Sustainable Product Innovation: Entrepreneurship for Human Well-being
315
Sustainable Product Innovation: Entrepreneurship for Human Well-being
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Product Details
| ISBN-13: | 9781604277883 |
|---|---|
| Publisher: | Ross, J. Publishing, Incorporated |
| Publication date: | 09/01/2017 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 315 |
| File size: | 7 MB |
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CHAPTER 1
THE SUSTAINABILITY CHALLENGE
This chapter defines and explores the intricate linkages among the topics of business, environmental, and social sustainability. It introduces the concept of sustainable products as a radical departure from the traditional way of conceiving, designing, manufacturing, and marketing new products and services. Throughout, the need for systems thinking is emphasized in order to achieve optimal outcomes that benefit all stakeholders in business, the environment, and society. The approach includes three main steps:
• Provide an overview of the prevalent interpretations of sustainability in business and the corresponding strategies and methods in new product innovation and commercialization.
• Examine the effects of current economic activities on people and the planet and the ways they have created an untenable situation with present harm and long-term systemic risk.
• Define the term social and environmental sustainability, and posit that the root cause of the present sustainability risks is a lack of tight integration of environmental and social sustainability factors in business, technology, and product strategies.
Traditional product innovation and commercialization methods must be amended to deploy holistic systems thinking and decision optimization that achieve integrated business, social, and environmental sustainability. The new business and sustainable innovation practices can be successful only if they are reinforced by supporting public policies and informed citizens. Sustainable products are the outcome of the amended practices that are examined in-depth throughout this book.
The Prevalent Interpretation of Business Sustainability
Traditionally, sustainability in business has meant continued success in attaining the firm's financial objectives, which is achieved by adopting effective marketing and operational strategies and by investing in technologies that strengthen the firm's competitive advantage and increase market opportunities. New products are developed and commercialized to grow revenues, market share, profitability, and shareholder value. Revenue is enhanced by products that expand the total available market and the served available market. The firm's product portfolio also is enhanced through horizontal and vertical mergers and acquisitions. To grow market share, new technologies and products are developed that create a compelling competitive advantage and help control the basis of competition and market assets in favor of the firm. Increased profitability is achieved through differentiated products that can demand higher prices, have lower cost of goods sold, and enhance the power position of the firm in the supply chain compared to other actors.
Growth and scalability are highly desirable for new products because they ensure shareholder value growth and an attractive return on equity throughout the product's life cycle. Figure 1.1 shows the steps in a new product's life cycle, from development and commercialization to the end of its useful life.
In addition to the firm's strategies and operational practices, business success depends on external factors like access to capital and efficient functioning of the supply chain. Start-ups might need venture capitalists to fund the development of high-risk new technologies, and established firms might need investment banks to provide the working capital to sustain their operation. Other capital market players enable companies to sell bonds and acquire capital for building new factories and growing their business. In addition, the sustainability of a business depends on the underlying contextual factors of a political economy, such as contract and intellectual property (IP) laws and regulatory regimes that influence risk assessment and decision optimization within a firm. In short, a business functions within an ecosystem comprised of the firm and its suppliers, investors, customers, and regulatory agents.
Today, the ecosystem of most businesses does not extend to include the environment or society. Furthermore, the outlook of business is limited to the investment-planning horizon without considering the long-term environmental and social effects of its activities. Only in recent decades have people become concerned about the availability of raw materials — the fossil fuels, water, food, and other resources we extract from the planet — or about the harmful health and societal effects of the waste that is generated throughout the life cycle of products that we produce and consume. This is reflected in standard business attitudes toward production. The principal resource issue of concern to a firm is affordability — that is, acquisition of resources and disposal of waste at the lowest cost in compliance with governmental regulations.
The life cycle of every product involves a flow of material, energy, and waste (effluent); starting with extraction from the earth, continuing through production, and ending with consumption and disposal (Figure 1.2). Firms design products or devise operational strategies based on only a few steps in this life cycle — those adjacent to the production of their product. They strive to produce and deliver products at the lowest cost, to ensure continuity of material and resource supplies for their production, to fulfill demand with on-time delivery, and to meet their customers' quality requirements. Concern for the effluents (gaseous, liquid, and solid) is limited to the production steps directly under the firm's control and to those effluents that are obtained from the product in use and must comply with applicable regulatory requirements. This limited outlook ignores many steps of the actual product life cycle, thus failing to consider the holistic impact of a product on the earth's ecosystems and society. Each step of the product life cycle requires consumption of resources such as material, energy, and water. These resources are provisioned by the earth and include both renewable and nonrenewable entities. They are referred to as sources. Furthermore, each product life-cycle step generates and disposes waste to land, water, or air, which the earth stores or processes. These functions are referred to as sinks.
Businesses are beginning to realize that global economic activities in aggregate affect the availability of resources for the manufacturing and consumption of our products and the capacity of the earth to store and process the waste. Since the Industrial Revolution, the impact of the human production-consumption system has grown exponentially relative to the earth's ability to supply the sources and to provide the ecofunctions of the sinks. As a result, the ratio of the human footprint to the earth's carrying capacity has risen exponentially (Figure 1.3). Can the current dominant growth strategy in business be sustained, at either the firm level or at the aggregate global system level? Unlimited growth in a limited system such as the earth is not feasible.
At the firm level, businesses argue that a single entity has only a small effect on the global system, and therefore they ignore the global system aggregation as they pursue their business growth strategies. Furthermore, the limits on this growth scenario are not universally accepted. Scarcity in global sources and sinks is believed to be resolvable by innovations in technology and free-market price mechanisms. Adverse impacts on the environment and society are also perceived to create entrepreneurial market opportunities for new product solutions.
The lack of sustainability of the prevalent growth strategy is nevertheless gradually appearing on the list of business challenges and strategic considerations. MIT Sloan Management Review and Boston Consulting Group surveyed 4,700 executives, managers, and thought leaders from a range of worldwide industries about the primary business challenges facing their organizations over the next two years. In the 2010 and 2011 surveys, only 14% and 16% of the respondents, respectively, considered the threats and opportunities of sustainability as a primary business challenge.
What Do Environmental Sustainability and Social Sustainability Mean?
The sources and sinks of the earth sustain our livelihoods and our economies. Some sources (like fossil fuels) are nonrenewable, and others (like air, land, fresh water, oil, minerals, plants, fish, and other animals) are renewable. The sinks absorb and process the effluents or wastes of living species and human technological activities, and provide ecofunctions (services) that sustain life. For example, the atmospheric ozone layer absorbs harmful ultraviolet (UV) radiation from the sun, trees and oceans sequester carbon dioxide (CO) emitted by transportation vehicles and industrial processes, fallen leaves turn into fertilizer to sustain the plant life cycle, coral reefs provide habitats to thousands of species, and soil among other things purifies water. There are many other ecofunctions that we might not yet know about.
The earth's capacity for sources, sinks, and ecofunctions are referred to as natural capital. The following is a list of services provided by the earth's ecosystem:
• Provisioning services, such as seafood, crops, livestock, and forest products
• Regulating services, including climate stabilization, water supply, fire prevention, flood control, sedimentation control, pest control, and pollination
• Cultural services, such as aesthetic values, knowledge systems, educational values, sense of place, spiritual values, inspiration, recreation, and ecotourism
• Supporting services and preservation of options through biodiversity and resilience
Figure 1.4 illustrates how ecosystem services affect human well-being according to the model developed by the United Nations Millennium Ecosystem Assessment.
The word sustainable means able to last or continue for a long time. The association of sustainability to goodness — such as environmental protection or social well-being, which often is implied in sustainability circles — came about as the risks to human development and its sustainability over future generations were examined. In the United Nations report on Our Common Future, Gro Harlem Brundtland defines sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." As is discussed later in this chapter, this definition is unclear. It neither defines the meaning of development nor includes the important concept of equitable development. Traditionally, human development has been defined as the creation of economic surplus by exploiting natural resources and producing innovative products. This development has been mostly unconstrained and has resulted in excessive environmental degradation and social harm. Therefore, we need to be explicit when relating development to well-being and to state the importance of equity in social welfare. In this book, sustainable development is defined as equitable human well-being that continues for a long time.
Sustainability means a high-quality life (well-being) for all people in perpetuity through the preservation of earth sources, sinks, and ecofunctions (environmental sustainability). Well-being for all underscores an additional requirement — equity and social justice, which is social sustainability. Human economic and social activities that improve human well-being without harm to others — here and elsewhere, now and later — are sustainable development. The word harm means a limitation on opportunities for others to have a high-quality life (well-being).
Sustainable development often is depicted by the triple-bottom-line framework shown in Figure 1.5 at the intersection of economic, social, and environmental sustainability.
When the earth, society, and the economy are seen holistically as an integrated system, two types of variables can be distinguished — stocks and flows. Stock variables or capital provide the capacity for the functions of the system, and flows represent the rate at which services and activities take place. These economic, social, and environmental factors form a dynamic and complex system that functions through multiple feedback loops and nonlinear interactions over time.
Four types of capital are needed to support sustainable development — natural capital (earth's capacity to provide sources, sinks, and ecofunctions), economic capital (physical infrastructure, means of production, and financial investments), social capital (trust and institutions that establish the rules that enable an optimal functioning of society), and human capital (education, health, and empowerment of citizens).
In applying the triple-bottom-line model to new product development, we must take a holistic systems view of a product's life cycle. We must consider all the steps and players in the supply loop shown in Figure 1.2, including the earth as the provider of the sources and sinks that support the entire system. The material inputs that support the supply chain start from the earth and the extraction of raw materials, and the effluents from various process steps are discharged to air, water, and land. At the end of their life, products also end up in landfills or in the atmosphere if incinerated.
This definition of sustainable development has both temporal and spatial dimensions. The well-being of present and future generations is considered on the temporal scale. On the spatial scale, sustainability is an equity and social justice issue: no one in the world should be denied the opportunity to have a high-quality life. Figure 1.6 illustrates the time and space scales in sustainable development. Economic development and product development must consider the impact of human activities on the environment and society in both transgenerational (time) and transboundary global (space) scales. We must maximize benefits and minimize harm here and elsewhere, now and later.
The meaning of well-being that appears in our definition of sustainability and the meaning of satisfaction of needs that appears in Brundtland's definition of sustainable development need to be expanded. These concepts are critical in the development of sustainable products and technologies because products aim to satisfy users' needs and improve their well-being. Several questions need to be asked: What is development? Do we mean economic growth or developments in science, technology, health, art, leisure, and human relationships? What do we mean by needs? Material needs or feel-good and spiritual needs? Is there a universal and transgenerational definition of needs, or do they vary and evolve across space and over time? Is there a floor for needs and need-satisfaction? Is there a ceiling? We also must ask whose needs should be satisfied and what geographic, race, social stratum, and class considerations are to be included in a definition of needs and their satisfaction. Well-being might be equated to satisfaction of a complex set of needs and aspirations — existential needs for survival, needs for a healthy and meaningful life, and needs for community, love, and happiness. Perceptions of well-being and need-satisfaction are highly variable among people across space and over time. What is important is the freedom to choose and the opportunity to realize one's own well-being and need-satisfaction.
Another important issue in the definition of sustainable development is not compromising the ability of future generations to satisfy their needs. The question is: How would the ability of future generations be compromised by our products and economic activities? Would our activities deprive future generations of earth's resources (both sources and sinks), diminish biodiversity, cause genetic health damage, and create long-term ecosystem degradation?
We also should ask: How is the ability of others around the globe to satisfy their needs compromised? How do our production outsourcing practices and the life-cycle management of our products affect the well-being of the have-nots — often the workers in poor countries and neighborhoods where polluting factories are situated? Are we contributing to the privatization of common goods and the globalization of earth's resources and labor? The latter results in the virtual transfer of earth resources from poor regions to the rich and exploits workers by lowering wages across the globe.
(Continues…)
Excerpted from "Sustainable Product Innovation"
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Copyright © 2017 Dariush Rafinejad.
Excerpted by permission of J. Ross Publishing, Inc..
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Table of Contents
Prologue ix
Introduction xi
About the Author xvii
WAV™ xviii
Dedication xiv
Chapter 1 The Sustainability Challenge 1
The Prevalent Interpretation of Business Sustainability 2
What Do Environmental Sustainability and Social Sustainability Mean? 5
The Scorecard: The Effects of Prevalent Practices on People and the Planet 10
What Is the Sustainablity Scorecard of Human Economic Activities? 15
Industrialization and Globalization 25
Human Well-Being versus Gross Domestic Product 28
Questions and Exercises 36
Endnotes 37
Chapter 2 Transition Toward Sustainable Development and Business Strategy 41
The Business Case for Sustainable Products and Processes 44
Sustainability Is an Opportunity for Transformative Innovation 46
Management and Leadership for Sustainable Product Development 51
The Sustainability Maturity Index in Business 55
Who Are the Agents of Transition to Sustainable Development? 56
Questions and Exercises 57
Endnotes 57
Chapter 3 Sustainability Frameworks and Industrial Ecology 59
Systems Thinking 60
System Dynamics and Resilience 64
Social Considerations in Industrial Ecology 65
Elements of Industrial Ecology: Eco-Efficiency and Eco-Effectiveness 65
Sustainability Frameworks 68
Life-Cycle Assessment 71
Questions and Exercises 72
Endnotes 73
Chapter 4 Life-Cycle Assessment 75
Attributional and Consequential LCA 77
Case Study: Beverage Containers 77
LCA Project Management 79
Selected LCA Resources 89
Current Shortcomings of LCA Tools 90
Additional LCA Books and Articles 90
Questions and Exercises 91
Endnotes 91
Chapter 5 Technology and Product Strategy 93
Product Strategy 94
Business Strategy 95
Marketing Strategy 95
Technology Strategy 97
Operations Strategy 98
Aggregate Strategy Framework 99
Technology-to-Market Value Chain 101
Case Study: Solar Photovoltaic T2M Value Chain 102
Success of the T2M Endeavor 104
Sustainable Product Strategy 108
Innovation Opportunities in Pursuing Sustainability 109
Case Example: Corporate Strategy at Millipore Corporation 110
Questions and Exercises 111
Endnotes 111
Chapter 6 The Product Concept and Development Process 113
What Is a Product? 114
The Whole-Product Concept 115
Stakeholders and Product Success 116
Application Environment 119
Technology Development 120
Complementary Technologies and Products 120
The Product Development and Commercialization Process 121
Business Model Canvas 139
Questions and Exercises 141
Endnotes 141
Chapter 7 User-Inspired Innovation and Design Thinking: User-Need Research 143
Innovation 143
User-Inspired Innovation 145
The Sources of User-Inspired Innovation 147
User-Need Research 149
Brainstorming for Product Ideation and Conceptual Design 154
Prototyping and Experimentation 155
Prioritizing User Needs 156
The Competitive Landscape and the Basis of Competition 158
Questions and Exercises 160
Endnotes 161
Chapter 8 Design for Excellence and Sustainability 163
Design for Excellence 163
Design for Sustainability 166
Manufacturing and Sustainability 168
Design-for-Sustainability Resources 172
Questions and Exercises 173
Endnotes 173
Chapter 9 Design for End-of-Life Management: A Zero-Waste Strategy 175
Waste from Use 175
Life-Cycle Strategies for Waste Management 176
Case Study: Reverse Logistics at Cisco Systems, Inc 178
By-Product Synergy 179
Questions and Exercises 182
Endnotes 182
Chapter 10 Public Policy and Building Inherent Safety by Design 183
The Evolution of Regulations Driving Design for EHS Protections 184
Decision Making for Compliance with EHS Regulations 189
Questions and Exercises 190
Endnotes 190
Chapter 11 Sustainability Standards and Product Ratings 193
Eco-Efficiency and Eco-Effectiveness 193
The International Organization for Standardization Environmental Standards System 194
The Value Chain Index 197
The Ecological Footprint 197
The Chemical Footprint Project 197
The Electronic Product Environmental Assessment Tool 198
The GoodGuide Rating 198
Corporate Rankings 199
Questions and Exercises 200
Endnotes 200
Chapter 12 Decision Analysis and Modeling in Product Development: System Dynamics Modeling 203
The Decision-Making Process 204
Example: Select the Optimum Product Concept in Phase 1 of the Product Development Process 205
Pitfalls in Decision Making 207
Risk Assessment in Decision Making 207
Modeling 208
Optimization Models 211
Simulation Models 214
System Dynamics Modeling 216
Questions and Exercises 221
Endnotes 222
Chapter 13 Return on Investment: Intellectual Property Protection 223
Return on Investment in New Product Development 224
Return on Investment for Sustainable Development 227
Reporting Cost of Externalities 229
Conclusion for Sustainable Product Development 230
Intellectual Property Protection 231
Questions and Exercises 232
Endnotes 233
Epilogue: Remarks on Leadership and Innovation 235
Appendix A Business and Environmental Sustainability at Toyota Motor Corporation: The Development of the Prius Hybrid Vehicle 237
Toyota's History of Success and Characteristics of the Auto Industry in 1993 238
What Is the Twenty-First-Century Car? 238
Developing a Twenty-First-Century Product: Defining Specifications and the Development Approach 240
Technology Pathfinding 241
Environmental Impact, Platform, and Outsourcing Strategies 243
Program Execution Challenges 245
Management Support 246
Prius Commercialization 246
The Chief Engineer's Strategic Dilemma and Most Demanding Challenge 249
Endnotes 250
Appendix B Chevrolet Volt: A Disruptive Innovation Bridge to Electrified Transportation 251
General Motors Corporation and the Competitive Landscape in 2005 252
The Driving Force and Product Strategy 255
Disruptive Innovation in a Large Company 257
The Project Team 259
Project Execution: Invention on the Critical Path 263
Volt Design Requirements and Features 270
Key Suppliers 278
Pricing Strategy 279
Product Launch and Market Penetration 279
Retrospect and Looking Forward 281
Endnotes 281
Index 283