Nonlinear Thinking

Compendium/Miscellanea/Almanac 04.17.2013

Stuff that has crossed my radar lately for one reason or another.

• The Strategic Plan is Dead.  Long Live Strategy. (Stanford Social Innovation Review)
• A new reality between the CMO and CIO (ZDNet)
• We’re from Corporate and We’re Here to Help (Strategy + Business)
• The Software Revolution Behind LinkedIn’s Gushing Profits (Wired)
• Pragmatic Pathway – New Approaches to Organizational Change (Deloitte University Press)
• Global Information Technology Report 2013 (World Economic Forum)
• Viral’s Secret Formula (Huffington Post)
• All eyes on the sharing economy (The Economist)
• 13 Hot Business Model Innovations (Sustainable Brands)
• Challenges and Opportunities of Investing in Cleantech and Renewable Energy (IGEL@Wharton)
• Marketers Rise to the Cloud Challenge (CMO.com)

Sustainability Becomes Mission Critical

After myriad proclamations over the past decade that the notion/concept of sustainability as a corporate imperative had crossed the Rubicon and entered the mainstream, it appears that maybe a destination of sorts has been reached.  A recent panel of senior executives from consulting, banking and the chemical industries sat down to debate and discuss this critical shift during the recent Wharton Social Impact conference and generally agreed that the movement has finally become a central part of the mission statement at many enterprises.

If building a sustainable enterprise was a fashionable trend five years ago, today it is a business imperative. Forward-looking corporations have figured out that a focus on environmental, social and governmental (ESG) factors is not just a bid to burnish their image, but rather it is a necessity in today's marketplace. And if done well, it is a true competitive advantage.

An important, and critical, divide seems to be opening between those companies that get it and those that don’t.  Despite protestations from a sub-stratum of firms that view an embrace of the green/sustainable strategy as a cost rather than an opportunity, more and more high-profile enterprises are engaging at varying levels of investment.

In fact, for savvy companies, a strategy built around sustainability can be a critical advantage, Boston Consulting Group senior partner Martin Reeves pointed out. Even when government action puts more burdens on business, Reeves said there can be an upside. When you change the rules of the game, you "are putting a floor on certain behaviors [and] raising barriers to entry." Case in point: the establishment of the Food and Drug Administration, which Reeves contended "essentially took a snake oil industry and turned it into an industry with very strict scientific standards."

When anticipating the learning curve for macro level changes in behavior, it is generally believed that it requires a generation for new behaviors to achieve mainstream acceptance and incorporation into strategic and tactical decision making going forward.  As the tail end of the Boomers and Generation X ascend to leadership positions in business, it would appear that sustainability will be a fundamental consideration for the most savvy and market attuned enterprises moving forward.

Among the panel's key messages was that the need to address ESG issues will only intensify over time, in part because the next generation of business leaders is demanding it. One of the audiences most keenly interested in the report Citigroup puts out annually on its sustainability record, Eubank noted, is the company's recruiting operation. "Students these days are much more environmentally aware, and they want to know what a company's sustainability policies are," Eubank said. "Bankers want to know that they are working for a company that is being responsible."

 

Compendium/Miscellanea/Almanac 01.12.2011

Stuff that I find interesting.  Maybe you will too.

• Budgets, Innovation Squarely in CMOs' Sights in 2011 (Advertising Age) 
• Clouds, big data, and smart assets: Ten tech-enabled business trends to watch  (McKinsey Quarterly) 
• How Tech Will Be Critical to Corporate Sustainability in 2011 (Greenbiz) 
• Light My Fire: The Matchbook Makes a Cultural Comeback (Fast Company) 
• How Aha! Really Happens  (Strategy + Business) 
• Swimming Against the Tide: How Technology, Media, and Telecommunications Companies Can Prosper in the New Economic Reality  (Boston Consulting Group) 
• Eric Berlow: How complexity leads to simplicity  (TED)  
• The AI Revolution Is On  (Wired)  
• The Battle for Control of Smart Cities  (Fast Company) 

The Slow Road to A Smarter Grid

The advent of the smart grid has been announced numerous times during the past 15 years.  It has been simultaneously encouraging and discouraging to witness the progress towards an environment of intelligent energy management during that period.  Few great advances arrive without serious headwinds.  Particularly in such a “smokestack”-affiliated industry as electric utilities, change can be glacial.

The “science” surrounding innovative technologies has always held far less interest for me than the practical application of those technologies.  It is not what it is, but what it can do, that intrigues me and feeds into my constantly evolving view of the world and the industries and markets that comprise the global marketplace.

A dozen years ago, I participated in sketching out an early architecture for the concept of the Smart Home as part of the broader smart energy initiative and have a continuing interest in the advancement of the technologies that comprise what is now referred to as the Smart Grid.  A simple graphic of the smart grid environment is represented below.

 

Managing energy demand and optimizing energy usage are fundamental to any strategy/philosophy/approach to arriving at a sustainable and clean energy economy.  To that end, electric utilities are being encouraged to utilize smart-grid technology -- network-connected devices to help intelligently monitor and manage power usage -- whether on their dime or through funding from the U.S. government's 2009 stimulus package. Smart energy systems are designed to save energy via intelligent management of energy usage in homes and businesses. Beyond that activity at the point of consumption, the smart grid seeks to promote improved optimization at every point between generation and consumption to actively manage the grid.

As this proposed build out of the smart grid is, for the most part, a digital network solution, the question/concern of hacking the system necessarily arises.  However real and mature the threat, it does create new challenges for utilities to meet to ensure safety, reliability, etc. for their residential and commercial customer bases.  The threat may be most acute at those interfaces where smart grid platforms are required to integrate with older control equipment such as SCADA ( Supervisory Control and Data Acquisition) systems as well as the first generation of smart meters.

As more and more processes in every industry become digitally-driven, we will face these same kinds of challenges.  In many cases, such as with the smart grid effort, they will be met and overcome because their is simply no alternative.

Business Models for Sustainable Consumption

Discovered an interesting report from the World Economic Forum published earlier this year discussing the need for new business models that are constructed on a platform of sustainable consumption.  The report offers a  “Business Case for Sustainability”  that provides “a cogent argument for sustainability as an issue that should be incorporated into the strategy and operations of business, not just as a matter of stakeholder responsibility but as a matter of business survival and value creation.”

 

Key elements of the business case include:

• Managing resource risks: Sustainability matters to business because it reduces exposure to volatile and rising resource prices, to the risk of increased scarcity of resources and to the risk that these (carbon, water, waste) are radically re-priced in the near future. Embracing models of sustainable consumption across the value chain will provide stronger resilience against external shocks.
• Shaping the regulatory environment: Principles of sustainability are increasingly being incorporated into the regulatory environment. If businesses wish to flourish in this environment, they must make themselves active participants in its construction.
• Engaging consumers as citizens: The biggest drivers of corporate sustainability investments are consumer concerns, employee interest and government legislation.8 For business, driving sustainable consumption can be an effective long-term strategy for deepening authentic engagement with consumers and employees.
• Engaging consumers as customers: Consumers increasingly want to be treated as customers, demanding not only more sustainable products and services, but also greater transparency over sourcing and content of existing ones. At the same time, the speed, spread and changing patterns of use of the media are forcing businesses to adopt pre-emptive strategies to manage their reputational risk on sustainability issues. Engaging proactively with the sustainable consumption is one way of managing these challenges in depth.
• Driving innovation: Businesses are the chief engines of value creation and innovation in society. The challenge of sustainable consumption presents an opportunity to enhance both, particularly when new partnerships and collaborations are opened along the value chain.
• Capturing opportunity: In the end, sustainable consumption matters to business because there will be winners and losers in the new economy, and those that move most swiftly are likely to reap the greatest benefits. Embracing sustainable consumption now offers a pathway to future markets and profitability.

What is made clear in the report is that continuing along a path of incremental adoption of today’s sustainability efforts will be insufficient as they are based on improvements to our existing model of consumption.  That model is, itself, unsustainable.  The graphic below illustrates the required shift from the traditional value chain to a closed loop value chain that incorporates reuse of consumed materials into the overall business model.

 

“The new normal for the global economy is one in which consumption is decoupled from negative environmental and social impacts, driven by a combination of innovation, evolving consumer values and more accurate product costs. In the end, it is not a world defined so much by scarcity and sacrifice, as a world defined by innovation and a new abundance.”

The “new normal” is an economy in which:     

• Consumers are the driving force 
• Consumption is about loops, not lines 
• Collaboration is a key
• Core business practices are sustainable    
• Public policy frameworks support sustainable consumption

Reports such as this support an emerging recognition, by early adopters at least, that those companies that are proactive in embracing sustainability will find themselves at a distinct operational, cost and branding advantage in the near future.

Are We Melting Yet?

 I understand and accept that the science surrounding climate change often appears to be inexact and that has driven some extraordinary polarization in the debate on the long term impacts, if any, that a changing climate might deliver.  However, I do believe that prudence should require every organization, and individual for that matter, to execute some scenario planning around the potentiality that a warmer planet might become the "new normal".  Personally, I think the Twin Cities have never looked better.

Building A Smarter Power Grid

A very nice video from GE on smart meters as part of the movement towards realizing the smart grid. 

Smart Grid

I have been having conversations regarding how advanced information technology will eventually be the key component of next generation energy management solutions.  Smart meters, the smart grid, the intelligent home, distributed generation and the myriad sustainable energy solutions will all be part of active demand management.  So, it was nice to see this story on the smart grid on MarketWatch recently.

The smart grid is the modern electricity network, where sensors and computers will aid in providing constant information on electricity consumption. Some features include signaling to consumers real-time pricing of electricity and predicting places where demand surges.

In order to implement a smart grid, the first step is a smart meter. A smart meter will replace your current electric meter. The new meter is able to send back information on your electricity usage to the utility. Through digital reading, utilities will be able to gauge how much power you are using throughout the day and introduce different rates for different times.
The goal will be to reduce electricity usage during peak times, allowing for energy conservation.
Already some utilities have begun to install smart meters. The states of California and Texas have seen the most development. Southern California Edison plans to replace 5.3 million standard meters by 2012. Another California utility, Pacific Gas and Electric, began installing smart meters in 2006 and plans to put in 6 million meters by the end of 2011. In Texas, Austin Energy is another utility that has initiated a smart meter program.

Pilots installations of smart metering have already delivered on their promised value proposition.  With increasing energy costs, the slow pace of alternative energy development and a fragile transmission and distribution infrastructure, the smart grid can't get here soon enough.

Solar Energy Storage Breakthrough

The most critical challenge that solar energy technology must overcome to begin to achieve mainstream adoption is storage for use during the night.  So it is very exciting that MIT has announced the discovery of a process that can remove this challenge.  

In a revolutionary leap that could transform solar power from a marginal, boutique alternative into a mainstream energy source, MIT researchers have overcome a major barrier to large-scale solar power: storing energy for use when the sun doesn't shine.

Until now, solar power has been a daytime-only energy source, because storing extra solar energy for later use is prohibitively expensive and grossly inefficient. With today's announcement, MIT researchers have hit upon a simple, inexpensive, highly efficient process for storing solar energy.

Requiring nothing but abundant, non-toxic natural materials, this discovery could unlock the most potent, carbon-free energy source of all: the sun. "This is the nirvana of what we've been talking about for years," said MIT's Daniel Nocera the Henry Dreyfus Professor of Energy at MIT and senior author of a paper describing the work in the July 31 issue of Science. "Solar power has always been a limited, far-off solution. Now we can seriously think about solar power as unlimited and soon."

Sunlight has the greatest potential of any power source to solve the world's energy problems, said Nocera. In one hour, enough sunlight strikes the Earth to provide the entire planet's energy needs for one year.

Nocera hopes that within 10 years, homeowners will be able to power their homes in daylight through photovoltaic cells, while using excess solar energy to produce hydrogen and oxygen to power their own household fuel cell. Electricity-by-wire from a central source could be a thing of the past.

You can read the press release here and read more in the MIT Technology Review.