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Sustainable New Product Development

Point: Make sustainability decisions at the start of new product development.

Story: “Seventy-five to 90 percent of a product’s environmental impact is determined the product development stage,” says Kevin Myette, director of product and supply chain sustainability at outdoor gear and clothing retailer REI (Recreational Equipment Inc.).

Given that fact, it’s extremely important for product designers to have access to information about the sustainability of materials when making decisions about which materials to use for new products.

For example, which do you think is environmentally more damaging: wool or polyester? Intuition might point you to rank wool as the more sustainable product, because it is natural. But, the processing of wool uses chemical washes, and wool as a material in apparel requires much more washing and energy use after purchase. Thus, although polyester uses more energy during manufacture, its lifetime energy usage is lower. Even better, polyester can be recycled. Nike used this information to design uniforms made from recycled polyester for the 2012 European Cup soccer championships, thus earning them high marks on sustainability.

A tool that’s helping the apparel industry with this problem is called the Higg Index, which lets manufacturers and brands score the environmental impacts of their garments across the apparel life cycle (materials, manufacturing, packaging, transportation, use, and end-of-life).

Getting industry-wide agreement on the metrics has been key. “As our CEO says, ‘sustainability is a team sport,’” Myette told me. “We’ve been working collaboratively with partners and competitors alike, pre-competitive, to develop the language and metrics of sustainability.”

Internally, to help its product designers make the right choices, REI implemented a product lifecycle management system that gives its designers a dashboard view of how materials rank across the lifecycle for sustainability.

Myette is encouraging REI’s suppliers to use the system, as well using a dyeing process that requires no water and using patterns that minimize scrap waste. “Five percent of our landfills are just textiles, apparel,” Myette says. Avoiding scrap material and encouraging recycling of apparel is vital for reducing this waste. Few consumers know that it takes 10 times more energy to produce textiles than to produce glass. Greater awareness could spur consumers to demand retailers offer recycling of their synthetic fabrics.

Action

  • Think about sustainability before you design the product, not just after you have the product and want the best suppliers
  • Consider the entire lifecycle of the product:

– your suppliers’ footprint for the raw materials
– your footprint of your production processes (and customer services, too)
– your customers’ footprint when using your product
– the recyclability/reusability of the end-of-life product (and any scrap produced along the way)

  • See if your industry has something like the Higg Index.  And if not, help create one!
  • Think holistically — perhaps something that seems unsustainable (e.g., fossil-fuel-derived polyester) might be best if it enables greater sustainability in other parts of the system (e.g., washing, dying, end-of-life recyclining)
  • Finally, keep looking for improvements, such as bacteria that can make biodegradable polyester

Sources:

Personal interview with Kevin Myette

Higg Index: http://www.apparelcoalition.org/higgindex/

Bacteria: http://www.asknature.org/strategy/aafff01c6748d9169047522c11c0280a

Note: this post originally appeared in the Huffington Post: Mitigating Environmental Impact of Apparel: REI http://www.huffingtonpost.com/andrea-meyer/mitigating-environmental-impact-apparel_b_2253103.html?utm_hp_ref=tw

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Innovation in the Collaborative Economy

Point: The collaborative economy enables new business models (and disrupts old ones).

Story: The collaborative economy is growing as individuals find new ways to connect directly with their peers to share or rent their assets and skills. The collaborative economy includes sharing assets like spare rooms (Airbnb) and cars (RelayCars) or consumable goods (CampusBookRentals, Toyswap) or services (TaskRabbit, oDesk).

The peer-to-peer rental market alone is worth $26 billion, according to Rachel Botsman, and that doesn’t include peer-to-peer-lending or crowdfunding, which is predicted to reach $5 billion this year.  Altimeter Group’s sample of 200 collaborative-economy startups revealed that one-third had received VC funding, amounting to $2 billion overall and an average of $29 million per company.

Consumers are sharing and collaborating with each other as new platforms make search easier and verification more secure.  The collaborative economy is expanding rapidly because it:

  • appeals to consumers who want to make money from their unused assets (RelayRides avg $715/mo)
  • appeals to companies who want to rent out extra office or warehouse space or equipment
  • appeals to individuals who want to earn extra income running errands or doing one-off tasks
  • appeals to individuals and companies who want to rent assets at a lower-cost or on a short-term basis
  • is good for the planet: renting a car when you need it means fewer cars need to be built. Patagonia is partnering with eBay to encourage re-sale of its used clothing rather than have it go to the landfill.

Some collaborative-economy startups are partnering with existing players. For example, Deliv partners with retailers who want to offer same-day delivery to customers.  Big companies, seeing potential disruption as well as opportunity, are entering the market as well. BMW is offering rentals from its dealership in San Francisco, and GM invested in RelayRides, which connects car owners who want to rent their cars with consumers who want to rent them by the hour, day or month.  GM gave RelayRides access to GM’s OnStar Navigation System, which is installed in 6 million American cars. Anyone who has an OnStar-equipped car and wants to rent it out can sign up on the site and then use the OnStar app to let the approved renter unlock the car via the app rather than handing over the keys.

Action:

  • Explore new business models enabled by the collaborative economy. Altimeter’s Jeremiah Owyang and Chris Silva offer three models: Company-as-a-Service, Motivating a Marketplace, or Providing a Platform. Or, use Alex Osterwalder’s Business Model Canvas to think through changes in the nine elements that make up a business model.
  • If you’re an established company, think about ways you could be disrupted, and consider jumping in or planning a counter-move.
  • If you’re a startup, consider providing a platform that connects and verifies the parties involved. Be aware of legislation and incumbents who may seek to legal action (bus companies blocking ride-sharing services like Ridester.com) or running afoul of licensure or insurance laws.
  • And whether you are an individual or a company, think about the under-utilized assets that you have sitting around.  Perhaps there’s a way to monetize them.

Sources:

 

The Sharing Economy, Economist March 9, 2013

Rachel Botsman, What’s Mine Is Yours: The Rise of Collaborative Consumption

Ontario bus-companies trying to shut down competition from ride-sharing groups

Crowdfunding tries to grow up – May. 6, 2013 – CNN Money

Jeremiah Owyang

Chris Silva

 

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Hidden Costs Provide Hidden Opportunities

Point: When choosing areas to target for process innovations, consider the complementary – not just direct – costs and benefits

Story: Companies naturally look for a satisfactory return on their investment when they make process improvements. But, sometimes the way they analyze costs and returns can blind them to significant gains.  For example, in most regions, water is cheap. Making investments to reduce water usage may be laudable from an environmental standpoint, but it’s often hard to justify on strictly financial terms if one only takes the nominal cost of the water into account.  However, water carries complementary costs associated with its usage. For example, the total cost water usage includes the costs of waste water disposal, chemical treatment from manufacturing processes, energy use associated with heating and cooling it, and so on.  These associated costs may total as much as 100 times the nominal cost of water, according to McKinsey & Co, who calls these associated costs “carrier costs.”

Let’s take a look at an IBM plant in Burlington, Vermont to see the carrier costs of water and how they can be reduced.  The IBM-Burlington plant saved over $740,000 in water costs annually, and another $2.3 million in energy costs, by being more aware of its water usage patterns.  Most of the changes that the IBM-Burlington plant made to achieve its savings weren’t rocket science, which makes them all the more exciting because it means that such savings are attainable by others.

First, when IBM pumped water to its factories, it took water out of frigid Lake Champlain. For 50 years, IBM pumped incoming water and heated it so that it could be used. Yet in another factory on the same corporate campus, IBM chilled water in 13 two-story tall chillers to make it cold, even in winter. By instead routing the incoming cold water directly to the areas that needed chilling, IBM now gets “free” cold.  Moreover, the industrial process that needs the cold water heats up that water without needing to use electricity. By using Vermont’s outdoor cold temperatures, which are rarely above freezing during the winter months, IBM makes cold water during the winter, again for “free” without needing to using electricity to run the chillers.

Similarly, a pulp-and-paper company achieved savings when it examined its water use and the heat energy lost in cooling process. By storing water in a different way, recapturing heat from condensation processes and reducing the amount of steam consumed by boilers, the company reduced total operating expenses by 2.5 percent.

Action:

  • Identify the associated (“carrier”) costs of using a staple like water.
  • Target processes for improvement in the way water is stored, heated, cooled, or treated for manufacturing or internal use.
  • Install sensors that monitor water temperature, contamination, pressure, etc. (Excess water pressure, for example, can cause pipes to leak or burst.)
  • Coordinate and cross-connect the multiple uses of the water to reduce the costs of heating, cooling, and treatment (e.g., let the “waste heat” from one process serve to prewarm water used in another process).

For more information:

“Measuring the Real Cost of Water,” McKinsey Quarterly, March 2013

Charles Fishman, The Big Thirst: The Secret Life and Turbulent Future of Water.

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