Crisis leads to opportunity and innovation
Navigating through a crisis and coming out a winner
A result of ongoing challenges associated with the global financial crisis (GFC), an ageing population and eco system strains - many companies are forced to rethink their business model and scrap previous business plans. Companies need to find new ways to innovate and seize emerging opportunities, when capital and debt financing has stalled to a standstill.
One of the first steps for any company is to build business resilience. After many years of significant market growth the GFC now provides companies with an opportunity to look internally within their business to improve efficiencies and save operating costs. I recall an on old saying I learnt during my time in Scandinavia: “the greenest energy is the energy you don’t use” and essentially the less we use the less we pay.
An ageing population:
Global population is now over 6 billion people with predictions reaching 8 billion by 2025. The standard of living too is rapidly increasing in many developing countries, with 85% of the global population living in these areas. This in turn creates greater pressure on remaining natural resources and further strain eco-systems.
Here in Australia the average age of the workforce in 2000 was approximately 39, and has been increasing faster than that of the general population. This ageing workforce will require support in their retirement, especially as more and more baby boomers leave the workforce in the years to come. As we continue to live longer we require more resources to sustain our expanding and ageing population.
The state of our systems:
Climate Change has been one of the most covered issues over the last 5 years, and during this time we have seen atmospheric carbon dioxide levels rise to around 380ppm. Let’s also examine some other key indicators. In 1950, 15% of fish stocks were harvested to their maximum sustainable limits, with 85% considered to be sustainably fished. In 2003, 32% of fish stocks had crashed, 39% were considered overfished and the remaining 29% were considered at the limit of sustainability. Also, current global forestry statistics show that 21% are intact, 32% working and 47% lost.
We therefore face a crisis on two fronts. Our global economy is in decline and our natural resources are already over exploited and perilously close to whole systems change. We cannot simply rely on our dwindling natural capital to get us out of the current crisis. We absolutely cannot afford to continue producing more by taking more, the key now is to find and invest in innovative ways to produce more with less.
It will be those who are ready to ride on the forefront of the new green economy and are able to use resources more wisely and efficiently (to satisfy real needs) that will prosper. In the words of Bjorn Stigson (former Chair of WBCSD) “we don’t have to worry about the companies that don’t get this, because they simply won’t exist in the future”.
During my time as Project General Manager of Environmental Affairs for Toyota Australia I recall a statement made by the global President Fujio Cho in 2002 “without a high level of response to environmental concerns the automotive industry has no future”. Around a similar time General Motors (GM) outlined that they would bypass hybrid technology and focus on the development of hydrogen powered vehicles. Hydrogen was seen as a replacement to oil by the US government in the 1970’s. Thirty years ago, they said hydrogen would take 30 years for commercial application. Today they are still saying that hydrogen may take another 30 years.
What we observed at Toyota was that GM had misread the emerging market and was not prepared for the anticipated forthcoming regulations. Toyota seized this opportunity and invested their profits into new technology of which hybrid represented the main platform. The hybrid system, essentially an energy management system also had the added bonus of the fun to drive factor, which enabled Toyota to transition from an iconic brand to an inspirational brand. GM current position speaks for itself.
Toyota also entered the formula 1 arena, which is traditionally a testing ground for new technologies where races are won on performance and fuel efficiency. At this year’s Melbourne Grand Prix, Brawn Racing Team finished 1 and 2 – largely due to an innovative new technology featured in the race. Kinetic Energy Recovery Systems (KERS) captures and stores energy from the rear braking system allowing a twice a lap, additional 6.5 second injection of 80 horse power to the car. This proved critical in Brawn’s success by enabling a power boost to that enhanced their overtaking speed. A great example of innovation as a result of environmental reasons, efficiency has led to performance improvement. Good for the planet and good for business – this is the new paradigm we are entering.
The waves of innovation for the 21st century will focus on clean technologies, renewable energy and more efficient products in their manufacture, use and end of life. Periods of crisis are a breeding ground for innovation; consider aviation and electronics flowing from the World War II this led to the space race, satellites and the digital networks we rely so heavily on today.
The questions that now must be asked are: what will this current crisis bring forth and how will this change the way the world operates and functions? What flow on technologies will result and which businesses are going to be the new leaders? Which countries will prosper and which states will be best able to capitalise on the new opportunities that arise?
Also, how are businesses going to manage the innovation required? Here are two ways:
- Through financial capital: Government funds are increasingly being directed towards greenhouse reduction technologies via Climate Ready and a number of other areas. Companies looking to boost their capacity to innovate have an opportunity to access these funds to ‘get the ball rolling’.
- Via human capital: the Federal Government has also embarked on a jobs creation drive – with an emerging recognition that the new technologies and solutions for improving environmental performance and reducing impacts will be a main new area of job creation. This represents both new businesses but also the re-design of existing businesses. Workforces will need to be re-skilled and a culture of entrepreneurism and innovation will be needed to survive the next 2-3 years. That culture of resilience but also opportunity identification will be the platform on which the new successful businesses will be launched.
Given the large resources available to global companies whose headquarters are largely based outside of our shores we are unlikely to see Australia competing in massive step change technological innovation. It will be the small scale, in part innovations that are more likely to represent Australia’s future. Such innovation can occur anywhere within the company and is a whole of company process guided by top down, bottom up influence and contribution. It is about developing a culture that is able to innovate at every stage of your business process from sales and marketing to manufacturing and engineering – each member of the business will need to be encouraged and supported to be able to innovate.
I recall at Toyota if we wanted to improve our energy efficiency – it was the employees on the line that were so important to engage, it was them that could hear if there was an air leak in the system – we needed to support and encourage them to speak up and promote a set of possible solutions. Then we needed to recognise and reward the initiative shown because that would re-inforce the culture we wanted to develop one that was a relentless pursuit for continuous improvement. Not for altruistic reasons of being a good clean company because this just represented good business.
Doing good is now, and will continue to be good for business. To survive and prosper through this time of crisis companies need to establish innovative ways that focus their operations on the business of doing good.
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by existentist