Recycling the Debate of Sustainability

What is sustainability? Is it a personal commitment to save the planet or just another opportunity to charge higher prices?  No one really knows.  When you think of the need for sustainability you might envision countries at war over water rights or abandoned vehicles along highways due to gas shortages.  These ominous images are not fantasy but possible realities, unless we, as a planet, can figure out how to curtail the depletion of our natural resources. Who should be in charge of such an undertaking and what can they do, if anything, to help reverse the inevitable? 

Sustainability is a very complex subject.  It is a byproduct of a long chain of technological advancements that over time have created the problem we face today, namely, the production of cheaper products.  As the global population balloons so too does the demand for our limited resources needed to produce these products.  It is only a matter of time before key resources such as iron ore, petroleum, or phosphates (used for fertilizers) are 100% depleted.  Higher prices help fuel additional exploration into harder-to-find deposits, but sooner than later, those new discoveries will get consumed as well.  Perhaps, what is needed is a comprehensive international sustainability plan that buys time to develop substitutes or alternative solutions.  In my quest to gain a deeper perspective, I recently attended three sustainability conferences.  What I discovered may surprise you.

Conference #1 – Sustainability
My first conference was at MIT’s 4th Annual Sustainability Summit (www.stabilitysummit.mit.edu).  Experts, thought-leaders, and entrepreneurs traveled from as far away as South Africa to compare and exchange ideas. Their animated presence gave credence to the dire urgency for a global mandate among our leaders.   The wide range of ideas and opinions that emerged from the Summit sounded hopeful, but also left one wondering, if a solution to such a large problem was even plausible.  I left with a list of nagging questions such as, who should be responsible for implementing sustainability programs, what steps would be taken to monitor progress, and how realistically ‘sustainable’ would these ideas stand on their own for years to come.  I felt as though our society had reached a turning point between progress and preservation, the same way a sailboat feels while turning into the wind to change its course.

Ironically, the same technological innovations (some of which originated at MIT) that helped make our natural resources readily available to the masses is being called upon to prevent its potential demise.  For now, at least, experts are focusing on remedies to slow depletion rates through improved management, communications, and efficiencies, but these changes only postpone the inevitable and do not provide a ‘sustainable’ solution.  At the MIT Summit we heard two presentations that I felt stood out.  One was from Starbucks and the other from the City of Boston.  As they both shared their experiences and best practices, I noticed an interesting pattern that I will later use to compare with my two other conferences.

Starbucks
Jim Hanna, the Director of Environmental Impact, leads the sustainability charge for Starbucks.  Starbucks began by evaluating the carbon footprint of every activity along their supply chain and focused on those areas that offered the greatest positive impact to the environment.  In one case they discovered that the nitrous oxide used to make their whip cream was 300 times more damaging to the environment than it’s equivalent volume in carbon dioxide.

Along with other like-minded corporations, Starbucks subscribed to a green certification process for their five roasting operations and, in addition, re-engineered their stores to use 25% less energy and water. They also empowered members of their supply chain to reduce their respective carbon foot print (i.e. paper mills) and supported their revered coffee farmers with fixed pricing, stable contracts, and business know-how.

City of Boston
Jim Hunt, the Chief of Environmental and Energy Services for the City of Boston took a similar infrastructure approach to Starbucks.  His research unveiled that ‘buildings’ and ‘utilities’ together offered a 65% improvement impact, vastly greater than other types of improvements including ‘consumer behavior’, which came in at a surprising 7%.  In conjunction with a third-party advocacy group known as LEEDS, Mr. Hunt’s team focused on new construction and retrofitting of buildings throughout Boston with a goal of becoming a carbon neutral city by 2030.  The improved office buildings would attract like-minded tenants who in turn would offer better jobs. One such building called the ‘Atlantic Wharf’ is rated with distinction as a ‘LEED Gold’ building.  It uses 42% less energy, has a 43% reduction in GHG emissions, and recycles 90% of the rain water for its cooling towers.  This clean energy initiative has rendered more than just savings for the City of Boston.  It has also accounted for over 64,000 clean-energy jobs from R&D to installation.

What struck me most from these two presentations was how both entities focused their resources on infrastructure improvements rather than on consumer or voter awareness.  Their consumers or voters were almost an afterthought and probably not worth the investment.  Perhaps they both felt that consumers/voters would eventually change their behavior or awareness on their own as they adapted to new and improved surroundings at the workplace, especially at companies renting the LEED’s-approved, ‘green‘ office spaces.

Conference #2 – Innovation vs Sustainability
At Reagan National Airport earlier this month, Boeing’s CEO, Jim McNerney, unveiled their new Dreamliner 787 aircraft boasting a 15% fuel reduction due to a whole host of technological advancements including a parabolic wing span and a lighter hull structure made of 100% carbon fiber.  The event attracted other sustainability leaders such IBM’s chairman, Samuel Palmisano, and iRobotics Chief Strategy Officer, Joseph Dyer.

Organized by ‘The Atlantic’, a Washington-based political publication (www.theatlantic.com), these influential  companies delivered a unified message on sustainability that contrasted with the MIT Summit.  Unlike Starbucks and the City of Boston, Boeing, IBM, and iRobotics focused less on infrastructure changes and more on new ways to apply ‘sustainability thinking’ to the process of innovation.  They wanted members of Congress to listen to their views on their collaborative strategic approach to innovation where each player, including the government, would have a specific role.

Boeings Mr. McNerney, felt that the US Government should not invest in specific companies, citing the recent Solyndra bankruptcy.  Instead they should focus on investing in tomorrow’s education and research, write laws to regulate a balance between economic growth and safety, and approve tax policies to help pay for these projects.

IBM’s Mr. Palmisano, noted that the politics of ‘offshore’ manufacturing no longer applies.  According to him, global business no longer has any ‘shores’ to have an ‘offshore’.  As a consequence, Congress should endorse more liberal immigration policies that will allow the global elite who study in US universities to remain working in the US rather than be forced to leave upon graduation.  To the underemployment issue, Mr. Palmisano announced a multi-corporate initiative with Mayor Bloomberg in New York where they are jointly offering a 6-year High School/Associates Engineering Degree program to qualifying students with a promise of a $50k/yr job after graduation.  This program is in its second year and has demonstrated dramatically improved test scores when compared to other schools.

Finally, iRobotics’ Mr. Dyer, felt that innovation companies like his, need a government mandated 30% financial cushion to meet all of the regulatory requirements. At the scale required to make a sustainable difference, innovation companies can no longer rely on the bootstrapping talent of a few eager entrepreneurs.  Just like new employees, startups need ‘an insurance policy’ of sorts to innovate successfully.  Mr. Dyer also shared an imperative discipline for generating successful R&D projects.  The first 10% of a project’s funding should include extensive planning and scheduling for the remainder of the project.  According to him, too many promising projects begin on loose terms that are based on hope rather than on sound planning.

Conference #3 – Excess Capacity
The third event I attended was an MIT presentation given by the co-founder of Zipcar.com and the founder of Buzzcar.com, Robin Chase.  Ms. Chase’s world looks at sustainability from a different lens.  Rather than address depleting resources, Ms. Chase focuses on organizing excess capacity to help alleviate the demand pressures from a growing population.  For example, assets sitting idle such as a parked car can be used by another person who might otherwise purchase their own vehicle.  Another example she cited is in Bogota, Colombia where a 130km stretch of a roadway is opened for pedestrian usage on Sundays.  …and of course, there is ‘cloud computing’.

The conclusions from Conference #3 were strikingly different from the other two.  First, unlike Starbucks and the City of Boston, Ms. Chase’s approach to Zipcars leaned heavily on the community for both endorsement and feedback and paid little attention to infrastructure improvements.  Once more, Robin’s approach to innovation was far simpler than Boeing’s, IBM’s, or iRobitics.  In her case new ideas could evolve with one or two trials at a near zero cost per trial.

Despite their common goal to achieve sustainability, each entity identified the approach that best suited their immediate needs.  Obviously what would work for one may not necessarily work for another, making the task of promoting sustainability that much more difficult.  No doubt sustainability is complex and the debate of how the planet can achieve sustainability will continue through many more iterations.  Allowing the debate to recycle freely and often, may be the optimal universal approach to lay the foundations for an international master plan.

Emerging Digital Wallets

Did it ever occur to you that some day you may have to pay extra for the cash stashed in your wallet?  Well, with the emergence of the digital wallet where daily transactions happen with a tap or wave of a registered device, merchants may soon opt to stop accepting cash or actually charge extra for cash payments!  Going ‘cashless’ may offer immediate efficiency benefits to society but over the long term, it could also change the landscape of global currencies altogether.

For centuries cash has been the life-blood of economies allowing buyers and sellers to exchange goods and services both locally and across borders, based on exchange rates that compare their respective buying powers. For many countries including the US, cash is a symbol of national pride. It not only represents the collective success of a nation among nations but also offers privacy and control of how we choose to spend it.  With more and more disruptive technological breakthroughs looming in this space, one might wonder what other trends could emerge when the physical evidence of hard currency is reduced to nearly-invisible electronic digits.

Today’s Technology
Electronic fund technology is founded upon on an ongoing convergence between established banking services and emerging smart gadgets.  At present two trends are battling for market dominance.  The first trend expands upon available credit card services (the lower hanging fruit) and focuses on increasing the number of possibilities where credit cards can be easily transacted.  Two emerging players include Square (www.square.com) and iZettle (www.izettle.com).  Both companies offer free credit card readers that attach to smart devices (i.e. Iphone and Android phones), hence, allowing both merchants and private individuals to transact anywhere and at anytime.  This space is already experiencing competition from Barclay Bank’s PingIt.  Unlike the other two companies mentioned, PingIt eliminates the need to use a physical credit card by offering its British clients the ability to transact using registered mobile  numbers.

The second trend supports contactless transactions where a buyer taps or waves a device that is registered with one or more credit or debit cards.  Based on RFID technology, a company such as LAKS, a UK-based watch manufacturer, offers an elegant wrist watch (www.watch2pay.com) with an imbedded chip that can be waved near a special reader for every day purchases.  The convenience of carrying an indiscriminate digital wallet on one’s wrist for purchases under $20 is both fashionable and practical. (It could also be just what wrist watch manufacturers like LAKS will need to revive their slumping industry.)  Mobil Corporation offers SpeedPass (www.speedpass.com) for gas and grocery purchases at participating Mobil stations, while AT&T and Verizon are developing ISIS (www.paywithisis.com), a grocery store application that registers a purchase at the time the buyer pulls the product off the shelf.

Both trends offer immediate benefits.  For cardholders, the time saved from waiting in line at a counter will encourage early adoption, while for merchants, the convenience of not being tied to a fixed cash register to close a sale can offer more possibilities.  Just the elimination of handling cash on a daily basis from the US Treasury through to the consumer amounts to huge savings.  A 2008 McKinsey Consulting study highlighted that Europe annually spends between 60-100 billion euros to process cash payments, which include bills and coins.  However, as money goes digital, the potential ripple effects caused by the ongoing convergence process of proven technologies could also become a nasty wake up call among elected officials.  Their recent inability to manage public funds effectively could trigger a public reaction to convert a seemingly harmless technological advancement into a global explosion of digital currencies.  Just think.  A similar phenomenon occurred when the number of TV channels exploded after the introduction of cable and satellite services.

Imagine if…
Imagine a world where corporations issued their own digital currency that could be accepted not only in their stores but also at their participating partner establishments.  For example, an individual might earn credits with Walmart (or even a list of other businesses) that would be directly deposited into their digital wallet from their monthly wages with perhaps a 10% limit.  Similar to credit card loyalty points, they might receive additional credits from competing businesses or gain special advantages when participating in a coupon-driven purchase program. Participating consumers with Walmart credits, for example, could spend these credits at Walmart or with any other strategic partners within Walmart’s group.

As the adoption process continues among buyers, a normal progression might be that clusters of related companies agree on accepting one common currency for the entire group.  Controls such as a $20 per transaction limit could help limit abuse. If a buyer did not have enough credits, they could easily exchange one currency for any other based on daily exchange rates governed by a realtime bid and ask system determined by other users.

Not farfetched…
Note that this vision of the emergence of corporate-supported currencies is not farfetched, since it combines elements from proven technologies and programs currently in use, including airline frequent flyer point systems, Skype’s low amount transaction policies, PayPal’s seamless exchange rates for international money transfers, and Google’s keyword bidding process.  When proven programs such as these converge, new ideas emerge that have a greater chance of succeeding.

The implications of a world with hundreds of possible currencies creates numerous opportunities for corporations looking to lower currency risk, share payroll expenses with participating partners, and introduce bonafide loyalty programs.  Less fortunate will be elected officials who will face tough challenges from having less control of the money supply and, possibly, their voting constituents.

Strategy in a Global World

In a tight labor market, staying employed can become a full time job.  One must constantly retrain, learn new skills, or even move to another country, just to avoid from getting fired.  But, what about corporations? What options do they have to avoid filing for bankruptcy?  How should they ‘reinvent’, reorganize, restructure, or expand to remain competitive? In short, what must CEO’s do to keep their jobs?

For years ‘going global’ or ‘globalizing’ meant expanding sales to other countries.  As companies ventured into emerging markets, they soon learned that by moving their production facilities to China, for example, they could produce their products for less. China offered cheap labor and a reliable capability to fill large orders on a consistent basis. As companies made the move, they created an eco-system of interconnected local suppliers that have essentially dominated the global supply chain for large orders.  How else could Apple have manufactured and sold millions of IPhones and IPads within such a short period of time without a massive cadre of capable Chinese workers, ready and able?  The firms that moved their global production to China helped to create a defacto low cost supplier for companies worldwide.

China’s dominance over the world’s supply chain has forced CEO’s to seek competitive advantages elsewhere.  Some CEO’s have turned to academic institutions for new ideas and approaches.  What they heard may sound surprising to you.  Leading business management professors claim that globalization is no longer just about selling and adapting to new markets but rather an opportunity/obligation to test a firm’s capabilities on the world stage. Unlike Pilates, a popular exercise class, globalization is not a fad or another reason to network.  It is a behavioral change that should become an integral part of every company’s corporate fabric.

At MIT Sloan’s Executive Education (executive.mit.edu), I attended a two-day workshop on this very subject, “Strategy in a Global World”.  There we evaluated trends, theories, and best practices from leading firms. One example that caught my attention involved an interview with the CEO of Haier, Zhang Ruimin.  Haier, which has no meaning in any language, is a top home appliance maker in China. During his interview Mr. Ruimin articulated a vision for globalization that treated the world as though it was his own personal university course catalog, where he could learn from proven competitors and work with top talent to design appealing products.  For a small spacer-saver refrigerator product, for example, Haier coordinated the efforts between an Italian-based designer and Japanese engineers.  Both were considered the best in their class.  To maintain close proximity between engineering and manufacturing, a key success factor, Haier moved one of their headquarters to Japan, not to dictate their terms but rather to learn from world class design engineers.  Haier’s ability to select premium vendors among top-notch eco-systems anywhere in the world ensured that their manufacturing capabilities, a core competency, would always rank at the top of the list of their closest competitors.

Haier’s success to be in multiple places at the same time, also a Harry Potter phenomenon, can explain the renewed focus on globalizing through integration. Using video conferencing, collaborative software, and a slew of similar affordable technological support systems, companies like Haier can decentralize and centralize the flow of information at will, hence, channeling ideas throughout the company (or to a network of partners) as though the “firm” were housed under one seamless roof.  New ideas that flow freely from a local market to multiple headquarters in real-time can be disseminated by management for competitive strategic analyses or rerouted for further field evaluation.  What evolves when ideas can naturally locate their best options within a firm is an organization that acts more like a living organism rather than a pile of stock certificates.

To fully appreciate the new role of global integration, CEO’s must be prepared to abandon traditional thinking where globalization had become just another scheme to increase profits quickly.  They should embrace globalization as a top company priority defined with clear goals and objectives including metrics and benchmarks to monitor progress.  As the Chairman of IBM, Samuel Palmisano recently stated, “ Global integration is no longer an option but an imperative.”

MIT’s Executive Education workshop demonstrated to me how global integration no longer has to be a game of chance but can follow a self-correcting, systematic approach that any company can adopt.  Executed as designed, the process can intuitively identify a company’s capabilities and gradually hone in on their most viable competitive advantages. What surprised me most was that what I learned in two days at MIT was not rocket science, nor does it need to be.  Instead it was pure common sense that could make the difference between a firm’s unsteady survival and its sustainable success.

Open Source Nouveau at MIT

At a recent emerging technology conference at MIT called EmTech ’11, a diverse blend among young innovators (under 35) and corporate leaders converged to share their renewed views and perspectives for the next chapter on investing, competing, and surviving in a crisis bound world.

At center stage was Joichi Ito, the newly hired director for MIT’s Media Lab.  Mr. Ito, a self-made entrepreneur/investor, brings with him a Silicon Valley secret sauce where innovators learn from each other within an open source environment. Drawing from his club management days, Ito forms impromptu meetings among diverse experts to discuss new trends and ideas.  His leadership style is contagious, humorous, and organically instigating.  With a travel schedule he calls ‘bankrupt for free time’, Ito travels the world to expand his open source influence.  When asked how one can profit from an open source environment (where innovative ideas are given away for free), Ito points to using open source discussions to determine revenue model innovations.  He highlights FireFox as a browser company that gives everything away for free, but through a clever revenue model will take in over $200 million in revenues this year.

Other EmTech presenters seemed to go along with Ito’s open source theme.  For example, IBM’s Smart Grid initiatives focus on instigating behavioral changes along a redefined value chain, forcing a convergence among new talents and industries, another open source opportunity in the making.  IBM’s process is designed to self-correct over time using an hierarchy forecasting methodology. Ford Motor is a good example of a company benefiting from open source innovations. Their EV Cloud Car concept is just an enlarged version of the Ipad.  Using purchased Apps, car buyers can personalize dashboards, activate special features, and fully customize their driving experience on a destination-basis.

Probably, the greatest challenge for open source is the timely commitment of scarce resources to help the discussion reach new heights. From a company level, Xerox formed Parc.com to show how co-extrusion printing can increase lithium-cobalt oxide battery life by 10% and solar panels by 6%. They view their contribution as another way to pull costs out of a collective process.  Also, start ups like 1366 Technology have successfully removed a step in the production of silicon wafers.  Adopting to this new open source environment, is the ‘fast-dating’ attitude of venture capitalists.  They prefer passion over slick presentations and are willing to forgo a large share to founders.  As Bill Joy from Kliener Perkins shared, “we are spending smaller amounts to gain experience and to stay in the game longer.”