2014-05-19

Co.Exist

Five Ways Companies Can Cope With A Resource-Constrained World

Need is the mother of invention. Here's a few ways to get started preparing for a world of rising scarcity.

These days, it's common to hear how the world is going to run out of resources. And with good reason. With the growth of China and other emerging economies, it makes sense that demand for basic commodities is going to go up, and that stocks of energy, food, and water are bound to run short.

Not everyone is pessimistic, however. In their book, Resource Revolution, Stefan Heck and Matt Rogers argue that resource constraints have been predicted before, but that humans have found ways to adapt and become more efficient. And they predict the same thing is about to happen now.

In fact, Heck and Rogers say companies are already adapting by following five strategies: optimization, substitution, virtualization, circularity, and waste elimination.

Under substitution, for instance, companies like Apple are poring over the periodic table and wondering what rare elements are swappable with less rare elements. Startups like Hampton Creek Foods are making egg substitutes from plants.

Under optimization, Komatsu, an industrial-equipment manufacturer, has set up a market allowing customer to rent purchases from one another when they're idle. If you need a $300,000 earth mover for a day, you can now go a competitor rather than buying the thing outright. That means less idle earth movers.

Circularity is perhaps the most radical idea. It involves companies designing products so they can be reused or recycled. That means less resources entering landfills and less need for raw materials to come out of the ground. (We've covered a few examples of companies developing circular ideas here.)

Heck, who is a Stanford Law School professor, and Rogers, who is at McKinsey, say that, far from being a threat to a business's future, scarcity could actually be a source of opportunity—if managers are imaginative. "Rather than facing a crisis of resource scarcity, the world economy will be revitalized by an array of business opportunities that will create trillions of dollars in profits," they write.

It's easy to be skeptical. After all, it's hard to see what a few enlightened companies can do against the economic forces of 2.5 billion new consumers entering the middle class. But Heck and Rogers argue that innovation really can be transformative in reducing the resources we need to do the same task. For example, before the diesel engine, people used to travel around in steam-powered cars at 12 miles per hour, with a range 30 miles. Then the Ford Model T came along, and it did 45 mph and went 250 miles on a single tank. Suddenly, you had a vehicle that went four times the speed and five times as far. Heck and Rogers argue that similar advances could be afoot around cars, from rapid improvements in battery technologies to autonomous cars that allow more cars to travel on the road.

The book offers an optimistic antidote to much doom-laden talk about the future. Read more, including a sample chapter, here.

[Image: Abstract via Shutterstock]

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