Just received this email (will move this later to another forum):http://www.amrresearch.com/Content/View ... llid=21113
Save the Planet, Survive a Recession
by Tony Friscia
Global stock markets have been on a roller-coaster ride, with the Dow opening 400 points down and closing 200 points up a mere seven hours later. Asian and European markets have seen equal volatility.
At the same time, energy prices have been skyrocketing. Even when they ve stabilized, it s been at all-time highs. And it s not a supply issue this time, as it has been in the past, but rather a demand issue. As the old adage goes, the first bad news you hear is not the last.
In these times, when most companies are curling up and helping a recession become a self-fulfilling prophecy, some will find and exploit opportunity. History shows that there is no better time to take share and break out of the pack than during tough economic times. No more rising tide to make everyone look good.
Think about the economic downturn in the early years of this decade the toughest to ever hit high-tech. What happened? IBM, HP, and Cisco emerged stronger, while Sun struggled, Nortel almost disappeared, and Alcatel and Lucent had to come together. Oracle consolidated the enterprise application market, while JD Edwards, PeopleSoft, and many others have become names in a Trivial Pursuit game. Google and Amazon emerged as the next players to watch, while Yahoo tried to redefine itself and hundreds of Internet startups disappeared.
As the economy settles in for another tough period, many companies will focus on cutting costs. But the best companies will also look to gain competitive advantage for the long term. With the economic and energy issues going hand in hand, one opportunity is to use the energy/environmental crisis to your advantage.
Energy, the environment, and economic opportunity
Energy policy is going to be front and center on the agenda of the next U.S. president, regardless of whom is elected. It s already top of mind globally, with overwhelming challenges facing us all.
Consider that the coal plants that went online in China in 2006 added 80 gigawatts of electricity generation to the country s power supply. That s about the electricity capacity of all of Great Britain. Add to this that demand for power generation in China grew by close to 20% in 2007, and you see that it s not about to slow down. The rest of the industrializing world India, Asia, Latin America, and Eastern Europe are all following suit in a trend that clearly can t be sustained. New regulations will abound and cost pressures will mount, and thus rises two new opportunities: creating new markets and realizing efficiencies for competitive advantage.
On the new markets front, opportunities abound in developing new alternative energy sources, new battery technology, carbon capture, and other technological innovation. The big opportunity for most, however, is in conservation that gets ahead of upcoming regulation and yields competitive advantage.
When we had the first oil crisis in the 1970s in the United States, we got out of it almost exclusively through energy efficiency. We now produce, in constant dollars, $15 of GDP for the same energy input we produced $8 before the first oil embargo in the 70s. And we ve only scratched the surface.
Here are a few examples of the business opportunities:
Operating efficiency - Texas Instruments (TI) started plans for a new fabrication plant in Richardson, Texas in 2004. It cost-justified building this plant in the United States rather than in China through energy efficiency. This fab will be built for an estimated 30% less per square foot than TI s previous facility, constructed just 6 miles away 10 years earlier. This plan will have lower emissions and will use less water, energy, and materials than similar buildings. Operating costs are projected to be considerably lower as well.
Take cost out of the supply chain - Wal-Mart has set a supply chain goal of 5% reduction in overall packaging by 2013. With more than 60,000 suppliers around the world, the impact of this reduction is the equivalent of removing 213,000 trucks from the road and preventing 66.7 million gallons of diesel fuel from being burned per year. Beyond the benefits the company will realize as a good corporate citizen, it will take more than $3.4B out of its supply chain cost through this initiative.
Create new sources of scarce supply through recycling - Hewlett-Packard (HP) collected and recycled about 165 million pounds (75,000 tons) of products in 2006, equivalent to the weight of 600 jumbo jets. This brings the cumulative total of products recycled since 1987 to more than 920 million pounds (420,000 tons). By the end of 2007, the company recycled 1 billion pounds (450,000 tons) cumulatively. In 2006, it also recovered more than 10.4 million pounds (4,700 tons) of plastics that were subsequently used to make new products like trays, shoe soles, and roof tiles. This recycling has had the added benefit of reducing supply chain risk in a time of growing demand for commodities with the associated cost increases and problems with availability. For example, for the precious metals used in manufacturing, HP gets 50% to 60% more of these metals from recycled PCs than from mines. In effect, HP has created a new captive mine through recycling.
We see oil hovering between $80 and $100 per barrel, the issue of climate change growing in the minds of consumers and governments, and political pressures on business to do something about it mounting. In this environment, the best companies will seize the opportunity to make manufacturing plants and buildings more efficient, design for sustainability, and take significant cost out of the supply chain in the name of environmental sustainability. Where are you on this curve? I look forward to hearing your thoughts firstname.lastname@example.org