving process, it requires all employees to be good listeners and collaborators.  For inward-looking cultures, leaders may have to encourage openness by tweaking management systems, launching change management initiatives or bringing in outside facilitators.

2.   A big but specific problem

Leaders will get the most out of co-creation strategies when they target big problems and opportunities that the firm cannot deal with on its own.  Open-ended problems are rarely successful, given the challenges of engaging participants and vetting the ideas.

To effectively manage the process, management should craft a number of hypotheses for the crowd to explore.  Furthermore, the firm should anticipate that prospective solutions would evolve as different stakeholder groups provide input.

3.   Make it easy for the right people

Leveraging dozens if not thousands of stakeholders across many organizations and regions can be complicated. To keep the co-creation process controllable and productive, managers must carefully consider the makeup of the internal team and extent of outside collaboration.  Firms should cast a wide net to attract the right number of external experts, in areas like the supply chain and customer ecosystem as well as universities and startups.  Moreover, organizations need to make sure they have the right data, rules and IT systems to foster rich interactions.

Numbers matter; for some problems, the input of a dozen experts can be more valuable than hundreds of amateurs. Furthermore, the number of submitted ideas will be proportional to the ease of participation. P&G’s Connect + Develop program requires only a name, email and physical address to submit an idea.

4.   The right platform

To properly engage the crowd, companies should carefully consider which online or physical vehicle they use.  In some cases, web-based platforms like Crowdspring or InnoCentive will work best.  In other cases, firms should consider building their own specialized co-creation model like GE or 3M’s customer innovation centres.

5.   Evaluate well

Even when using hypotheses, companies can still get inundated with many interesting ideas.  To understand which solutions are feasible and have the greatest potential, managers should undertake quick online experiments, computer simulations or launch first in virtual worlds like Second Life.

Utilizing the crowd can be problematic. Like executing other key business strategies, prudent leaders will ‘measure twice and cut once,’ to ensure they design the right program for the right challenge – and can leverage the raw value of the biggest ideas. For those that do, Co-creation will be a game-changer in terms of better tackling customer needs and improving the pace and efficiency of innovation.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Next generation manufacturing, today

Recent advances in digital fabrication technologies have the potential to revolutionize how companies build products and target consumers. Manufacturers can now produce many customized products and prototypes ‘when needed, as needed’ with the same economics as high volume production.  DF technologies will transform many industries including apparel, consumer & industrial products and healthcare – as well as local economies, which may experience a manufacturing revitalization.   Savvy manufacturers are exploring how they can leverage these new technologies to compete better.

The rapidly evolving field of DF is doing for manufacturing what the Internet did for information-based goods and services.  DF turns traditional, volume-based manufacturing economics upside down. In the conventional “subtractive” production model, the existence of scale economies means that it costs much more money to produce one unit than it does to produce say 100,000 units.  When DF technologies and approaches are employed, it now becomes cost effective to manufacture much smaller batches of customized products on demand, while shortening the cycle time between design and production.

Not surprisingly, DF has disruptive characteristics. “3D printing can provide the garage entrepreneur with the same productive capabilities as the large corporation,” says Abe Reichental, CEO of industry leader 3D Systems.

Additive technologies

At the heart of DF has been the development of additive-based technologies like 3D printers.  These machines allow firms to take digital designs and rapidly print (i.e. build) products or parts from a variety of materials using bonding or fusing techniques. The 3D printer’s advantages in programmability, quick set up times and rapid change-overs enable firms to produce small batches and prototypes for the same cost per unit as long production runs.  Furthermore, companies can rapidly adjust production to meet customer demand and changes in taste.

3D printing is best suited for products or parts that are expensive to inventory, need high levels of customization and require quick production runs. In the healthcare sector, the 3D printing future is already here. Over 10 million 3D-printed hearing aids are currently in circulation worldwide. 3D printing is being adopted by industry leaders such as GE, Medtronic, Boeing and Mattel as well as a host of smaller enterprises to make a myriad of items such as aerospace parts, iPhone accessories, orthopaedic implants, jewelry and toys.

The future looks promising:  additive technologies are evolving on a path similar to Moore’s Law: machine capability is growing while cost is decreasing exponentially.  Jeff Immelt, CEO of engineering giant General Electric, is convinced.  “I think it’s going to be big, I really do… [particularly for] shortening cycle times between designing products and making them.”  This advantage could help North American manufacturers compensate for higher wage costs compared with those in emerging economies such as China.

Of course, DF has its limitations.  The technology is not mature enough to handle large or complex products.  Furthermore, additive technologies cannot match the low cost and throughput of conventional manufacturing for routine parts.

Open Source Manufacturing

Perhaps the most intriguing facet of the DF revolution has been the emergence of an ‘Open Source’ manufacturing movement. Booze & Co. describes this as the rise of a ‘Maker Culture’ – a self-organizing community and supply chain made up of hundreds of connected manufacturers, consumer groups, on-line shopping sites, and hacker groups.

The Maker Culture encompasses an ecosystem of players.  Online fabrication services like i.materialise and Sculpteo provide on-demand 3D printing for personalized small volume production, at rates that are affordable to individuals and small businesses. Customers forward a digital design and receive the corresponding physical item by mail a few days later.

New open design repositories and DF-powered supply chains are sprouting up on the Web.  Thingiverse is an online hub where people can freely download each other’s designs and programming code for such ubiquitous products as bottle openers, gears, and coat hooks.  Distributed manufacturing networks like Makerfactory and 100kGarages connect digital manufacturers directly with a global market. Potential customers post job requests, which are then bid on by individual fabricators.

Similar to their programming cousins, Makers are forming open source collaboratives and workshops around the world. These spaces are not centrally owned or organized, but they share information collectively and collaborate on each others projects. Makers are expected to publish their plans and specifications, typically under an open source license.  This allows others to copy, adapt, and co-develop designs, along with ensuring credit and mutual access to ideas. This cultural shift has the potential to germinate a diverse, dense and innovative network of local vendors centered around large original equipment manufacturers or by industry.

The rise of DF has important implications for every manufacturer.  Those that embrace the technological and cultural opportunities will benefit from lower production costs, greater innovation, a faster design-to-build cycle, and the support of a more responsive supply chain.

For more information on our goods and services, please visit the Quanta Consulting Inc. web site.

Great innovators: Nature vs Nurture?

These days virtually every company looks to gain competitive advantage by launching innovative products and programs.  In many companies, innovation is more about people than it is about sub-optimal capital, structure or strategy. With this reality, how can managers spark more innovative thinking within their existing human capital pool?

A recent issue of Working Knowledge from the Harvard Business School published an excerpt from an interesting new book. Written by authors Clayton Christenson (of disruptive innovation fame), Jeff Dyer and Hal Gergersen, The Innovator’s DNA argues that innovation skills can be taught, cultivated and embedded into a company’s DNA. 

Conventional wisdom says that innovators are typically right brain individuals with a strong independent streak and flair for out of the box thinking.  For a firm to become more innovative, they need to attract as many of these unique people as possible.  Unfortunately for this line of thinking, a significant amount of academic and medical research on twins confirms that the majority of creativity skills are not simply genetic traits endowed at birth.  Rather, they can be developed and fostered. The research shows that 60-75% of our innovation skills come through learning – first from understanding the skill, then practicing it, and finally from gaining confidence in our creativity capacity.

If innovators are made and not born, then which attributes are important?  The authors canvassed approximately 5,000 executives to understand the different skills that separate innovators from the average executive.  Their research identified 5 major skill sets (4 behavioural, one cognitive) that can be taught and nourished:

Observing

Innovators spend a lot of time studying the market and technology ecosystem with a focus on customers, products, and competitors.  The observations gleaned in one place often serve as new ideas or ways of doing things in other places.  As an example, many of Steve Job’s ideas for Apple’s innovative Macintosh computer and mouse came from Xerox PARC’s research facility.

Associating

Innovative people are often able to identify, synthesize and recombine disparate ideas or technologies – a cognitive process known as Associating – into something new.  While some see this as a welcome confluence of events, innovative people have a knack of connecting seemingly unrelated factors into new concepts or problem solving.  On a corporate level, well-known innovators such as P&G and 3M incorporate associational strategies into their innovation programs. Our firm helps companies develop Associating skills through specialized facilitation and creativity-enhancing learning.

Questioning

Innovators are passionate and curious people who spend more time than the average person asking and valuing questions.  These questions seek to bring clarity and solve difficult problems by challenging conventional wisdom or key assumptions.   Out of the answers come breakthrough insights, ideas and results. Albert Einstein may be the most famous example of this kind of innovator.

Experimenting

Innovative people thrive on new experiences, experimentation and change.  Very often, their restless nature translates into a impetus for launching pilot programs to test hypotheses and new products.  One of the most prolific inventors of all time, Thomas Edison was a relentless tinkerer who also headed an industrial laboratory and major corporation (Edison General Electric, later GE).

Networking

Innovators understand the power of the network in identifying and catalyzing new thinking and action.  These people expend a lot of effort collaborating with others on existing projects as well as seeking to connect with new people and organizations for inspiration, new ideas and resources. As an example, Steve Jobs was coaxed by a friend to check out a small and eccentric computer graphics company named Industrial Light & Magic.  He ended up buying the firm for $10M and turned it into Pixar, which he eventually took public for $1B.

Inculcating these five talents in whole or in part in people can lead to significant increases in individual and organizational innovation. Akin to a person’s DNA, these discovery skills are necessary building-blocks for firm’s to ramp up innovation capabilities and outcomes.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Making Open Innovation work: the case of 3M

Open Innovation is a proven paradigm for generating higher levels of innovation in products, processes and capabilities.  As opposed to the “closed” nature of many company’s R&D efforts, OI looks to open up a firm’s innovation process to outside ideas, collaboration and partners.  Because technical knowledge is widely distributed and dynamic, organizations will not be as innovative when they rely entirely on their own research.  Instead, managers should actively search out and buy or license technology, patents or inventions from other companies, individuals or research institutes. At the same time, technology not being used in a firm’s business can be offered outside the company.  OI is not only about big science projects.  One of the most common applications is problem solving for challenging technical issues. 

Many market leaders like GE, Cisco, Adobe and P&G have successfully used OI to improve their products, reduce R&D costs, solve difficult technical problems and accelerate time to market.  One of the best exploiters of OI is the manufacturer, 3M.

In 2010, 3M was voted the World’s third most innovative company in a survey by consultant Booz & Co.  How does 3M use a paradigm like OI to regularly create successful new products and capabilities?  Fred Palensky, 3M’s Chief Technology Officer, shared some insights in a recent edition of strategy+business magazine:

  • 3M stresses internal sharing of new innovations.  New technologies and capabilities that are developed in one R&D centre must be shared – cross pollinated – across product lines, markets and technology platforms;
  • Cross pollination is enabled by a cultural trait known as “dual citizenship.” Employees are responsible both to their market and department as well as the global 3M technical community. Key people are often moved around to different sectors, roles and geographies enabling them to share ideas and skills while bringing them a holistic view of the business. 
  • 3M encourages regular collaboration with outsiders. For example, 3M’s R&D labs are presently collaborating with universities and business partners in over 300 projects.   To better address user needs, 3M has developed 30 customer technical centers that bring users directly into the product development process.

Palensky attributes 3M’s innovation success to culture, not structure or process.  OI has been practiced for years and is part of the firm’s DNA. According to Palensky, OI works because “everyone has skin in the game.” In particular, employees must spend 15% of their time outside of their area of responsibility, collaborating, visiting customers or brainstorming.

In our experience helping firm’s germinate innovation, strategizing on OI is a lot easier than making it work.  The following are some of our best practices:

Cultural considerations are paramount

Within closed R&D organizations, the “not invented here” phenomena is very strong.  Overcoming this requires managers to regularly reinforce a culture of external collaboration, information sharing and trust and back it up with reward schemes.

Management systems must align

Key elements like structure, information rights, roles & responsibilities and measurement systems must be congruent with an external-facing, sharing-based philosophy.

Seek and ye shall find

Serendipity is most likely to occur when a range of technical problems is exposed to a large number of diverse participants. Sufficient resources, time and mandate must be designed into the OI process: innovation discovery & synthesis, partner identification and relationship management.

Governance is critical

OI programs must be carefully designed to protect intellectual property, designate decision rights and reward distribution in advance.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Making sustainability live in your organization

Most executives I speak with acknowledge sustainability’s strategic imperative. A few of them have understood the transformational impact of sustainability and have moved boldly to realign their operations and cultures in order to reap significant business value. This value creation includes tangible outcomes such as improved brand image and supply chain efficiencies as well as intangible benefits like enhanced employee morale and greater appeal to new recruits.   While the majority of organizations have similar ambitious goals, many are unclear how to turn intent into results.

Recently, MIT’s Sloan Management Review looked at how companies were responding to the emergence of sustainability as a mainstream business driver. The study found that most organizations fall into one of two groups: a select group of embracers and the masses of cautious adopters.  Embracers such as GE, Unilever, Walmart, P&G and SAP recognized early that they can leverage sustainability strategically to outflank competition, drive brand differentiation and revitalize supply chains. To bring this vision into action, the embracers quickly integrated sustainability strategies and practices into the core of their business and organizational models. The results have been impressive:  enhanced corporate reputations, significant supply chain savings, higher product margins and a lower environmental footprint .  

On the other hand, the cautious adopters have been more reactive and timid.  They see sustainability as important but within the context of efficiency gains and risk management.  In their planning, sustainability is pursued as a series of tactical initiatives executed within their current organizational model.  In most cases, results have been modest with little appreciable change in competitive position.  Not surprisingly, cautious adopters will be challenged to overtake the embracers as long as they continue to treat sustainability in such an incremental fashion.

Interestingly, capital spending was not a barrier to action.  Despite recent economic and political uncertainty, 60% of surveyed firms reported increasing their 2010 sustainability investments.  What then is holding back most companies?

To drive sustainability, executives need to change the way they do business.  The implementation strategies of embracers offer a number of lessons, including: 

Move early even if there is incomplete information

Brian Walker, CEO of sustainability-leader Herman Miller furniture believes that many sustainability decisions “can’t be reduced simply to a formula or financial return…it requires a bit of instinct, a gut feeling of where you want to go.” In most industries, there are sufficient best practices and case studies to help firms move forward with plans that improve sustainability competitiveness.

Balance a long term vision with concrete short term wins

While long term success favours the ambitious, the reality in most organizations is that short term project wins are needed to generate operational experience and catalyze change.  One IT CEO I worked with refused to implement a large scale sustainability initiative until the firm had garnered sufficient learnings from a couple of pilot programs. 

Integrate sustainability into the organizational structure and operations

Sustainability must be woven into the fabric of the organization and not siloed within a specific department.  For example, GE and Nike translated their bold sustainability mandate directly into their operating units, practices and cultures.  Santiago Gowland, Unilever’s VP of Brand and Corporate Responsibility, says that his company views sustainability as a key business growth lever, treated at the same level as HR, Marketing and Supply Chain Management. For Unilever, sustainability is a new way of doing business.

Leverage top down and bottom up commitment

While getting a strong mandate from the Executive Team and Board is crucial, much of the early effort and ideas must come from the lower ranks.  One firm I worked with gained environmental leadership in their industry mainly through the efforts of a highly motivated, cross functional volunteer committee of low and middle level employees.

Make sustainability integral to key product, service and supply chain decisions

Inputting sustainability criteria into decision making and operational analysis is essential for developing a business case and gaining external compliance.  Companies like SAP and Walmart have driven sustainability savings and compliance using tools like Product Life Cycle Analysis, which look for opportunities to reduce environmental impact while generating significant cost savings.

Successfully deploying sustainability strategies requires more than lip service.  As well as putting their money where their mouths are, practical executives will seek to embed sustainability practices and beliefs within their companies.

For more information on services and work, please visit the Quanta Consulting Inc. web site.

The ten commandments of germinating innovation

Increasing innovation is now the mantra of many executives as they seek to address key developments like sustainability and regulatory change or boost performance in areas like cost reduction or service levels. Considerable attention and resources is now being paid to identifying and implementing organizational strategies that cultivate product, operations and workflow innovation.  

My experience over the past 20 years – which is now buttressed by ample scholarship – is that it is easy to make innovation a corporate priority but it’s a lot harder to germinate it within the organization.  Typical barriers include an inhospitable culture, lack of leadership and sub-optimal management practices. 

Fortunately there are now best practices to fostering innovation in organizations regardless of industry.  Some of these include:

1.         Enable the employee

Innovative enterprises like 3M and Google require employees to spend a specific amount of time on “creative” projects even at the expense of their daily responsibilities.  These firms also design performance measurement and reward systems that reinforce innovation goals. 

2.         Break down organizational silos

Innovation flourishes when there is a rich exchange of data, learnings and technologies between business units, people and functions.  A variety of approaches including knowledge management tools and departmental transfers can help facilitate this cross-pollination.   

3.         Encourage diversity

To avoid groupthink and shared bias, innovative firms focus on hiring and cultivating diversity within their staff, project and management groups.  Diversity, in terms of intellectual approach, is also encouraged in critical areas like analytics and problem solving.  

5.         Create shared values

To take root within a company, innovation must become embedded within the cultural norms and practices.  This requires strong and consistent, top-down executive support as well as a solid business case and company-wide alignment.   

6.         Use stretch goals

Management can trigger innovation by setting aggressive stretch goals around revenue and profit.  When properly used, stretch goals harness a team or individual’s stress and anxiety to look beyond existing strategies towards breakthrough thinking.

6.         Evaluate realistically

Not surprisingly, typical short-term financial measures like payback and ROI are not suitable to evaluate unique innovations, particularly when key information like market size is unavailable.  At an early stage in the innovation project, other metrics like consumer appeal should carry more weight.  To avoid expensive failures, companies also need a gating process that quickly kills off poor innovations. 

7.         Aim for home runs but welcome the small wins

Home run innovation like Apple’s iPad can deliver major rewards but so can a number of smaller improvements, which together, can increase product value, streamline operations or reduce delivered cost.  Small wins also have the benefit of building internal momentum and nurturing organizational learning.  

8.         Engage outsiders

Given the speed of technological change and globalization, virtually no company can innovate by themselves anymore.  Savvy innovators like P&G engage academics, suppliers and customers around the world for good ideas.   As well, emerging open innovation models like crowdsourcing are bringing the ideas and thinking of the masses into the firm.  

9.         Focus on Commercialization

For many firms, innovation is only about R&D.  Insufficient attention is paid to getting the innovation to market in a timely, effective and cost-efficient manner. Truly successful innovators like Apple and GE fully leverage their ideas by being expert at commercialization including marketing, sales and product management.  

10.       Be patient

Innovation usually does not happen overnight.  The innovation process is often unpredictable and false starts are inevitable.   Furthermore, it often takes a long time to refine the idea and commercialize the innovation.    

Getting these elements right will create the right conditions for innovation to flourish.  However, some firms could still under-perform because of a variety of institutional biases and strategic misconceptions.  These will be discussed in an article next week.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Two More Best Practices in Sustainability: Wal Mart and Rio Tinto

Earlier, we explored two companies, GE and Nike, that are considered ‘best in class’ when it comes to generating financial and environmental value from sustainability initiatives.  Below are two other leading firms in this area, according to research from MIT’s Sloan Management Review.

Wal Mart

Background

The World’s largest retailer of 7800 stores (and growing) has been at the forefront of implementing sustainability initiatives. Initially, Wal Mart focused on internal programs like greening their roofs and moving to more energy-efficient light systems.  Lately, the firm has turned its focus to greening its supply chain and encouraging it suppliers to follow its sustainability lead.

Some Key Strategies

In 2005, Wal Mart set ambitious goals of producing zero waste, using only renewable energy and selling only environmentally sustainable products.  They backed up these goals with one of the most comprehensive sustainability plans at the time.  As part of this plan, Wal Mart has pushed [sic] most of its large suppliers to switch to more green-friendly products and to track their environmental footprint.   In addition, Wal Mart is undertaking a wide-ranging product lifecycle analysis of its supply chain to identify areas with significant environmental and cost savings potential. For example, to hit its zero waste target the company is implementing a number of programs that improve inventory management, increase donations, and ramp up recycling.  Finally, Wal Mart is participating in a consortium along with academics, retailers, NGOs, suppliers, and the government in order to build a global database of product information.  This data will be used to develop an index for consumers to evaluate products based on environmental impact.  A centerpiece of this plan is the creation of a Sustainability Index which requires each supplier to rate their products based on sustainability criteria.

Results

Wal Mart’s efforts have yielded important savings.  For example, at Wal Mart’s behest Unilever switched to concentrated detergents in 2006 order to save packaging and reduce its carbon footprint. According to the firm, the packaging change has saved well over 80M pounds of plastic resin, 430M gallons of water, and 125M pounds of cardboard.   Importantly, Unilever’s packaging decision triggered a category shift to concentrated formats driving further savings.  For the future, Wal-Mart is aiming to turn its Sustainability Index into a global standard that measures and communicates the green footprint of a product, thereby becoming “a tool for sustainable consumption.”

Rio Tinto

Background

Rio Tinto is a big mining entity with a big environmental footprint.  For new projects, the company needs to win the backing of local communities, governments, and NGOs in order to reduce political, economic and brand risks and to deliver steady returns. 

Some Key Strategies

About a decade ago, Rio Tinto came up with the concept of working within countries and communities in order to operate in an environmentally respectful fashion. At the time, the company was developing a mine in Madagascar that was a source of contention.  The Madagascar government as well as NGOs were worried about threats to biodiversity and the local communit, given that the site was one of the last pristine regions on the island and a home to aboriginal people.  A plan was developed to protect the environment and create economic opportunities in the communities surrounding the project, including setting standards and goals for the company to meet. Key components of this plan include:  policies to protect biodiversity and water quality around mine locations; plans for the time mining operations would be over in order to prevent the emergence of “ghost towns” and; goals for greenhouse-gas emissions and energy use.

Results

As a result of this initiative, Rio Tinto has obtained what it calls a “social license to operate” in Madagascar thereby increasing overall corporate revenues and profits and improving their corporate reputation.  As well, the company also helped form the International Council on Mining & Metals, which encourages sustainable practices across the mining sector.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Mobile health care: Its (almost) here

Are we at the tipping point for widespread adoption of mobile health care solutions?  Device usability, power and ubiquity have improved immensely. Mobile networks now cover virtually all of the globe.  And, social networking sites are now a driving force in community-building for tens of millions of people.  Yet, this would not be the first time that expectations have exceeded what is technically and behaviorally possible in the short term.   

Wireless health care delivers major benefits to the 3 Ps: patients, providers and payers.  It speeds diagnosis and treatment, extends services to under-served regions and saves doctors’ and nurses’ time, all compelling factors for over-burdened, expensive health care systems which must cope with aging populations. Mobile health care has many appealing applications for major disease areas like heart disease and diabetes in terms of treatment compliance, remote diagnostics and community-building.

The Economist magazine recently published an excellent overview on the latest developments in wireless health care.  Below are some of  the highlights.  The market-research firm Kalorama Information estimates that the US market for wireless health care devices and services will be $9.6B in 2012, up from $2.7B in 2007. Importantly, significant players like GE, Sprint and Virgin have begun entering the market bringing new applications, scale and credibility. Already,  Apple offers thousands of health-related applications in their App Store.

Mobile health care can already claim successes, particularly in the emerging world.  For example, Medicall Home, a Mexican firm that provides medical consultations by mobile phone, has signed up millions of customers. Some applications have been so successful in the developing world that they are now being adopted in the rich world too. Voxiva, an American firm that has set up mobile health systems in Rwanda and Peru, is helping launch Text4Baby, a public-health campaign to educate pregnant mothers (they receive free text messages with medical advice).  T4B will soon become the biggest deployment in the world.  Virgin HealthMiles is using online social networks to enable friends and family to encourage (or nag) patients electronically on weight loss and exercise.  Thousands of patients already participate in Facebook communities to seek medical support and information.

Fully leveraging these new solutions will not be easy. Firstly, wireless health care will require a standardized Electronic Health Record that can be shared by all health care providers. This remains to be created.  Technical issues continue to hamper system reliability and device inter-operability on existing 3G networks.  To reduce risks (and legal exposure), all devices will need to seamlessly, privately and securely operate on all networks with 99.9% or better reliability.  While tremendous strides have been made with wireless devices, they will still need to demonstrate better performance in terms of usability and battery life in order to support health care applications.  

Like the adoption of other technologies, the human element looms large.  Patients – particularly the elderly, the largest consumers of health care – will need to embrace new technologies and make the necessary behavioral changes to use them. Furthermore, their health care providers will also need to be wired, compliant and integrated through standardized EHRs.  Given that up to 25% of all physician offices in some geographies are not connected to the web, ensuring close to 100% compliance will take time.  Finally, though technology exists to ensure patient security and privacy, additional safeguards will have to be developed to keep personal information safe.

Given its real and measurable benefits to multiple stakeholders, mobile health care is poised for growth.  As soon as the technical, standards and human issues are sorted out, a broader roll out can be expected.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Two Best Practices in Sustainability: GE and Nike

Sustainability as a key business driver is quickly moving into maturity.  According to MIT’s Sloan Management Review published in 2009 , there are now a number of firm’s whose strategies and tactics could now be considered best practice. Two of them are summarized below.

General Electric

Background

Early on, GE figured out that there was a compelling business and sustainability case for companies who could reduce their energy and water use, waste, and carbon emissions. Instead of seeing sustainability only as an internal cost, GE saw a large and profitable business opportunity in helping companies move along the sustainability path.

However, GE’s vision was not only externally-focused.   They also wanted to make their operations, culture and practices more sustainable.  The question was:  how do you align the entire company around a sustainability vision and then create a new business in an early-stage sustainability market?

Some Key Moves

In 2005, GE set up Ecomagination as a separate business unit to identify and deliver market-leading environmental solutions which would drive market leadership. Ecomagination was given aggressive top and bottom line goals and was prioritized and resourced accordingly.

GE also saw this initiative as a means to catalyze internal sustainability programs and to ensure management buy-in and compliance.  For example, managers began to be measured on how much energy savings they had achieved.  As well, GE began engaging employees to see where energy savings could be found. Ecoimagination sold and validated these solutions within the GE universe;  later these ideas were turned into products and solutions that were marketed to customers.

GE also proactively sought to influence environmental policies and regulations around climate change through its involvement with nongovernmental organizations and government bodies.  For example, GE pressed for a cap-and-trade carbon emissions system to in order to help clarify policies and regulations around climate change measures.

Results

In 2008, GE generated sustainability sales of $17 billion, up 21 percent from a year earlier.  The Company is aiming for $25 billion in sustainability revenues by 2010.  According to GE’s 2009 sustainability report, the Company has saved $100 million from their energy management measures and cut its greenhouse-gas intensity—a measure of emissions against output—by 41 percent.

Nike

Background

Nike was stung in the 1990s by a public campaign against its Asian labor practices.  To improve its image, the firm embarked on a long process of reinventing its operations around socially responsible production and to meet broad sustainability metrics by 2020.  A key question was:  how could Nike move beyond “compliance” and maximize sustainability by integrating new goals and principles into its business model?

Some Key Moves

Nike formed a senior, multi-functional team who was tasked with driving compliance around stringent social responsibility and environmental standards.  The team’s mission was to review and overhaul its entire design process, product line-up and supply chain.

To galvanize attention, management set aggressive 2020 goals around zero waste, zero toxic materials, closed loop systems as well as sustainable growth and profitability. To monitor progress, Nike created an in-house index to measure product design against these goals.

New, sustainability-inspired design and production strategies were implemented.  For example, Nike reinvented its design process to cut waste and material usage while substituting more sustainable materials and processes. Furthermore, the Company brought its supply chain partners into its effort because it knew it could not achieve its goals without their counsel and involvement.

Results

Under the new design and production methods, Nike’s lead product line – the Considered line of footwear and apparel – delivered:  a 67 percent reduction in waste, a 37 percent cut in energy use, and a dramatic 80 percent drop in solvent use as compared to other Nike products. Nike aims to convert all athletic shoes to Considered line standards by 2011, all clothing by 2015, and all equipment like balls, gloves, and backpacks by 2020.

 For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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