Possibility of Eco-Business -...

Possibility of Eco-Business

Workshop on Recycling, MJIIYTMay, 2013

Nobuo Nakamura(CEO)

　　 a-Socca, Inc.

Workshop on Recycling, ‘Possibility of Eco-Business’

a-Socca, Inc., May, 2013 2

!  Outline

" Introduction of Eco-Business

" Cases of existing Eco-Business in Japan

" Features of Eco-business

" Summary



!  Outline




" Summary


4

!  Increasing importance of Eco-Business

‘Eco’ has become a key to achieve a competitive advantage in business. So now running an environmentally conscious business has become vital.

Aggravation of global Environmental Issues

To heighten Stakeholders’ expectation to maintain the

environmental consciousnessIncreasing of global competition

a-Socca, Inc., May, 2013

Rise of emerging countries

Actually a little incidence of success in both environmental consciousness and business

But



The general definition is; “Eco-industries... may be described as including firms producing goods and services capable of measuring, preventing, limiting or correcting environmental damage such as the pollution of water, air, soil, as well as waste and noise-related problems. They include clean technologies where pollution and raw material use is being minimised...”. (European Commission, 1994)

!  Definition of ‘Eco-Business’

Directly or indirectly reduces environmental loads on society and ,at the same time, profits the stakeholders economically.

In our research, we define ‘eco-business’ as business that


!  Classification of environment industry products" Environmental equipment

# waste-water treatment equipment; # waste management and recycling equipment; # air pollution control equipment; # noise reduction equipment; # monitoring instruments, scientific, research and laboratory equipment; # natural resource conservation/protection and urban amenities.

" Environmental services # waste-water operations; # waste handling and facility operations; # air pollution control operations; # noise reduction operations # analytical, monitoring and related conservation and protection services; # technical and engineering services; # environmental research and development; # environmental training and education; # accounting and legal services; # consulting services; # other environmental business services; # other: eco-tourism.


‘The Environmental Goods & Services Industry (OECD, 1999)’



!  Market size of ‘eco-business’ in Japan

2020 2006

Market　 120 Trillion Yen 70 Trillion Yen

Employees　 2.8 Million 1.4 Million

Ref.「緑の経済と社会の変革」による市場規模・雇用規模 (in Japanese) 　　Ministry of Environment’s HP, http://www.env.go.jp/guide/info/gnd/

# 120 Trillion Yen at 2020 about 23 % of GDP of Japan at 2008

# 50 Trillion Yen is difference between the size at 2006 and at 2020 about tripple of Toyota’s sale, 19 Trillion Yen, at 2012



!  Outline

" Introduction; what is Eco-Business



" Summary


!  Cases of waste management business

9 a-Socca, Inc. May, 2013

Case 1; lnk cartridge reuse business; Ecorica Case 2; EV Battery service; Better Place Case 3; Ecologicom ; Brix Co. Case 4; EcoBiz Belt; EcoBiz CO. LTD. Case 5; Leasing fluorescent lamps; Panasonic


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!  Case 1 Ink cartridge reuse; Ecorica Inc. [Outline]

【Outline】 ‘Ecorica’ collects containers of used ink cartridge from consumers by setting ‘Ecorica collection box’ at volume home electrics retailers. And then, the company cleans them up, fills them with compatible ink, and releases recycled ink cartridges into the market for its own brand products.

a-Socca, Inc.,　May, 2013

Ecorica Retailers ConsumersContainers of used ink cartridge Containers of used ink cartridge

Recycled ink cartridges Recycled ink cartridges

(Source)http://ecorica.jp/

(source)http://ecorica.jp/Ink cartridges from

printer manufactures

Printer manufactures


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!  Case 1 Ink cartridge reuse; Ecorica Inc. 【Features】

$ Printer manufactures earn their profit from not by selling printers but by selling Ink cartridges. So Ink cartridges have relatively high profit margin on sale.

$ The inventor thought that he can supply ink cartridges at cheaper price by reusing containers of used ink cartridge and reusing them is more environment friendly.

Background of the idea generation

Points of innovation

$ By setting collection boxes at volume electronics retailers and offices, the company can collect a stable amount of containers of used ink cartridges and produce and sell a stable amount of recycled ink cartridges.

$ At first almost all retailers did not sell Ecorica’s recycled ink cartridges or sell them in the different way as ink cartridges from printer manufactures. But a long tough negotiation with volume electrics retailers made them sell Ecorica’s recycled ink cartridges in the same way as ink cartridges from printer manufactures.



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!  Case 2 EV Battery service ; Better Place 【Outline】

【Outline】　The cost of the battery consists most of EV’s price. Better Place provides users EVs whose batteries can be exchanged. The company possesses these batteries and charges users for their amount of electricity consumption. The company tries to accelerate diffusion of EVs by reducing EV owners’ initial investment. At first this company tried to introduce this system to Taxi in Japan.


Car Manufactures

EV supply

Consumer Guide

Purchase

Electric power company

Mileage charge

Charge order

Short traveling Long

traveling

Electricity supply

contract

Electricity supply

Regenerated energy

Off peak Better Place

Exchange system

Charging spot Battery exchange station

EV

Battery Operation Center


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!  Case 2 EV battery service; Better Place 【Features】

$ Because of the depletion of energy resource and the increase in global warming, the inventor was sure that EV would be the leading part of a next-generation transportation.

$ The inventor thought that most important problems which interrupted diffusion of EVs are high battery price and few charging spots.



$ Suitability with the existing social system is very important to launch new business in the developed countries. But Better Place tried to create new social infrastructure for the future better place.



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!  Case 3 Ecologicom ; Brix Co. 【Outline】

【Outline】　The business is operational management of website which matches “ shippers looking for trucks” with “carriers looking for burdens”. Transportation companies payback 10% of the shipping charge to Ecologicom.


Transportation transaction formationMembers of owner companies

Direct transportation contract

Transportation information registration

Members of Transportation companies

Empty car registration

eg. manufactures, retailer

Ecologicom auction


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!  Case 3 Ecologicom ; Brix Co. 【Features】

$ The inventor realized that more than 60% of return transportation is empty. $ And Most of the transportation companies is too small to manage the return

transportation.



$ The most important innovation of this business is targeting small and medium-sized transportation companies which don’t have the operation system to make return transportation efficient and utilizing the empty trucks, which earn no profit but should return.



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!  Case 4 EcoBiz Belt; EcoBiz CO. LTD. 【Outline】

【Outline】　This company sales EcoBIz Belt, which is reusable substitute for stretch film. During the distribution, huge of stretch file are used and disposed every transportation. Using EcoBiz Belt make the cost for stretch film, the labor cost for setting up stretch film, and the cost for disposal of used stretch film decrease.


Customers

Distribution Center

Whole salerAEcoBiz

Leasing Company

Belt Manufacture

Factory

Distribution Center

Whole salerB

Whole salerC

RetailerA

RetailerB

Whole salerD

Belt

Leasing Contract

EcoBiz Belt

Texture Manufacture

Flow of products or serviceFlow of used EcoBiz BeltFlow of money Leasing Contract

Used EcoBiz Belt

Fee Fee

Fee

Texture for B

elt

Recycler


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!  Case 4 Ecologicom ; Brix Co. 【Features】

$ The inventor worked for setting up the stretch film in his university days. He thought that this way of wrapping is waste of time and materials.

$ And then he tried to solve this problem.



$ There are many company in the distribution system, even for the one product. For the first contract, the inventor negotiate toughly and long time with almost all stakeholders of distribution. He should change the system of distribution of his customer for introducing EcoBiz Belt.

$ And a leasing contract make this company be able to forecast the amount of EcoBiz Belt ordered in future. So he can make a efficient EcoBiz Belt production plan easily.



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!  Case 5 Leasing fluorescent lamps; Panasonic 【Outline】


参照：http://panasonic.co.jp/ism/akari/html/01.html

【Outline】 In this business, Panasonic stopped selling the lumps, and began to sell the service of lighting. He rents lumps to the customers, and sets up them. After using lamp, he collects them, sets new one up, and sends used lamps to the proper recycler. 　

PanasonicCustomers Rent

Collect



!  Outline




" Summary


!  Difficulties of eco-business

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Point 2;Non-recognition of environmental value in the market

$ Environmental value is not perceived enough as monetary value.

Point 3;Incompatibility with existing economic system

$ Existing economic system is based on market principles

Point 5; Absence of experts

$ Firms seldom has experts in both business and environmental issues.


Point 1; Existence of externality

$ Eco-business provides value to various stakeholder.

$ Even restructuring business model is difficult, because firms do not have enough such experience.

Point 4;Necessity of restructuring business model


!  Six features of Eco-Business

1.  6th,7th types of business model innovation

2.  Divergent and Convergent process of eco-business planning

3.  Niche strategy

4.  Variety of environmental value

5.  Elimination of barriers to consumption

6.  Eighteen rules for generating eco-business




!  Features of Eco-Business　(1)6th, 7th types of innovation

# Product innovation # Process innovation # Market innovation # Supply chain innovation # Organization innovation

Five types of innovation by Schumpeter

#  Lifecycle innovation # Business Area innovation （Co-creation，Sympathizing）

��


# Apple’s revolution, ‘iTune’, ‘iPod’(2003） # A 2008 IBM survey reported that over 50% of executives believe business model

innovation will become even more important for success than product or service innovation. 　

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New business models often look unattractive to internal and external stakeholders

Very little formal study has been done into the dynamics and processes of business model development.

Business model innovation is still difficult

!  Difficulty because of business model innovation


Ref. Mark W. Johnson, Clayton M. Christensen, Henning Kagermann, ‘Reinventing Your Business Model’, Harvard Business Review, December, 2008

Incompatibility lack of experience

Business model innovation is becoming more important

but


Just ideas

!  Features of Eco-Business (2) Divergent and Convergent process


Core idea

Business Plan

To improve the feasibility, the core concepts and business models are revised again and again.

Eco-business model (prototype)

# Customer# Products / services# Way of production# Revenue model# Place# Promotion

Generation of ideas Generation of Eco-business idea

Making a business plan

Superior’s approval

Generation of business models

Eco-business idea

To generate an eco-business idea, various ideas are combined



!  Features of Eco-Business (3)Niche strategy

Diffusion of innovations, new products

Market share

Early AdoptersInnovators Early Majority

Late Majority Laggards

To find and to approach the segments, who recognize environmental value, is very important.


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!  Features of Eco-Business (4)variety of environmental value


Altruistic satisfaction (Public interest)

Compliance

Cost reduction

Risk reduction

Psychic satisfaction

Branding

examples

1％ for the Planet, Patagonia 1L for 10L, Volvic

Prius; Hybrid car Ado-chopsticks（Eco-advertising）

Ecotourism

Bio-plastic Recycling rare metal

ESCO, Recycle, Energy saving equipment

Waste management, air-pollution, water-pollution control

Easy

to m

anet

ize


Porter’s generic strategy

!  Features of Eco-Business (5)Elimination of barriers

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Market segmentation

Price

Environmental value

Inconvenience

Risk

Barrier Value

a-Socca, Inc. May, 2013

Functional value

Cost Leadership strategy

Segmentation Strategy

Differentiation Strategy

In many eco-business, the effort to eliminate barriers to the consumption of eco-business can be found


!  Features of Eco-Business (6)Eighteen rules 1

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Market segmentation

Price

Environmental value

Inconvenience

Risk

Barrier Value

a-Socca, Inc. May, 2013

Functional value

3.Rules for lowering barrier 1.Rules for increasing environmental value

2.Rules for adding other function

4. Rules for Changing market segment


Rule 1; Use of lower environmental loads materials (in production) Rule 2; Introduction of lower environmental loads process Rule 3; Expansion of product’s life Rule 4; Enhancement of product’s environmental loads efficiency Rule 5; Change to lower environmental loads utilities Rule 6; Managing product usage and environmental loads Rule 7; Managing life cycle of products Rule 8; Use one more time

Rule 9; Receiving contracts for environmental loads Rule 10; Function sale Rule 11; Developing new service with knowledge

Rule 12; Making environmental loads visible Rule 13; Sale the right to use; e.g. sharing and rental Rule 14; Change revenue stream; e.g. lease, servicizing, and ESCO Rule 15; Expansion of the business scale Rule 16; Utilizing knowledge or technology in other fields Rule 17; Financial support or charge from other stakeholders

Rule 18; Change target segment of customers

" Increasing environmental value

" Adding other value

" Changing market segment

" Lowering barrier

!  Features of Eco-Business (6)Eighteen rules 2




!  Outline


" Examples of existing Eco-Business


" Summary


!  Summary

31 a-Socca, Inc. May, 2013

! Eco-business is becoming more important not only from the viewpoint of environmental issues but from the viewpoint of achieving a competitive advantage in business.

! But unfortunately, to establish eco-business is difficult because of externality, necessity of restructuring business model, and absence of experts in general.

! To establish eco-business, we should know well and utilize the features of eco-business, such as 6th, 7th types of business model innovation, Niche strategy, Variety of environmental value, Eighteen rules for generating eco-business.

! But there is huge possibility of eco-business in the view point of economic growth and environmental conscious society.

Thank You for Listening･･･

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