When are you going to start redesigning your business model? Before your competitors, or after? Steve Evans, Cranfield University
Steve Evans, Professor of Life Cycle Engineering at Cranfield University, draws on 12 years in industry and nearly two decades of academic experience to share inspiring examples of how climate change is forcing companies to redesign their business models in order to stay competitive.
Read the transcript below.
Steve Evans, Professor of Life Cycle Engineering, Cranfield University
Thank you. So, I can guess what you’re expecting; lots of pictures of planets and doom and tornadoes. Well, hopefully I’m not going to do that. I’m going to start with a personal video. I knew that people would be putting up fantastic presentations and setting a standard that was impossible to follow, so I’ve stolen other people’s. So they’re all terrible, but none of them are mine. This is a personal journey.
Can you hear me? Can you hear me? Ah, thank you...
I thought I’d start a personal journey. This is a slide and a video thing from Martin Baker Engineering. This was my last job before going into academia; I was responsible for improving the performance of design and manufacture of ejection seats. This thing that you’re seeing in slow motion – and it is very slow, you’ll see it in full speed in a second – is on a rocket sled in Northern Ireland. It goes from nought to 1,000 km an hour, to nought in 1,500 metres. If you are offered a job in Formula 1 after this, you’d say, 'Boring.'
This is the best water chute in the world, because that’s how you slow something down from 600 miles an hour. And that’s the real speed. Absolutely fantastic company, 90% of the world market. So, when you’ve got a job like that, you’ve got to find somewhere else to work afterwards. And one of the reasons that I’m in the university system is that I get to go and see hundreds of companies. We don’t invent anything, we observe, and observe, and observe, and boil it down and boil it down to what we imagine the essence, the important messages that come out of there – and I’m going to take you through some of those.
So, it was really wonderful two years ago to back to Martin Baker, the company, and be present at this presentation. And it doesn’t really matter what it says up there, just look at the pattern in these graphs. They’re all zeroed, so there’s no political posturing in these numbers. This company is reducing its impact on the environment by 60-75% in about three or four years in a number of dimensions – quite fantastic. Just because it wanted to. And how is it doing that? Well, it started through a social concern; it started because some of the people working on the shop floor were getting increasing frequency of eczema as the coolant used in the machines got more and more horrible. The frequency is about once every six weeks until you clean it up.
So they built this technology and it saved them loads of money on the coolant. So at the end of that six weeks, now instead of taking away all this dirty stuff and paying somebody to process it – because it’s not allowed to go in a hole in the ground – it stays in that machine. So, they’re now using the same coolant that they’ve had in there for ten years, instead of throwing it away every six weeks; and that inspired them to go looking for other things that they could do. So yes, one way to do this is to spend loads of money on technology, but there’s another way of making improvements.
You may not be able to see it – I think this is genius, it’s certainly ingenious – you want to separate the metal from the horrible gunky liquid stuff that attaches itself to this wharf, in order to maximise the value of that metal when you sell it into the recycling market. If you went to big companies they would buy a centrifuge, spin it at great speed. So they’d spend lots of money and lots of energy separating those two things. What has this company done? It’s got a skip and it’s put a little wooden block under the corner of the skip, and it’s allowed time and gravity to do the same job. And somebody pointed out that those two things are free. And this, I think, is a very important example of both using technology and using ingenuity to solve these sorts of problems.
Why are we so wasteful? This factory – I’m not going to tell you where it is, it’s anonymous – this is their energy use. And I’m hiding the detail. But how would you tell... how has this happened? We’ve allowed ourselves to become this wasteful. We’ve become this wasteful because we have not yet learned how to see this waste. I was working in manufacturing when we were starting to be overwhelmed by all that knowledge of how the Japanese were doing their manufacturing, and we learnt new ways of seeing things. So, I used to see a machine with lots of inventory next to it and think; fantastic, that machine will never run out of work – that’s a good thing. Now we know why that’s a bad thing.
We’re going into a new revolution over the next ten, 20, 30 years, where we’re going to see things and go, 'That’s bad.' I walk around this building because of my training and I go, 'Hey, I can halve the energy use of this building now,' because I know how to see it. And I think that’s something that’s going to happen to more and more of us. Although, you know, Martin Baker’s a little company; let’s take us to a big company.
You’ve heard of this one; Toyota have 11 factories in Europe. In November of 2007 they sent their last kilogram of waste to landfill. These are big factories, 11 of them; nothing, zero, goes to landfill. That is an enormous achievement, and I wish they’d tell more people about it. These are figures from their particular plant in Burnaston, Derby. They now make a car with 23% of the energy when they started; they haven’t installed new technology. That’s four cars for the energy that it used to make one. Hands up if you think Toyota are a dumb, stupid, wasteful company when they started this journey; you know? They’re the most famous waste-busting company on the planet, and yet on day one of this journey they still had a system that used four times more energy than is currently used to make a car. Once you understand and can see these things, you can tackle them.
Why is this happening? Well, I’d say that we’re taking a very long journey. Go and read Adam Smith, the two books that you only ever... you only need to read two books – except for Roberto’s, which is fantastic and to be recommended, sorry. Adam Smith will explain why businesses behave the way they do, and Darwin will explain why ecosystems and people behave the way they do. And when you combine those two – and I wish somebody would write that great book – then we’ll understand how to manipulate these systems. But Adam Smith was writing in the time of the first industrial revolution; he was writing in a time when we were concerned with labour productivity, because labour was the thing that was scarce, and there was loads of nature around and we could chop down trees forever; we can dig up coal forever; we can use as much water as we wish to wash our production processes.
And what we saw was – and this is a very good example of the emergent system – as the technology emerged, the implications of that technology then also emerged. It wasn’t planned. The industrial revolution did not plan to get us where we are today. And what we ended up doing was sub-optimising; focusing on individual pieces and making those as best as we could. I’m going to argue that the next industrial revolution – I don’t know whether it’s the second or the 20th – but the next one is going to be very different in character to all of the previous ones.
We’re running out of nature. We have been so incredibly good at what we’re doing, we’re running out of nature. But actually, there might be nine billion of us on the planet in 2050, a lot of whom will be working, I hope, and the ones who aren’t working are going to be supported by those who are, so let’s hope as many as possible of those nine billion are working. Why, oh why are we worried about productivity when we’ve got that many workers? Because it’s an externality. Because if I, as a company, choose to employ 5% more workers than your company, I’ll go out of business and they won’t be employed anymore. Well, that’s simply a poor system. And no single company can change that system on their own, so one of the big changes that I’m going to predict we see over the next 30 or 40 years is a move to whole system design.
We’re going to see business, social agencies, and governments working together to take steps to achieve a resource-efficient world – you cannot do it on your own. The other difference is that we’re going to be back-casting. We know where we want to be in 2050; the only other parallel to this is war, where we know where we want to be at the end. Here, we know where we want to be by 2050 in terms of CO² equivalents at least on climate change. So, we can’t just let things emerge and maybe get us there; we actually have to put in plans to achieve that.
I’m going to add people into this. There are three things that are going to be incredibly available, and yet here we are, trying to find solutions which squeeze people out of the current business system, and we’re relying on the energy supply industry to make changes that will encourage solar income, whether it comes from wind, wave or solar directly. We’re relying on them to solve the problem for us so that we can carry on behaving in the way that we’ve always behaved. We’re subcontracting the problem away from ourselves.
And what we see is factories – and I’m going to encourage you to take up some conversation – we’re seeing businesses and factories integrating ever more variables. I think you’ll see a presentation from Marks & Spencer’s later; have a read of the paper that is the re-launch of Plan A. Marks & Spencer’s, as an example, entered into an interesting relationship with Oxfam, and I think that’s an interesting example of where we might be heading in the future. I’m really looking forward to that presentation, because where are we going to take that next?
We’re going to see a company like Vitsoe – could you put your hand up Mark, I can see you there? Mark Adams is the Head of Vitsoe, and you may not have heard of it, but it’s a wonderful company and it shares with Martin Baker, a number of characteristics. One, it makes things inside the M25. Manufacturing is not dead, it’s just very, very polite and quiet. Two, it’s got an extremely long vision about what it wants to achieve, and a focus on customer and customer and customer in the long term, which drives the way that that business works.
At Martin Baker, customer feedback is a letter at least once a week saying, 'Thank you for saving my life.' They all go on the notice board. I’ve never, ever gone past the notice board to see any financial figures on it. That reminds you about why you’re there, and you can see that passion in certain companies, and those companies seem to also be the ones that are leading the way in reconsidering the whole of the business model. They’re taking that passion, that long-term focus, and they’re saying, 'Hey, how do we fold in the concerns that we have for other stakeholders, into our business model?'
I’m very interested in the Marks & Spencer’s experiment on this; let’s see where it takes us. But I’d like to finish by suggesting that I haven’t shown you pictures of tornados, there’s enough doom and gloom out there; we can enter into that debate should you wish. But the thing that most people share and understand is that we are limited in our resources. It is difficult to access water, energy, oil, steel, iron or whatever it is that you require to run your business, they’re going to become more and more scarce. And if you want your business to be resilient as well as your business to be efficient, you’re going to have to find ways of dealing with those things into the future.
And to slightly tweak your business model to say, 'Hey, this is how we’ve always done it, and if we’re just a little bit more efficient in the way that we use energy in our building, everything will be fine...' – I suggest is a dangerous strategy. It is one that might be employed at the moment by the majority of companies. It isn’t one that I suggest is going to keep you healthy for a very, very long time into the future.
Most businesses, maybe not all, maybe there’s a random element to it; but most businesses seem to have started with a coherent idea, and you sit there going, 'Ooh, our potential customers have this frustration, and if I did this and this and this, I could satisfy that.' And you build a business out of it that’s completely coherent for its time and place.
But the time and place is changing, and the future business models need to be designed. You need to design them before people do it to you, and that’s why the link back to the theme about rethinking the way we do business, must be a deliberate design activity. So, I’ll leave you with a question; when are you going to start redesigning your business model, before your competitors, or after? Thank you.