Alternative Energy Source Development

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Alternative Energy Source Development

• Andrea Larson
• Darden Business School, University of Virginia
• July 17-19, 2003
• Florida Atlantic Universitys Fort Lauderdale
  Campus

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Darden Graduate School of Business
AdministrationUniversity of Virginia,
Charlottesville, Virginia

• 2-year MBA
• General Management
• Case method
• 650 students
• First year required curriculum
• Doctoral programs in ethics and entrepreneurship
• Executive Programs

• Sustainability Issues in the 1st year program
• Strategy/Entrepreneurship
• Accounting
• Ethics
• Executive Program

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The Ingenuity Project
Purpose Integration of Sustainability Issues
Into Management Education
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

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Innovation, Entrepreneurship and Natural Systems
ENERGY MODULE
FUEL CELLS
COURSE CONTENT
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Sustainable Innovation and Entrepreneurship

• Innovation, Entrepreneurship and Natural Systems
  2004

Sustainable Business
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Fuel Cell Material Useful in Courses On

• Strategy
• Environment
• Innovation
• Entrepreneurship

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Perceptions and/or Assumptions
Ethics
Only Big Companies Can Afford
Altruism
Social Responsibility
Environment is out there separate
Costs and Compliance
Externality
Only Small Companies Can Do
Risk Liability Regulation
Luxury for Good Times
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Course Topics

• Entrepreneurship (Schumpeterian)
• Innovators and innovations
• Future products and services
• Opportunity
• Competitive Advantage
• Business and individual leadership

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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 sustainabilitys
  zero-waste goal offers a critical, underlying
  insight environmental and social issues offer
  opportunities for businesses.

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Sustainable Business Opportunity and Value
Creation

• 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.

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Evolution of the Sustainability Focus in the late
1990s Parallels the Evolution of Quality Programs
in the early 1980s
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

1. Resistance and lack of understanding at the
   outset
2. Seemingly unrealistic goals (zero defects, now
   zero waste/emissions) become standard operating
   practices
3. Initiatives lead to product and process
   innovations (not just incremental improvements)
4. Both movements require leadership and an
   educated and engaged workforce
5. Success extends efforts into value chain
   management and further improvements and innovation

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The Evolution of Corporate Response to
Environmental Concerns 1980s, 1990s and Beyond
Innovative, anticipatory, entrepreneurial
management Organization-wide frameworks, tools,
and programs Profit and Environment and Equity
Reactive management Isolated activity Profit or
Environment
Managerial Mindset
Opportunity for efficiency
Cost burden Altruism Focus on compliance End-of-pi
pe filters and treatment Side issue
Operational excellence and strong financial
performance
Focus on competitiveness and strategic advantage
Definition of the Issues
Product and process design criteria include the
environment
Quality initiatives encompass environment
Waste streams to landfills (linear) Piecemeal
analysis Waste is inevitable and costly
Opportunities in product recovery and
remanufacturing (cyclical)
Perception of Waste
Systems thinking
Waste can be minimized
Waste is a resource
Peripheral to strategy Focus on the
firm Pursuing incremental change Returns to
stockholders
Integrated into strategy
Wider focus on networks of firms across the value
chain
Strategic Orientation
Positioned for breakthrough innovation Triple
bottom line
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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
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Key Questions to Be Addressed in the Course

• WHY the Concern?
• WHAT Does It Mean?
• HOW Are Firms Implementing?

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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
  

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Methods

• Discussion and analysis
• Articles, book chapters
• Case studies
• Technical notes
• Mini-lectures
• Guest speakers
• Videos
• Student reports
• Final Papers

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Frameworks and Concepts

• Schumpeterian innovation
• Entrepreneurship
• Environmental management and sustainable
  innovation
• EIP x A x T
• Earth Systems Engineering and Management
• Industrial Ecology
• The Natural Step
• Natural capitalism
• Cradle to cradle
• Green chemistry
• Natures services
• Biomimicry
• Precautionary principle

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5 Schumpeterian Forces of Creative Destruction

• Discovery of
• New technologies
• New products
• New markets
• New processes
• New organizational forms

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SchumpeterEntrepreneurship as New Combinations

• Existing technology new processes
• New technology applications new organizational
  forms
• Enhanced products new processes expanded
  markets
• New technology new markets

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Entrepreneurship A Frontier of Innovation
Time Orientation Past Present
Time Orientation Present Future

• Schumpeters creative
• destruction
• New technologies, products, markets, processes,
  organizational forms

New Paradigm
The Entrepreneurial Economy
The Traditional Economy
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Creating the Future Through Innovation
Wind turbines Fuel cells Hybrid
cars Biodegradable plastic Organic food Buy
function, not product Reverse logistics Zero
waste Zero emissions Markets in natures services
New Products
Conventional Products, Services (power,
transportation, materials, food, shelter)
PAST
PRESENT
FUTURE
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Sustainable Business Innovation and the
Traditional Economy
Traditional Economy
Entrepreneurial Sector
Sustainable Business Subsector
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The Impact of the Entrepreneurial Sector

• The force of one periods entrepreneurs becomes
  the next generations business paradigm,
  therefore entrepreneurship trends can be seen as
  a leading indictor of business change

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Entrepreneurship

• At the core of entrepreneurship is the question
  of why and under what conditions opportunities
  for Schumpeterian innovation and creativity
  exist.
• Venkataraman, 1997

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Population Growth
Source Living in the Environment, Tenth Edition,
G. Tyler Miller, Jr., 1998
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UNLIKE NATURAL SYSTEMS, MODERN HUMAN SOCIETIES
PROCESS RESOURCES IN A LINEAR FASHION, CREATING
WASTES FASTER THAN THEY CAN BE RECONSTITUTED INTO
USABLE RESOURCES.
6 Product
94 Waste
On average 94 of the raw materials used in
creating a product ends up as waste only 6 ends
up in the final product.
Source National Academy of Engineering
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Changing Character of Natural Resource Challenges
in the Last 25 Years
Local Specific Short Delay Low Complexity Society
Impact Low
Global Diffuse Long Delay High Complexity Societa
l Impact High
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Major Environmental and Resource Problems

• 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

• Air Pollution
• Global climate change
• Stratospheric ozone depletion
• Urban air pollution
• Acid deposition
• Outdoor pollutants
• Indoor pollutants
• Noise

Major Environmental Problems

• Water Pollution
• Sediment
• Nutrient overload
• Toxic chemicals
• Infectious agents
• Oxygen depletion
• Pesticides
• Oil spills
• Excess heat

• Human Health
• Childhood diseases
• Cancer
• Asthma
• Immune system deficiencies
• Reproductive system problems
• Endocrine system disruptions

• Waste Production
• Solid waste
• Hazardous waste

Source Living in the Environment, Tenth Edition,
G. Tyler Miller, Jr., 1998
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Changing Conditions
Demand for Natural Resources (population,
consumption, technology)
1900
1970
Material cost, availability Waste
disposal Regulation Health issues
Fines Liabilities Insurance Bank credit Risk
The Economy
Innovation and Opportunity
The Economy
Corporation
Public opinion NGOs Media International protocol
Customer demand Recruitment and retention
Natural Resource Services (amount, quality,
assimilative capacity)
Innovation Creating New Competitive Space
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66 (or 2/3rds) of U.S. oil imports are used for
transportation
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"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
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Earth Systems Engineering and
Management
Climate Systems

• Fuel Cells
• UTC Fuel Cells Innovation Inside a Large Firm
• Fuel Cell Technology and Market Opportunity
• Case Teaching Note

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Energy Module
Corporate Transparency
Regulation
Bank Credit Insurance
Efficiency
Health
Earth Systems Engineering Management
National Security
Risk Management
Competition
Fiduciary Responsibility
Corporate Response

• Telework
• Emissions trading systems
• Fuel cells

• Teaching Materials
• Articles on ESEM, video
• Telework at ATT
• Atlantic Energy
• Fuel Cell Technology and Market Opportunity
• UTC Fuel Cells Innovation Inside a Large Firm
• Teaching Note

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Expected U.S. Fuel Cell Market Growth
2010
23 billion
U.S. Fuel Cell Market Size 2006
3.3 billion
Source Freedonia Group 2002
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Case Discussion

• Entrepreneurship Framework Analysis
• Team
• Opportunity
• Product
• Resources
• Strategy
• UTCFC Evaluation
• Pre-1997 and 2002
• Corporate Environmental Policy Beyond Compliance
  to Innovation

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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)
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Total Relative Emissions from Vehicles
Sulfur Dioxide Nitrogen-Oxygen Compounds Volatile
Organic Compounds
Source http//www.sandiegometro.com/1999/sep/cove
rstory.html
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Fuel Cells

• Advantages
• 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

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Challenge to UTC
Small RD Shop Cost Center
Market-facing High-growth Profit Center
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Two Separate but Interlinked Corporate Arenas of
Activity

• Environmental Management
• Sustainability Innovation

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Sustainability as a Next Step in Total Quality
Management

• Safety zero injuries
• JIT zero inventory
• TQM zero defects
• Sustainability zero waste and zero emissions

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A Framework for the Process of Entrepreneurship
Entrepreneur
Opportunity
Strategy
Product Concept
Resources
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Environmental Impact Model
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)

Source Living in the Environment, Tenth Edition,
G. Tyler Miller, Jr., 1998
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Sustainable Business Opportunity and Value
Creation

• 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.

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From Patagonia, Toms of Maine, Ben and Jerrys,
The Body Shop to

• Interface
• Mitsubishi Electric
• Scandic
• Electrolux (Frigidaire)
• IKEA
• Xerox
• ATT
• Weyerhauser
• Alcoa
• Ford
• UTC

• Allied Signal
• 3M
• Collins Pine
• Visteon Automotive Systems
• Suncor
• Harley-Davidson
• Johnson Johnson
• Royal Dutch/Shell
• Conoco
• BP
• Shaw

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Lens Adjustment

• Engineered world
• Systems Cells to atmosphere/biosphere

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Sustainable Business Opportunity and Value
Creation

• 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.