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 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


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



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


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.

Alternative Energy Source Development

Business

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