Wednesday, July 13, 2005

Gambling? At RIck's? Captain Reynaud was shocked. We shouldn't be. I was just speaking of contingent futures. Here's one: Recent surveys, including one just released by Design Chain Associates, show significant lack of readiness in the tech industry for the EU's directives on WEEE -- which takes effect one month from today -- and RoHS (which takes effect in July 2006). Fewer than 20% are actively selecting compliance schemes, while 5% have selected compliance schemes. The survey also revealed that 23% percent haven't even started and 17% are 'completely confused.' (The confusion is understandable, notes author Mike Kirschner: Direction on how to comply with WEEE is sparse and confusing in most EU member states.) But even more concerning: 60% of respondent companies are doing nothing to reduce WEEE costs. Is this a big deal? Maybe not. EU states may provide extensions and exemptions. But I wouldn't want to base my strategy on that possiblity. Not when about a third of tech industry revenues are earned in the European market. So I've been surprised by the surprise (as I've said before). The directives and the impending deadlines have been known for years. The political momentum has been evident for decades. The driving science has been known for centuries. And, for those who've missed the signs, the EU periodically tips its hand with documents like Towards a Thematic Strategy on the Sustainable Use of Natural Resources (released October 2003). So, homework for everyone: When you find yourself surprised by events, take a moment and ask yourself whether you've been paying attention to the right things. (And whether you can count on your competitors doing the same.) 7:42:54 AM    comment []  trackback []

Future 'shock' scenario planning and strategic resilience I closed my recent post, Eye of the Beholder, with this reflection: I spent a few days recently with several dozen CEOs, VPs environment, and risk management executives from a variety of companies, exploring the challenges of "environmental health and safety" implementation and results. The wide-ranging and universally high quality presentations included a brilliant and sweeping "futures scan" by a very senior executive of a very large energy company. It was captivating. It touched on everything from oil prices to geopolitics to China. And it didn't include a single word about greenhouse gases or climate change. Natural Logic associate (and scenario-meister) Hardin Tibbs offered this response: This denial is typical! And for all the talk about the power of scenarios to alert people to future issues, these undiscussables often remain off the map. My observation is that if an industry does something inherently problematic -- like burning hydrocarbons -- and it fundamentally believes there is no alternative, denial will operate very powerfully. The trick is therefore somehow to reframe the business concept so that it is not centrally dependent on the problematic activity. But if the thinking process is seen simply as a "future scan" it will not contain anything that generates or forces this reframing. If it is a "scenario process" then business reframing can in principle be included as part of the exercise -- but only if the "scenarists" recognize this problem! And are willing to engage people's assumptions about risk, consequences, options and costs. If oil goes to 60 dollars a barrel -- wait a minute, it has! If (when?) oil goes to 100, what would be the impact on your business -- your own cost structure, the cost structure of your supply chain and the reliability of critical inputs (from raw materials to commuting employees). At issue is not only the projected likelihood of such events, but the potential impact -- and the costs of preparing for or attempting to prevent those impacts. With futures uncertain, a prudent company, executive, investor or person will make some investment in being prepared for contingent futures that have large potential impact, even if their perceived likelihood is relatively low. Views differ on that likelihood, of course, which is what makes horse races -- and futures markets. But they also differ dramatically on the cost of change, and the cost of design for resilience. People still commonly assume that there are inevitable tradeoffs -- quality, speed, price; pick two' or 'environmental or economy - pick one'. But what if those tradeoffs weren't inevitable? The cost of change and resilience don't come off a rate card; they're highly sensitive to innovation, and to strategies that 'design in' the synergies of multiple benefits -- that tunnel through the cost barrier and produce unexpected return on investment (ROI). Or, in scenario terms, that prepare an organization to respond effectively to any of several potential future scenarios, not just the most likely ones. There's still opportunity cost, of course; finite management bandwidth as well as finite capital means you can't do everything. But what's the cost of being caught by surprise, when you didn't have to be? 6:55:40 AM    comment []  trackback []

'Eye of the Beholder' - full text Here's the full text of that Eye of the Beholder article I referenced last week. (No point missing out on blogosphere visibility.) 'Eye of the Beholder' - New Bottom Line 14.5 - June 30, 2005 I've encountered very different perspectives from the world of business in the past few weeks - emblematic of the challenges our industrial society still faces. I spent two days recently at the 'Cradle to Cradle Design & Intelligent Materials Pooling in Practice' workshop presented by Foundation for Global Community in 'Silicon Valley, CA' (actually Menlo Park, but hey, which name has the buzz?). Michael Braugart, Bill McDonough and others (including Peter Senge and Joe Laur of the Society for Organizational Learning) guided 150 people through the fundamentals and the challenges of C2C, and a day of small group grappling with putting the concepts to work. Dr. Braungart (co-founder of McDonough Braungart Design Chemistry (MBDC) and advisor to Herman Miller, Nike, Ford, SC Johnson, Interface, Unilever, BASF, Volkswagen and others) laid out his strategies for moving beyond making products less harmful to making products that support a sustainable future - in his inimitable way: 'We still have people talking about 'sustainability'!  Nothing is more boring. Are you proud if your marriage is 'sustainable'? We feel guilty, and cut our hair to use less shampoo. It's guilt management and celebrating mediocrity.' Braungart showed gas chromatograph analyses of the toxics that offgas from products in everyday user, from electric shavers to childrens toys - 'Pocket Polly emits more chemicals than gasoline station' - to even natural products like wood. 'Weapons of mass destruction,' he called them, as we seal buildings, in the name of energy efficiency, full of products not designed for indoor use. One indicative result: asthma is now the most prevalent children's disease, with 40% of children suffering from allergies, vs 2-3% a few decades ago. 'And smart people now go to business and law, not science.' The key, Braungart advised, is the transformation of environmental issues into issue of quality.  'First be effective - do the right thing; then look for the right tools. Efficiency may be one of them, but there's no point being more efficient at producing a harmful outcome. 'Students and top management understand this,' he said. 'Middle management hates us.' The new design criteria, according to Braungart: Cost, function, esthetics, ecological  intelligence, fairness, fun: Total Beauty Design. 'It's not beautiful if it's toxic, and if you can't make a living.' The design principles: Waste equals food; Use current solar income; Celebrate (don't just respect) diversity. We need to look at the molecules, it turns out. Braungart outlined 'five steps of eco-effectiveness': - Identify substances to eliminate (like PVC at Shaw, BASF, Miller, Nike) - Personal preference (based on scientific experience) of what makes sense - Passive positive list - Active positive list - Re-invention (what do you really want) He didn't stop at five, since the next step was to build on this 'creating strength' with 'purchasing strength,' in which companies with common list of preferred materials pool their purchasing and logistics strengths to gain economies of scale and rationalize supply chains. Two of many applications discussed: a complex product, and a relatively simple one. The Ford Model U concept car is designed to go into enzyme bath - the whole product - at 60k miles that will dissolve and filter out the glues, and 'keep the intelligence of the materials in it.' Upcycling. 'There's no innovation in recycling.' Shaw Industries (the country's largest carpet company, now owned by Warren Buffet's Berkshire Hathaway) see s C2C as its goal and focus, according to Steve Bradfield, their Corporate Director of Environmental Affairs. 'All the other stuff is transitional.' 'We're looking way ahead; our EVP now talks about 'what the company will look like in 25 yrs.' It's not about quarterly profit, but about how do you stay in business?' Bradfield notes. 'C2C is a beautiful thing, even to a bean counter if it's profitable.' Shaw began its materials redesign in 1994, and 'exited PVC in 2004. 'Product recovery is at 50%, with a 30% recycle process efficiency; 'so 25% of new backing from old tile... at this point, while energy savings of 56% nets to 14% (based on that 25% use).' Shaw's EcoWorx backing won a Presidential Green Chemistry award in 2003, as an alternative to PVC, with 40% recycled content. Among the business benefits: Shaw can get more of the thinner and 30% lighter carpet tile on a trailer (7000 square yards vs 4000). This highlights the challenge we often see as companies struggle to comprehensively and accurately tally costs and benefits. How well this is done can guide business strategy as well as gate investment decisions - with significant competitiveness as well as profit impacts. (Life cycle assessment isn't the whole answer. Nylon flooring will last 30 years, Bradfield notes, and that's often the figure used in LCIs, but it's generally pulled in seven.) (BTW, it takes some hard work to find any of this on the main Shaw web site; turns out it's only on the Shaw Contract Group sub-site.) Note: MBDC announced the C2C certification system at the NeoCon conference in June, to evaluate and certify the quality of products based on the principles of Cradle to Cradle Design. As described in the launch announcement: - Ingredient chemistry is researched for its potential impacts on human and environmental health, and strategies for phasing out any ingredients of concern must be in place; - Product is recyclable following its use and a system for recovering and fully recycling the product has been identified; - Manufacturing maximizes the use of current solar income and water quality; and - Workplace and business practices are ethical and support employees and communities. I mentioned 'very different perspectives' at the top of this posting. Here's the other: I spent a few days recently with several dozen CEOs, VPs environment, and risk management executives from a variety of companies, exploring the challenges of 'environmental health and safety' implementation and results. The wide-ranging and universally high quality presentations included a brilliant and sweeping 'futures scan' by a very senior executive of a very large energy company. It was captivating. It touched on everything from oil prices to geopolitics to China. And it didn't include a single word about greenhouse gases or climate change. Food for thought. 6:45:06 AM    comment []  trackback []