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Topic: Is sustainability a key driver for change in today’s economy? Explain the link between sustainable development and business innovation. Discuss your position through sustainable innovation strategies. Provide relevant examples from your country of origin and/or Australia. 

 • Sempels, C & Hoffmann J 2013, ‘Chapter 6’ in Sustainable Innovation Strategy: Creating Value in a World of Finite Resources, Palgrave Macmillan. https://ebookcentral.proquest.com/lib/cdu/detail.action?docID=1571862. 

 

Sempels, C & Hoffmann J 2013, ‘Chapter 5’ in Sustainable Innovation Strategy: Creating Value in a World of Finite Resources, Palgrave Macmillan. https://ebookcentral.proquest.com/lib/cdu/detail.action?docID=1571862.

Jørgensen, S & Pedersen, L, J, T 2018, ‘Service-logic rather than product-logic’ In RESTART Sustainable Business Model Innovation, Springer. https://cdu-edu-primo.hosted.exlibrisgroup.com/permalink/f/7r169d/TN_cdi_oapen_doabooks_43806

 

Sempels, C & Hoffmann J 2013, ‘Chapter 4’ in Sustainable Innovation Strategy: Creating Value in a World of Finite Resources, Palgrave Macmillan. https://ebookcentral.proquest.com/lib/cdu/detail.action?docID=1571862.
Ellen MacArthur Foundation 2021, Publications, https://www.ellenmacarthurfoundation.org/publications

Additional suggested reading:

Jørgensen, S & Pedersen, L, J, T 2018, ‘The circular rather than the linear economy’. In RESTART Sustainable Business Model Innovation, Springer. https://cdu-eduprimo.hosted.exlibrisgroup.com/permalink/f/7r169d/TN_cdi_oapen_doabooks_43806

 

Sempels, C & Hoffmann J 2013, ‘Chapter 3’ in Sustainable Innovation Strategy: Creating Value in a World of Finite Resources, Palgrave Macmillan. https://ebookcentral.proquest.com/lib/cdu/detail.action?docID=1571862.

Additional suggested reading:

Apple Inc 2021, Environmental Progress Report, https://www.apple.com/environment/pdf/Apple_Environmental_Progress_Report_2021.pdf
Braungart, M & McDonough, B 2004, ‘Eco-effective design of products and production systems. Eight theses on methodological and institutional prerequisites’, In Eco-Efficiency and Beyond: Towards the Sustainable Enterprise, Taylor & Francis Group. http://ebookcentral.proquest.com/lib/cdu/detail.action?docID=1741634
Global Regulatory Considerations for Green Packaging, https://www.packaginglaw.com/special-focus/global-regulatory-considerations-greenpackaging

 • Sempels, C & Hoffmann J 2013, ‘Chapter 2’ in Sustainable Innovation Strategy: Creating Value in a World of Finite Resources, Palgrave Macmillan. https://ebookcentral.proquest.com/lib/cdu/detail.action?docID=1571862.Additional suggested reading:

Jørgensen, S & Pedersen, L, J, T 2018, ‘RESTART Sustainable Business Model Innovation’, In RESTART Sustainable Business Model Innovation, Springer. https://cdu-edu-primo.hosted.exlibrisgroup.com/permalink/f/7r169d/TN_cdi_oapen_doabooks_43806

 

Bocken, N, M, P, Short, S, W, Rana, P & Evans, S 2014, ‘A literature and practice review to develop sustainable business model archetypes’, Journal of Cleaner Production, 65, 42-56. https://www.sciencedirect.com/science/article/pii/S0959652613008032

Asia Pacific College of Business and Law Page 1 of 1

Assessment Item 3
ENT202 Innovation: Strategies and Systems

Assessment Topic: Written Assessment

Due Date: Week 12, Friday
Length/Size/Amount: 1500 – 2000 words, including references

Semester Value: 50%

Learning Outcomes: 1, 2, 3, 4

Preparation
Examine the material covered during lectures and tutorials, especially from the second half of the
semester. Additionally, read relevant journal articles and other credible sources related to the topics
covered.

Task Detail
Prescribed format: Word document, numbered

Prescribed font: Arial, 10pt

Prescribed spacing: 1.5

Topic: Is sustainability a key driver for change in today’s economy?

Explain the link between sustainable development and business innovation. Discuss your position
through sustainable innovation strategies. Provide relevant examples from your country of origin
and/or Australia.

This is a classical essay assignment. A good essay will demonstrate original independent thinking
grounded in the relevant theory.

In the introduction identify your contention related to the question and issues to be discussed. Try to
express yourself with clarity and precision.

In the body of the essay, analyse the issues/arguments identified in the introduction. Engage with the
relevant literature and provide appropriate examples. Make sure your references are credible, recent,
and set out correctly using the CDU Harvard referencing style. Ideas and words of others must be
acknowledged, as CDU exercises a strict policy when it comes to plagiarism.

In conclusion, summarise the relevant points and as much as possible make your position in relation to
the topic evident.

Make sure that sentences are well-constructed with a logical flow of connected ideas within and
between each paragraph. Explain the information concisely and carefully proof-read your essay before
you submit it.

Slide 1

ENT202 / Innovation: Strategies and Systems

Week 7: Sustainable business model

College of Business and Law

Karmen Lužar

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Slide 2

Recognition of Traditional owners
and Indigenous cultures

Charles Darwin University acknowledges the traditional
custodians of the land on which we’re meeting and pays
respect to Elders both past and present and extends that
respect to all Aboriginal and Torres Strait Islander people.

2

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Slide 3

3

Business model

• 1940s origin of the concept ‘business model’

• Opens new perspectives for innovation

• Examples of business model innovations: low-cost
aviation, free press, social business, car-sharing,
collaborative platforms

• Different reasons to innovate through a business model,
e.g. new technology outdating current value-capture
methods, redefinition of an organisation’s mission, etc. –
sustainable development plays a prominent role!

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Slide 4

4

What is a business model?

• The business model describes the principles according to
which an organisation creates, distributes and captures
value.

• 3 key building blocks:

• The value proposition

• The value architecture

• The economic equation

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Slide 5

5

Business model canvas (BMC)

Osterwalder and Pigneur, 2005

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Slide 6

6

Value proposition

• It is the reason why a customer chooses one company
over another to solve a problem or satisfy a need.

• Benefits obtained in comparison with the consented
sacrifices (client’s perception of value).

• Communication to stimulate a favorable evaluation is
central, especially when a change of consumer behavior is
demanded (e.g. carpooling).

• Diverse value drivers: Design, performance,
innovativeness, service, accessibility, low cost, etc.

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Slide 7

7

Target market

• A value proposition is strictly related to the potential customers
= target market.

• Business model takes a broader view to understand the sources
of value creation, distribution and capture:
• Mass market: a single value proposition for “all”.

• A segmented market (various segments that vary in their needs, their
expectations or their behaviors): a unique value proposition for one
or more segments or niches having specific needs or problems to be
solved – customization.

• Multiple markets: value for involved specific markets, e.g. real-
estate: buyer and seller.

• Diversification: a) meeting different, but interrelated needs or
b) aiming to address completely disconnected markets.

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Slide 8

8

Distribution channels

• To reach its target market via distribution and
communication channels.

• Direct or indirect channels (internal or external).

• Can be a central element of the competitive advantage or
differentiation.

• Distribution channels will concern all the touchpoints in a
client’s “life cycle” with a company: awareness, evaluation,
purchase, delivery and after sales. – Internet a ‘game
changer’.

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Slide 9

9

Customer relationship
management
• Defines the kind of connection a firm wishes to establish

with its customers:

• Personal assistance: based on the human interaction
between the company’s staff and customers – can
powerfully shape the customer experience.

• Self-service: customer manages the interface, while the
company provides the means and tools for self-servicing.

• Automated relations: founded on the exploitation and
analysis of patterns of customer data.

• Community relations: exchange within a community of
users.

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Slide 10

10

Key resources

• Configuring a value chain and allocating resources are at
the core of the strategy activity.

• The resources of a company are vital in building its
competitive advantage.

• The key strategic resources of a company include:

• Human resources

• Intangible resources

• Physical resources

• Financial resources

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Slide 11

11

Key activities

• A value chain organises and structures the various
company activities – identifying those that most contribute
to the company competitiveness.

• Depend on the nature of the company.

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Slide 12

12

Key partnerships

• Managing strategic links and interactions with different
actors in a market is central to enable the company to
advance toward its objectives.

• Potentially many and diverse – motivation varies (from
traditional customer–supplier relation to interest in new
resources or activities, pool expensive infrastructures,
obtain economies of scale or reduce risks).

• Example: EV Ready

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Slide 13

13

Cost structure

• The choice of key activities, key resources, distribution
channels, ways of managing customer relationships and
partnership management will directly affect the cost
structure depending on their scale and configuration.

• Cost-structure assessment can be an innovation source
(e.g. Michelin Fleet Solutions).

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Slide 14

14

Revenue streams

• A variety of mechanisms to build revenue streams:

• Usage fee

• Subscription fee

• Lending/renting/leasing

• Licensing

• Brokerage fees

• Success fees

• Advertising

• Combinations possible (e.g. Sportify).

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Slide 15

15

Triple bottom line

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Slide 16

16

Sustainability and BMC

• Sustainable business model canvas (SBMC) builds on the
traditional model, adding blocks to address costs and
benefits for society and environment.

• 13 blocks are eminently related to each other, any
modification in one block induces effects on others.

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Slide 17

17

Sustainable BMC

Adapted from www.strategyzer.com/canvas

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Slide 18

18

Cost for society and environment

• Any relevant negative impact toward its stakeholders and
the environment.

• Examples include:

• Biodiversity damages

• GHG emissions

• Perturbations to its neighboring communities

• Negative impact on health

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Slide 19

19

Shared costs

• Some of the social and environmental negative impacts
can represent a financial burden for the company.

• A company is actually destroying value creation for itself
(affecting its balance sheet) and its stakeholders.

• Examples include:

• Energy consumption

• Lack of projects’ social acceptance causing delays (opportunity
costs)

• Expensive raw material made up of finite resources (e.g. rare
earth materials)

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20

Benefits for society and
environment
• By providing the society with social and environmental

benefits through its operations, the company increases its
social legitimacy and influence.

• A lower footprint than the sector’s standards.

• Examples include:

• The contribution to the restoration of the biodiversity

• Positive impact on health of local population

• Stimulation of local employment

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Slide 21

21

Shared benefits

• Economic interests of a company align with stakeholders’
expectations and future generations’ needs – taking into
account social and environmental issues.

• Examples include:

• Saving costs by reducing the amount of raw materials used in
the operation

• Relying on free ecological services as an activity contributing
to the delivery of the value proposition

• Increasing the spaces of differentiation and contributing to
enhance a positive image

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Slide 22

22

Bibliography

• Sempels, C & Hoffmann J 2013, ‘Chapter 2’ in Sustainable
Innovation Strategy: Creating Value in a World of Finite
Resources, Palgrave Macmillan.

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Slide 23

23

Next week…

• Eco-efficiency and eco-design

• Tutorial reading for today (read before the tutorial):
Bocken, N, M, P, Short, S, W, Rana, P & Evans, S 2014, ‘A
literature and practice review to develop sustainable
business model archetypes’, Journal of Cleaner Production,
65:42–56.

• Tutorial reading for week 8: None.

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Slide 1

ENT202 / Innovation: Strategies and Systems

Week 10: From Products to Use-Oriented Services

College of Business and Law

Karmen Lužar

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Slide 2

Recognition of Traditional owners
and Indigenous cultures

Charles Darwin University acknowledges the traditional
custodians of the land on which we’re meeting and pays
respect to Elders both past and present and extends that
respect to all Aboriginal and Torres Strait Islander people.

2

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Slide 3

3

Introduction

• Scarce resources – effectiveness required.

• In Western societies planned obsolescence still
encouraged.

• Consumers thirsty for innovation and change?

• Circular economy has limitations.

• A shift to a service model.

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Slide 4

4

Transition to use-oriented
services
• Use-oriented services aim to redefine the relation with the

tangible goods that surround us by making them available
without transfer of ownership, and by invoicing their use.

• Examples: hiring, leasing, pooling, self-service bicycles,
public transport, etc.

• This transition is potentially very important on economic,
sociological, anthropological and even philosophical level.

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Slide 5

5

Economic point of view

• Modified relation with the object and to time.

• Recurring revenue throughout its life – the profitability
generated by a single good.

• Goods developed to be robust and easy to maintain or
repair.

• Eco-design encouraged – longevity.

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6

Sociological point of view

• A good shared among several users – increased intensity
of use.

• The service rendered for the same amount of physical
material in use.

• Reduce the demand for physical material while still
providing a service.

• A company keeps the control of the material – the
circularity principle is simplified.

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7

Environmental point of view

• The economic and environmental benefits of a transition
to a use-oriented service are not automatic.

• American and European economies have seen a
continuous growth in the service sector during the 20th
century, without any reduction in their environmental
impact.

• To reap environmental benefits along with economic
benefits, the substitution of sales of the product with the
provision of these same products in a service system
presupposes a reliance on principles of eco-efficiency and
circularity.

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8

Example

• Added-value and potentials for innovation.

• Example: SFpark – collects and distributes real-time
information about where parking is available through a
phone application so drivers can quickly find free spaces.

• Primary benefit: reduction of time spent looking for a
parking space.

• Associated benefits: less congestion, reduction of
pollution, time saving, faster public transit, more safety for
pedestrians and bicyclists. -> better quality of life.

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9

Customer readiness – B2B

• Beyond the simple question of “make or buy”.

• The relationship to ownership is less emotional.

• Use-oriented services also offer many advantages
appreciated by companies, e.g. guarantee for a quick
management of any service disruption.

• Suppliers are responsible for piloting and optimising
maintenance costs, as well as the management of the
product at the end of its lifetime.

• Payment can be based on the equipment’s effective use.

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10

Michelin example

• The traditional business model of a tire manufacturer rests
on the sale of a product.

• A new business model for professional fleet operators; an
outsourced management service of the fleet’s tires, based
on the provision of tires remaining the ownership of
Michelin and invoiced on the basis of distance travelled.

• The customer benefits include: elimination of hidden costs
related to internal management, binding of the cost to the
volume of activities, improved productivity of the fleet,
improved safety of drivers and goods, fuel savings
enabled, reduction of CO2 emissions.

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11

Customer readiness – B2C

• The service presupposes a renouncement of ownership. –
Sacrifice?

• Ownership has an extrinsic and intrinsic value.

• The relation to ownership has evolved in advanced
economies in recent years, especially among younger
generations privileging access and collaboration to
ownership.

• Example: Airbnb

• Positive social spin-offs by promoting solidarity and
enhancing the social fabric.

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12

Clothing/footware example

• Buying second-hand clothes has long been around.

• However, online platforms have enabled physical barriers
to be overcome to connect people and enact new offers.

• Examples: buying/swapping FB pages, eBay, Swapstyle,
Thredup, Refashioner, Bag Borrow or Steal, etc.

• Second-hand market is still linear flow of materials.

• Upgrade: formal wear rentals as CE model, ski hire, skates,
golf shoes, bowling shoes hire

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13

Acceptability of use-oriented
services
• These services are an innovation and as such, their

adoption depends on variables identified by Everett
Rogers:
• the services’ relative advantage over competing solutions,

• their complexity,

• their compatibility with established or usual practices or
possessed equipment,

• the observability of their benefits or characteristics, or

• the perceived risk associated with the innovation.

• User-specific context: integration rather than invasion.

• Evolution of lifestyles privileging the here and now.

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14

Acceptability of use-oriented
services cont.
• Additional motivations include psychological freedom,

flexibility and variety of choice, absence of financial and
nonfinancial costs related to the possession (cleaning and
maintenance, insurance and so on), gain of space and
access to material of a better quality for a specific use.

• Factors conditioning acceptability:

1. Characteristics specific to the product

2. Characteristics specific to the service offer

3. Characteristics specific to the consumer

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15

The Internet of objects

• An innovation supporting the deployment of use-oriented
services.

• Allows manufacturers to monitor and control the use of
products and therefore control the market while
optimising the system.

• 3 key elements of the Industrial Internet:

• Intelligent machines

• Advanced analytics

• People at work

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16

Actors and partnerships

• Use-oriented services may be managed by a single
company or a network.

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17

Impact on the business model

• Use-oriented service demands a complete reconfiguration
of the business model.

• Implementation of B2C offer is generally more complex
than in a B2B setting.

• Why change?

• A new value proposition for a specific market.

• A mandatory product redesign.

• An entirely revisited value chain.

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Slide 18

18

Impact on the supply chain
and distribution
• Identify the actors who will take part in the service value

chain.

• Strongly atomised nature of the market will condition
logistic choices. Configuration of these flows ban be:

• A direct relationship between the company and the final
customer.

• The retailer stays in the value chain, but with a radical
change of role.

• Selecting the best option requires developing a business
case analyzing the organizational, technical and financial
feasibility of each option.

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Slide 19

19

Impact on the supply chain
and distribution cont.
• Redefining the role of the actors in the value chain.

• The role of the intermediary redefined as well.

• The configuration of such value chain has impact on the
other business blocks, e.g. customer relations.

• Importance of staff training and marketing.

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Slide 20

20

The economic model

• The cost structure results from the whole of the activities
to deploy and the resources to be mobilised.

• The main difference between a sales model and a service
or leasing scheme lies in the revenue streams and the
level of the cash flow.

• The manufacturer is no longer remunerated by asset sales,
but by a monthly rental subscription.

• The price must be attractive to prospective clients and not
exceed the price of a new, lower quality product or a good
quality second-hand product.

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Slide 21

21

The sustainability impact

• Use-oriented services also have:

• Costs for society and environment, e.g. sourcing raw
materials and negative environmental spin-offs (e.g.
manufacturing), etc.

• Shared costs, e.g. energy and transportation costs, waste,
etc.

• Benefits for society and environment, e.g. development of
local activities, recycling, etc.

• Shared benefits, e.g. positive financial returns, increased
added value of the value proposition and new areas of
differentiation, cost-saving through improved efficiency, etc.

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Slide 22

22

Developing economies

• Earth’s resources are finite – a constraint and an
opportunity.

• Use-based services provide access to individuals not able
to afford the cost of ownership. -> The rise of ‘social’
business models.

• However, cognitive barriers related to transition from
ownership to usership.

• The role of the group vs the role of the individual.

• Collaborative web platforms and online social networks
are powerful drivers of change, e.g. Sina Weibo. – United
States and Europe are no longer perceived as role models.

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Slide 23

23

Bibliography

• Sempels, C & Hoffmann J 2013, ‘Chapter 5’ in Sustainable
Innovation Strategy: Creating Value in a World of Finite
Resources, Palgrave Macmillan.

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Slide 1

ENT202 / Innovation: Strategies and Systems

Week 11: Result-Based Integrated Solutions

College of Business and Law

Karmen Lužar

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Slide 2

Recognition of Traditional owners
and Indigenous cultures

Charles Darwin University acknowledges the traditional
custodians of the land on which we’re meeting and pays
respect to Elders both past and present and extends that
respect to all Aboriginal and Torres Strait Islander people.

2

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Slide 3

3

Introduction

• Use-oriented services model not suitable in all contexts
(fast-moving consumer goods, commodities). E.g. water,
electricity, etc.

• However, in a context of scarce and expensive resources,
and growing regulations, the existing models are coming
under pressure.

• Reduction of energy/water consumption on a worldwide
base seems unrealistic given the strong demand from
emerging economies. However, it does make sense on
mature markets with low/no growth.

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Slide 4

4

Goods’ rendered service

• Physical goods are bought for the ‘service’ they provide.

• The product frames the formulation of the need and thus
limits its resolution to a sole perimeter.

• Considering the basic need or job to be done opens other
alternatives may exist to solve it besides the product
currently in use.

• Commercially, the difference is enormous (complexity
increases -> competitive advantage also). Value curve
rapture.

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Slide 5

5

Goods’ rendered service cont.

• A shift of focus away from the product towards functional
spheres – generic needs, e.g. mobility, health, education,
habitat, entertainment, etc.

• This strategy creates the conditions of a possible
decoupling between revenue growth, on the one hand,
and consumption of resources and energy, on the other
hand.

• Example: Koppert

• A true strategic rapture!

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Slide 6

6

Scope of activities

• Scope of activities is likely to change – diversification.

• Difficult to imagine that a water or energy supplier would
embrace such a strategic change by purely and simply
discarding a confirmed and competitive business model.

• Disruptive innovation is often carried by new
entrants/entrepreneurs or internal incubation space
within a company.

• This journey is often experimental.

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Slide 7

7

Catalyst for blue ocean strategies

• 2005 Blue Ocean Strategy by Kim and Mauborgne

• Two strategic spaces:

• Red oceans: current strategic space, with clearly defined
boundaries and fierce competition among companies to gain
market shares. Growth and profit prospects are limited,
innovation is primarily incremental.

• Blue oceans: new, unexploited strategic spaces, free from
competition, a particularly original value proposition to a
specific demand. Radical innovations from a red ocean.

• Value innovation – simultaneous pursuit of differentiation
and low cost.

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Slide 8

8

Catalyst for blue ocean strategies
cont.
• Despite the evidence that blue oceans are profitable, few

companies actually put it into practice. Reasons include:

• Companies are generally more inclined to add
functionalities than to remove low perceived valued
features.

• Such strategy is also riskier, and large groups are more
reticent to take risks compared to apparently less risky
continuous and incremental innovation.

• Blue ocean strategies taking longer to be developed.

• Inertia to change.

• Cognitive barriers, e.g. value leap.

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Slide 9

9

Defining a new value curve

Figure 1: Strategy canvas for two competing pesticides / Source: Sempels, C & Hoffmann J 2013

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Slide 10

10

Blue ocean strategy

• Aims to configure a new value curve:

• Which of the factors that the industry takes for granted
should be eliminated?

• Which factors should be reduced well below the industry’s
standard?

• Which factors should be raised well above the industry’s
standard?

• Which factors should be created that the industry has
never offered?

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Slide 11

11

Result-based integrated solution

Figure 2: Reconfiguration of the value curve by a result-based integrated solution / Source: Sempels, C & Hoffmann J 2013

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Slide 12

12

Contractual innovation

• The new value proposition required a commercial contract
= ‘service level agreement’.

• Service rate is the base for the evaluation and the
remuneration of the service.

• The service level agreement is a part of a service contract
where the level of a service in terms of nature, quality,
duration, performance, length and so on is formally
defined.

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Slide 13

13

Contractual innovation cont.

• Defining the target service level and the appropriate
invoicing unit requires:

1. A reliable indicator of the service level

2. Feasibility assessment and installation

3. Ongoing monitoring and reporting to control compliance
with the contract terms

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Slide 14

14

Reliable indicator

• E.g. Availability, performance, operation or any other
relevant attribute.

• Can define a target or a minimum service to be delivered.

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Slide 15

15

Feasibility assessment

• The target objectives must be specified, with a precise
description of the methods and schedule of
measurement.

• Feasibility study may be needed.

• Example: Anesco – Energy Saving Performance Contract

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Slide 16

16

Monitoring and reporting

• Piloting the service level supposes identifying and
potentially sanctioning any noncompliant behavior in the
execution of the contract.

• It is therefore necessary to set up methods and tools for
monitoring the service level, validating compliance with
the agreed contract terms and the flexibility authorised in
the execution of the service.

• Internet of objects.

• Potential for generating substantial energy savings.

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Slide 17

17

Other contract parameters

• Agreement must also anticipate possible issues and the
way they will be treated (incl. any penalties for non-
compliance and conditions for application and exclusion).

• The rights and duties of each party.

• Any performance beyond the service rate must entail
bonuses and shared division of benefits.

• Confidentiality and data access terms must be clearly
specified.

• Usual contractual conditions must obviously be integrated,
e.g. the competent jurisdiction in the event of litigation.

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Slide 18

18

Building the market

• Finding clients can be a challenge – typical for a rupture.

• Majority of customers prefer to “wait and see”.

• Adoption by some pioneers.

• Uncomfortable and risky situation for the service provider
– requires adequate innovation management.

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Slide 19

19

Co-creation with early adopters

• Blue ocean strategy value innovation frame by Midgley:

1. Identify the innovating customers’ potentially sensitive
to such an offer (early adopters). – potential partners,
co-creators.

2. First version of the service for customers to try, collects
their suggestions for improvements, and to adjust the
offer, test again and so on – faster development process.

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Slide 20

20

Building the perception for the
differentiating attributes
• Positioning to emphasise the differentiating attributes of

the offer compared to the classically considered
alternatives – see the strategy canvas competing factors.

• Emphasis should therefore be placed on those product
attributes that are linked to the service offer – results.

• This positioning aims to persuade early followers -> build
firm’s portfolio and address criticism.

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Slide 21

21

Management of criticism

• Opposing forces can be strong and may ruin innovation –
it is all about customer perception!

• The capacity to attract clients to a co-creation process or
to convince a reference client in the market to be an early
follower will strengthen arguments against any detractors.

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Slide 22

22

Impact on the business model

• The implementation of a new value proposition will thus
demand the definition of a new value chain, sustained by
new resources.

• A service is managed very differently than a tangible good.

• The appreciation of the service, and the resulting
satisfaction will be largely guided by the experience of the
service.

• The customer relations will generally become direct where
it was previously managed by distributers or sales reps.

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Slide 23

23

Impact on the business model
cont.
• The capacity to guarantee a result instead of the sale of the

means to reach that result will often require the
development of partnerships, a potential source of
innovation and value.

• Expert partnerships through an ‘open model’ -> the
transition from a value chain to a ‘value constellation’.

• Mass of niches to be satisfied according to particular needs

-> Customer relations become personalised direct relations.

• Value innovation seeks simultaneously to increase the
perceived value for the customer while minimising the costs.

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Slide 24

24

Emerging markets

• Emerging economies have a fast-growing environmental
footprint.

• Result-oriented services demand a solid institutional
frame and the respect of the legislation.

• Emerging markets are characterised by ‘institutional
voids’.

• Challenges vary, but a central challenge lies in the existing
infrastructures.

• Opportunity for the result-oriented services because the
financial limitations call for lean management.

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Slide 25

25

In conclusion

• Result-oriented services are a credible economic
alternative to businesses models built on logics of volume
that are increasingly under pressure.

• Result-oriented services are certainly not an easy, risk-free
path. Disruptive innovation comes at a price.

• Strategy is a reframing process. Which forces are shaping
the business landscape for the years to come?

• Sustainability is becoming a paramount of a new world.

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Slide 26

26

Bibliography

• Sempels, C & Hoffmann J 2013, ‘Chapter 6’ in Sustainable
Innovation Strategy: Creating Value in a World of Finite
Resources, Palgrave Macmillan.

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Slide 1

ENT202 / Innovation: Strategies and Systems

Week 9: Circular Economy

College of Business and Law

Karmen Lužar

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Slide 2

Recognition of Traditional owners
and Indigenous cultures

Charles Darwin University acknowledges the traditional
custodians of the land on which we’re meeting and pays
respect to Elders both past and present and extends that
respect to all Aboriginal and Torres Strait Islander people.

2

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Slide 3

3

Introduction

• The industrial revolution is characterised by a linear model of
production and consumption, following a “take-make-dispose”
pattern.

• Estimated 2,500 and 4,000 billion kg of waste is annually
discarded in the world.

• Australia generated 76 million tonnes of waste in 2018-19.
Over half of all waste was sent for recycling (38.5 million
tonnes), while 27% was sent to landfill for disposal (20.5 million
tonnes). Sectors generating the most waste were:
• Manufacturing: 12.8 million tonnes (16.9%)

• Construction: 12.7 million tonnes (16.8%)

• Households: 12.4 million tonnes (16.3%)

• Electricity, gas and water services: 10.9 million tonnes (14.4%)

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Slide 4

4

From linear to circular economy

LINEAR FLOW OF MATERIALS

CIRCULAR FLOW OF MATERIALS

Adapted from Samples, C & Hoffmann J 2013

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Slide 5

5

Circular economy (CE)

• A new industrial system that replaces the “end-of-life”
concept by restoration and regeneration by intention and
design.

• Shift toward the use of renewable sources of energy,
reduction or elimination of the use of toxic materials.

• By redesigning products, services or processes, a
waste/previously unvalorised resource is transformed into
a productive one that may be reused in closed-loop
systems.

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Slide 6

6

Circular economy (CE) cont.

• Traditionally based on the 3R principle:

• Reduce: Eco-efficiency is a precondition to any circular
approach.

• Reuse: maximum material can be preserved for the longest
possible time.

• Recycle: to revalorize maximum materials contained in
products.

• However, circular economy is much more than recycling as
we consider it traditionally. The concept of waste is indeed
eliminated, products being designed and optimized for a
cycle of disassembly and reuse.

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Slide 7

7

Cradle-to-cradle (C2C) philosophy

• Classifies all materials entering productive processes
around two metabolic logics:

• Biological metabolism

• Technical metabolism

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Slide 8

8

Biological metabolism

• Based on the ‘biological nutrient’ – material or a product is
designed from the beginning to reintegrate the biological
cycle, by being 100 percent biodegradable.

• Many applications, e.g. a natural cotton T-shirt,
biodegradable cell phone case, etc.

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Slide 9

9

Technical metabolism

• The industrial metabolic principle

• Materials that are not biodegradable are designed in such
a manner to be recovered and reintroduced in a closed
productive cycle, without any loss of quality.

• ≠ Recycling

• Demands a whole new product design upstream that
supports downstream disassembly and recuperation of
materials for their rehabilitation and further reuse.

• Needs to guard against any contamination or any mixture
of substances that would be irreversible.

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Slide 10

10

Sources of value creation

• Circular economy allows four clear-cut sources of value
creation, based on increased material and energy
productivity:

1. Power of the inner circle

2. Power of circling longer

3. Power of cascaded use

4. Power of pure circles

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Slide 11

11

Power of the inner circle

• Minimising material use compared to the linear
production system.

• Tighter the circle and the faster a product returns to use:

-> higher the potential savings on material, labor, energy
and capital embedded in the product and on the associated
externalities (such as GHG emissions, water, toxicity).

-> higher virgin material substitution effect, generating
another source of value.

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Slide 12

12

Power of circling longer

• Maximising the number of consecutive cycles (be it reuse,
remanufacturing or recycling) and/or the time in each
cycle.

• By keeping products, components and materials in use
longer in closed loop systems, the revenue generated by
unit of mobilised resources is increased, as is the
generated value.

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Slide 13

13

Power of cascaded use

• If the materials/components cannot be maintained in the
same economic cycle, an assessment should be made to
cascade the resources across different product categories,
by diversifying reuse across the value chain.

• Example: cotton clothing may be reused first as second-
hand apparel, then cross to the furniture industry as fiber-
fill in upholstery, the fiber-fill being later reused in stone
wool insulation for construction.

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Slide 14

14

Power of pure circles

• Uncontaminated material streams increase collection and
redistribution efficiency while maintaining quality,
particularly of technical materials, which, in turn, extends
product longevity and thus increases material productivity.

• Need for a new approach of designing goods and services
in a way that allows the quality of components across the
same economic cycles to be maintained, which facilitates
the disassembly processes.

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Slide 15

15

CE and innovation

• CE offers a broad space for innovation, related to:

• Product redesign

• Economic valorization of waste by a diversification of
activity

• The creation of partnerships

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Slide 16

16

Circularity in product innovation

• Redesigning a product to allow the recovery of its
components while maintaining the quality.

• Generally, cannot be made without a relatively major
reconfiguration of the company and its business model.

• Example: Xerox – organised a circular material flow of its
photocopiers, allowing it to recover 70–90 percent of the
components of old machines to reintroduce them into the
new generations of photocopiers.

• Sometimes it is possible though to apply the circularity
principle just to the perimeter of the product.

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Slide 17

17

Example: Green Kitchen

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Slide 18

18

Circularity in economic
valorisation of waste
• By-product to be revalorised, directly or indirectly.

• Direct valorisation: direct economic value from building a
value proposition for a new company activity (waste =
resource).

• Indirect valorisation: waste reduction = reduction of waste
treatment costs (profitability medium to long term).

• Example: a house entirely built out of urban waste.

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Slide 19

19

Circularity in local innovation
systems
• Application to a specific geographical area.

• ‘Eco-districts’ or ‘eco-parks’, e.g. Kalundborg in Denmark,
Tianjin in China, Masdar City in the UAE

• Technology can be a major facilitator for developing such
initiatives, e.g. SYNERGie.

• Alternative to parks: single entrepreneurial initiatives.

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Slide 20

20

Kalundborg, Denmark

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Slide 21

21

New economic activity

• SBMC help to structure the development and the strategic design.

• Value proposition = an optimised provision of qualified and quantified
organic materials on a given territory.

• Web platform as a contact and distribution channel (IT competences and
equipment constitute another key resource).

• Automatic management of customer relation/partner (personalised
direct relation for the establishment of the initial contacts).

• A second market: the material holders.

• A sales force necessary to launch the project.

• Key activities: the cartography of available materials, the development
of a platform and specific modules.

• Partnership with a logistic operator, Chambers of Commerce and
Environmental Government Agencies.

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Slide 22

22

The economic model

• Multiple options (business cases must be carried out to
establish the economically viable and profitable scenarios).

• Various scenarios depending on resources.

• Various methods to generate revenue streams, e.g. recovering
economically the exchanged material, collecting the monetary
flows and managing the remuneration of the actors, by taking a
fee for the intermediation OR a fixed monthly or annual
subscription, plus a variable fee depending on the amount
offered or demanded.

• Various price fixing of the material.

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Slide 23

23

Towards triple bottom line

• The profitability of such a project must be measured by
triple bottom line metrics, but also through an evaluation
of the project’s environmental and social surpluses, based
on relevant indicators.

• On a national level the main environmental economic
instruments are natural resource prices and
environmental fees; resources, energy and environmental
taxation; green trade policy; emissions trading; green
consumption; eco-compensation; green fiscal policy; and
green finance.

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Slide 24

24

CE industry report

• Ellen MacArthur Foundation (EMF)

• First CE report in 2012.

• The potential to transform several economic sectors, e.g.
buildings, mobiles and smart-phones, light commercial
vehicles and washing machines – global impact.

• A subset of the EU manufacturing sector could realise net
materials cost savings worth up to US 630 billion per
annum towards 2025—stimulating economic activity in
the areas of product development, remanufacturing, and
refurbishment.

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Slide 25

25

CE industry report cont.

• 2013, the EMF released its second report focusing on fast-
moving consumer goods that have a lower unit cost, are
bought more often and have a much shorter service life than
durable goods:
• Food and beverage

• Clothing and footwear

• Packaging

• The full value of these circular opportunities for fast-moving
consumer goods could be as much as USD 700 billion per
annum in material savings all net of materials used in the
reverse-cycle processes. Those materials savings would
represent about 20% of the materials input costs incurred by
the consumer goods industry.

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Slide 26

26

Triggers for change

1) Resource scarcity and tighter environmental standards;

2) Information technology enabling traceability in the supply
chain (e.g. connected devices); and

3) A shift in consumer behavior from ownership to access.

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Slide 27

27

New CE business models

• For the consumer goods industry:

• Volume aggregators, e.g. Asos

• Technology pioneers, e.g. Veolia

• Micro-marketers, e.g. Woolworths

• Urban-loop providers, e.g. The Plant

• Product-to-service converters, e.g. Patagonia

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Slide 28

28

EMF since…

• 2021: Universal circular economy policy goals: enabling
the transition to scale

• 2020: Upstream Innovation: a guide to packaging solutions

• 2020: The circular economy: a transformative Covid-19
recovery strategy

• 2019: Circular Economy in Cities

• 2017: The New Plastics Economy: Rethinking the future of
plastics & catalysing action

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Slide 29

29

To conclude

• Waste, by definition, is deprived of any value.

• Waste should be reconsidered as a resource, way beyond
mere recycling.

• Waste valorisation requires changes – in production and
consumption processes.

• Vision past immediate financial gain required.

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Slide 30

30

Bibliography

• Australian Bureau of Statistics 2020, Waste Account,
Australia, Experimental Estimates,
https://www.abs.gov.au/statistics/environment/environme
ntal-management/waste-account-australia-experimental-
estimates/latest-release

• Ellen MacArthur Foundation 2021, Publications,
https://www.ellenmacarthurfoundation.org/publications

• Sempels, C & Hoffmann J 2013, ‘Chapter 4’ in Sustainable
Innovation Strategy: Creating Value in a World of Finite
Resources, Palgrave Macmillan.

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Slide 31

31

Next week…

• Use-oriented Services

• Tutorial reading for today (read before the tutorial): None.

• Tutorial reading for week 10 (read before the tutorial):
None.

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Slide 1

ENT202 / Innovation: Strategies and Systems

Week 8: Eco-efficiency and Eco-design

College of Business and Law

Karmen Lužar

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Slide 2

Recognition of Traditional owners
and Indigenous cultures

Charles Darwin University acknowledges the traditional
custodians of the land on which we’re meeting and pays
respect to Elders both past and present and extends that
respect to all Aboriginal and Torres Strait Islander people.

2

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Slide 3

3

Example

• The water footprint of a 1 kg beef steak is approximately
15,000 liters.

• To produce a 1 kg beef steak, a cow eats more than one
ton of cereal and seven tons of grass, which will have
needed irrigation and rainwater, for around three years;
similarly, the cow will have drunk more than 24 m3 of
water, not counting the water needed for the
maintenance and cleaning of the cattle shed and
equipment.

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Slide 4

4

Eco-efficiency

• “Doing better with fewer resources.”

• Invites companies to reconsider their modes of production
in order to drastically reduce the resources needed to
achieve the same result, and the environmental impact to
cater for the Earth’s capacity for self-renewal.

• World Business Council for Sustainable Development:
“Effectiveness with which natural resources (mineral,
energy and biological) are used by the industrial systems
of production and consumption to meet human beings’
needs, at competitive prices, while reducing
environmental consequences.”

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Slide 5

5

Eco-efficiency cont.

• Applies to both products and services.

• Applies to the process and the whole of a company’s
activities.

• Application of eco-efficiency encourages a reconsideration
of the design of a product, a service or a process in order
to decrease its environmental impact.

• ISO and Ecolabel

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Slide 6

6

Example: Louis Vuitton

• COMMITMENT: 100% OF PRODUCTS TO COMPLY WITH AN
ECO-DESIGN PROCESS BY 2025

• Products made to last

• Upcycling: Be Mindful Collection

• Responsible sourcing of materials – 70% of materials are
already engaged in a certification process (2020)

• Regulate the use of chemicals in value chain

• Responsible packaging

• Partnership with Solar Impulse Foundation

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Slide 7

7

Eco-design

• Starts with the product conception and its intrinsic legitimacy
to avoid perception of being “another greenwash” company.

• The eco-design approach is based on several specifications. An
eco-designed product must:

• Be adapted to its use, form following function.

• Reduce the material intensity and minimize the use of
nonrenewable resources.

• Reduce the energy intensity.

• Minimise the toxic components or replace them whenever possible.

• Be reliable and useful, and designed to last.

• Be easy to maintain, repair and support recyclability.

• Minimise its environmental impact on the whole life cycle.

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Slide 8

8

Adaptability to product’s use

• The design should be at the service of the function of the
object in order to improve usability and use efficiency.

• Example: in 2011 Unilever introduced a new design for the
Vaseline Petroleum Jelly jar that reduced the amount of
plastic by three percent, saving about 113 tons of resin a
year. By using polypropylene, the pack has become more
recyclable, needing less energy to be produced, saving
13,000 MW a year. Consumers also appreciated the
change: the packs are more visually appealing and easier
to open.

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Slide 9

9

Reducing resources

• Example: Cognac brand Hennessy – Redesigned its bottle
to make it more environment friendly. They reduced its
glass content by 23 percent (making annual savings of 715
tons of glass), replaced the stopper, formerly made of tin,
with one made of beech from a sustainably managed
forest (Forest Stewardship Council (FSC) label) thus saving
30 tons of tin, labeled the glass using enamels without ink
or glue or paper and used FSC certified packaging,
bleached without chlorine.

• Example: Lush – Solid shampoo bars save 450,000 liters of
water per year in their production.

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Slide 10

10

Reducing energy intensity

• Example: Philips LED lamps – consume less electricity, at
equivalent luminosity, a much longer lifespan and lifetime.

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Slide 11

11

Minimising toxic components

• Example: Louis Vuitton – Inoculation Plan, first
launched in 2014. All suppliers are imposed a
Restricted Substances List (RSL). LV continually verifies
compliance by testing both raw materials and final
products. Around 250 audits per year.

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Slide 12

12

Reliability and durability

• Opposite to ‘planned obsolescence’.

• Moving from planned obsolescence logic requires a major
change for economic models based on volumes of goods
sold. By lengthening the lifetime of a product, the
company is likely to be deprived of or to delay revenue
streams from the replacement market, thus being
penalized economically.

• Example: Michelin – multiplied by 2.5 the lifetime of its
tires by adopting an alternative business model.

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Slide 13

13

Recyclability

• An eco-designed product must be able to be repaired
easily, in particular by allowing the replacement of the
single flawed piece.

• Example: Apple – iPod, initially criticised for its sealed
battery. The company redesigned the product to allow its
replacement and provided an extended warranty of two
years.

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Slide 14

14

Minimising life cycle impact

• Eco-design imposes an analysis of the environmental
impact of the product over its whole life cycle, from the
extraction of raw materials to the end of its useful life,
through all the stages of the supply chain, manufacturing,
distribution and use of the product.

• The objective is to prevent a transfer of pollution between
various phases of the life cycle.

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Slide 15

15

Minimising life cycle impact cont.

• Example: paint

Paint A Paint B

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Slide 16

16

Eco-design project

The implementation method of an eco-design project step-
by-step:

1. Assemble a team in charge of the eco-design project
within the company (demanding new human, financial
and intangible resources in the SBMC)

2. Choose a product to be upgraded

3. (Re)design

4. Implementation

5. Follow-up scoring

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Slide 17

17

Sustainability team

• Ideally, a minimum of four profiles should be part of the
team:

• R&D/product innovation,

• operations/manufacture,

• marketing/sales, and

• environmental management (if that profile exists).

• Orientation towards problem-solving.

• Support from the top management is essential.

• External expertise, if necessary.

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Slide 18

18

Product selection

• Based primarily on the expected objectives of the eco-
design project. The pursued aims can concern:

• Internal factors: e.g. reduction of costs, dependence on raw
materials, (re-)facilitation of local production, abandoning a
toxic component, etc.

• External factors: e.g. marketing differentiation or perceived
value, market demanding certain environmental criteria,
answering new regulations, responding to competitive
pressure, etc.

• Other considerations: e.g. product improvement potential,
the relative simplicity or complexity of the redesign and
capacity to reach a higher number of goals.

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Slide 19

19

Product selection cont.

• Objectives need to be linked with the main strategic
orientation of the company.

• Focus on a product with high sales volume, because
the total benefit will be amplified by the volume effect
of the incremental improvements.

• However, customer acceptability of these
improvements must still be validated by offering at
least, the same functional and esthetic benefits.

• The impact of these improvements on price must also
be considered.

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Slide 20

20

Redesign

• Life-Cycle Assessment (LCA) is an essential process to
assess the environmental impact of the product
throughout its life cycle (new resource allocation and new
activity).

• LCA is codified by the ISO 14040 and associated standards.

• LCA also closely linked with marketing – user acceptability
of the innovation.

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Slide 21

21

Redesign cont.

Figure: Enriched space of marketing differentiation / Source: Sempels, C & Hoffmann J 2013

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Slide 22

22

Life-Cycle Assessment (LCA)

• Carrying out an LCA is generally entrusted to an expert
company, able to guarantee the quality of the
implementation of the approach, or to new partnerships.

• General recommendations include:
• Selection of lower impact raw materials;

• Reduction of the material intensity;

• Optimisation of production techniques;

• Optimisation of logistic flows and delivery systems;

• Optimisation of the use and reduction of the impact during the
use/consumption phase;

• Improvement of the product lifetime;

• Optimisation of the management of the product’s end of life.

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Slide 23

23

LCA cont.

• A financial analysis: to evaluate the amount of
investments necessary to redesign the product and the
associated return on investment.

• A technical analysis: the feasibility of the
recommendations and their relative simplicity or
complexity of implementation. Also integrate the time of
development of the project in order to estimate the time-
to market of the redesigned product.

• A marketing analysis: the potential valorisation of the
choices at the marketing and sales level.

• Final report.

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Slide 24

24

Implementation

• Improvements are evaluated and validated before moving
to the development stage.

1. Internal considerations: impact on the supply chain,
production modes, financial assessment, amount of
training and coaching to accompany the change,
traditional tests of intrinsic quality of the product, etc.

2. External considerations: acceptability test, concept test
with target customers and analysis of market
opportunities.

• Potentially new marketing plan, training and internal
communication.

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Slide 25

25

Follow-up scoring

• Economic profitability of eco-design processes

• An improvement of customer satisfaction (added-value)

• Enriched vision for the design of new products

• A positive impact on employee motivation and
commitment to the company

• Reduced employee turnover, attracting new talent

• Improved knowledge capital

• Improved public image of the company

• Improved stakeholder relations

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Slide 26

26

Case: biomimicry

• A design discipline that seeks sustainable solutions by
emulating nature’s time-tested patterns and strategies

• The core idea is that nature has already solved many of
the problems we are grappling with.

• Applications in numerous fields: agriculture, architecture,
climate change, energy, energy efficiency, human safety,
industrial design, medicine, natural cleaning and
transportation.

• Examples:

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Slide 27

27

Bibliography

• Sempels, C & Hoffmann J 2013, ‘Chapter 3’ in Sustainable
Innovation Strategy: Creating Value in a World of Finite
Resources, Palgrave Macmillan.

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Slide 28

28

Next week…

• Circular Economy

• Tutorial reading for today (read before the tutorial): None.

• Tutorial reading for week 9 (read before the tutorial): None.

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