FINAL POST: CLIMATE CHANGE

INTRODUCTION : ABOUT CLIMATE CHANGE

With the exception of deadly epidemics such as cancer, malaria and HIV/AIDS, climate change is considered as one of the greatest environmental challenge facing the world today.
It is a phenomenon attributed to rising global temperatures which bring changes in weather patterns, rising sea levels and increased frequency and intensity of extreme weather. These effects are felt everywhere and affect us all internationally with more severe problems for people in regions that are particularly vulnerable.
A recent Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC) by scientists at the UK Hadley Centre, The Earth has warmed by 0.74°C over the last hundred years , and that around 0.4°C of this warming has occurred since the 1970s. The climate of the Earth and has thus changed many times in response to a variety of natural causes and human activity:
• According to AR4, the level of our CO2 emissions will determine the increase in mean global temperatures which are likely to rise between 1.1 and 6.4°C by the end of this century. This will result in a further rise in global sea levels of between 20 and 60cm, continued melting of ice caps, glaciers and sea ice, changes in rainfall patterns and intensification of tropical cyclones.
• The main human influence on global climate leaves us in no doubt that human activity is the primary driver of the observed changes in climate: emissions of the key greenhouse gases - carbon dioxide (CO2), methane and nitrous oxide. The accumulation of these gases in the atmosphere through fossil fuel use and land use (deforestation) strengthens the greenhouse effect and leads to the concentration of these gases in the atmosphere which have now reached unprecedented levels for tens of thousands of years. The diagram here below shows how concentrations of carbon dioxide in the atmosphere are naturally regulated by numerous processes collectively known as the “carbon cycle. While these natural processes can absorb some of the carbon dioxide emissions produced each year, an excess is added to the atmosphere annually and resulting in The Earth’s positive imbalance between emissions and absorption attributed to the continuing growth in greenhouse gases in the atmosphere.
Below is a diagram illustrating the process of greenhouse gases – CO2 emissions.

THE GLOBAL CARBON CYCLE

SOURCE: INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE (IPCC)

CLIMATE CHANGE AND ITS INFLUENCE ON BUSINESS MODELS
As much as I adhere to the principles of individual responsibility in reducing the negative effects of Climate Change, I knew very little about how far companies have to go today in order to adapt their business models to suit the trends brought about by climate change. I learnt a lot from my research that climate change has the “power” to affect businesses and companies across the world, and even to change the dynamics of the global economy as we know it today. The causes of global warming, most predominantly greenhouse gases such as carbon dioxide, are almost universally agreed, but there are also other important factors that are thought to contribute to changes in business models:
• In the United Kingdom for example, reports indicate that the effects of climate change in businesses
from the north to the south of the country will depend on the sector of business they are in, and on the type of weather they need to take into account.
Looking further into the depth of how far UK companies have to adopt their business models in as far as energy and water consumption are concerned, it is predicted that flash flooding will become more of an issue as rainfall becomes heavier. As such, industries such as water and electricity suppliers will have to ensure that their systems can cope with the change in rainfall because flash flooding can cause problems such as short-circuiting, resulting in power outages. This provokes the necessity for the water and electricity industries to ensure that their systems are safe and reliable, knowing that the change in rain distribution will also present new problems of water storage.
• Another point to elaborate on how climate change is affecting business models with a point of view
about the United States, is that this phenomenon is going to have a huge impact on energy providers and also on the amount of energy needed and consumed. This implies that although warmer winters will mean a decrease in heating bills, hotter summers will push the cost back up again when people begin switching on their air conditioning – an energy surge experience which the United States has already undergone during the summer months due to the increasing use of air conditioning systems.
A more in depth anecdote of this effect is my experience in the summer of August 2003 in France, when a severe heat wave not only had serious effects on the elderly and vulnerable people, but also the industrial sector, forcing several nuclear power stations to operate at a reduced capacity and some reactors completely stopping to work due to a lack of cold water to cool fuel rods.
Unless taken into account, such effects can in turn have a knock-on effect on the methods of energy production. Thus, if future energy technologies are to remain productive and viable, companies must anticipate, adapt and respond to the shifts in climate by finding more environmentally friendly methods of producing energy, such as geothermal energy, solar, wind and water power owing to fossil fuels becoming scarcer.

CASE STUDIES OF THE IMPACT OF CLIMATE CHANGE
In order to better understand how far companies have gone in order to adopt their business models to climate change I have selected the insurance and automobile sectors to elaborate on their businesses practices:

Insurance companies
For businesses like the insurance industry, climate change could have both positive and
negative effects for example, certain industrial sectors have begun taking out newly designed
types of insurance policies like weather derivatives and catastrophe bonds to cope with the
developing effects of climate change. This results into opportunities for more business in the insurance sector thanks to new demands on insurance policies for risk transfer. However, this new trend also means a change in the type of insurance that businesses take out, and also a change in the type of insurance policies available. An example could be manufacturers in the clothing industry who are offering retailers a rebate on winter clothes if it turns out to be a mild season and they are unable to sell enough of their winter stock. The manufacturers are able to do this by taking out a weather derivative which will pay out if it is a mild winter.

Inergy Automotive Systems
I had the chance to work with Inergy Automotive Systems, a plastic fuel tank supplier for major French and international Automobile companies such as Renault, Audi, BMW and VolksWagen. The nature of their business has had a particular impact on the company’s products as far as climate change is concerned, obliging the Marketing and Communications company in which I worked to portray messages of INERGY’s high technology products like diesel engines to reduce fuel consumption, therefore CO2 emissions. Since its creation in August of 2000 through a joint venture between Solvay (Belgian Company) and Plastic Omnium (French Company), INERGY’s progress in diesel technology over the past years is becoming more environmental friendly thanks to diesel fuel than gasoline through two major innovations:
• The PZEV plastic fuel system: conceived to meet California’s very stringent requirements to reduce their fuel emission by a factor of ten: “Partial Zero Emission Vehicle” (PZEV)
• Diesel engines to reduce fuel consumption through the SCR (Selective Catalytic Reduction) system

CONCLUSION: FUTURE WATCH
In my opinion, the trend that climate change has set is a complete shift that will gradually grow in a positive or negative direction, depending on how it is perceived and the solutions adopted to adopt to the trend by individual, company/institutional, society, governmental and international views.
I have cited 2 anecdotes to illustrate my opinion:
• According to the National Energy Information Center (NEIC) in the United States, World carbon dioxide emissions are expected to increase by 1.9 percent annually between 2001 and 2025.
• Two quotations from the Executive Director of UNEP (United Nation’s Environmental Program); Klaus Toepfer
- "Climate change, linked with human-made emissions, is already under way", said UNEP Executive Director Klaus Toepfer. He warned that globally there will be a rise in extreme weather events impacting "every facet of life", including agriculture, health, water supplies and the natural environment.
- "It will be the poorer parts of the world, the poorer people, who will suffer most because they have neither the financial or other resources to cope", Mr. Toepfer said, calling on industrialized nations to ratify the Kyoto Protocol, which contains binding targets for reducing greenhouse gas emissions. He also urged broader efforts "to help the poorer parts of the world adapt, to help them cope with the more unstable and more extreme environments likely in the coming decades".
The above anecdotes, in my opinion are justified due to the current status of the world’s climate condition today. High rate of pollution especially in big cities, industrial irresponsibility in product packaging and many other factors such as uncontrolled energy use contribute to the situation caused by climate change. And yet if each of us – from an individual, company/institutional, society, governmental or international level took heed, there could be chances for climate change to be a trend that is would rather be a positively growing shift through some of the responsible attitudes as cited below:
Individually – reduce energy consumption at home, using shopping baskets instead of paper bags and using public transport instead of personal cars.
Industrial level – printing fewer documents and if really important on recycled paper.
For more public awareness, the video below illustrates all the most important elements concerned with climate change. Hope you’ll enjoy watching it.

Innocentive in the Car Industry

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OPEN INNOVATION

The Idea behind Open Innovation
At a glance even for the first time visitor, my impression on discovering Innocentive’s website was that of a company conscious of its image because of the webpage layout… which is not only clear and concise, but also sophisticated in trying to make viewers understand who they are “virtually”. And yet, there’s actually more to that in that Innocentive as an “open innovation” driven company avails firms the opportunity to use external as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.

Problems Solved
The concept of Open Innovation is considered as the “new imperative” for creating and profiting from technology in many business and not-for-profit organisation sectors.
Under open innovation, Innocentive’s clients use both external and internal ideas to create value, and internal mechanisms are defined to claim some portion of that value.
An added advantage of open innovation to customers is that it assumes that internal ideas can also be taken to market through external channels, outside the current businesses of the firm, in order to generate additional value. And in so doing, ideas can also start outside the firm’s own labs and can move inside.
Open innovation also allows the recovery of overlooked innovations in that there’s a greater chance for the projects to find value in a new market or to be combined with other projects, because everything is more open and flexible.

Customer Groups
Since it started business in 2001, Innocentive has been using the open innovation concept to serve customers in various sectors such as academic institutions, businesses and non-profit organizations. Despite the various reasons for their choice to change their business model, all the clients served by Innocentive are on the look-out for the latest innovation technologies for better performance in the various sectors in which they belong.

Open Innovation: How it Works
Thus with reference to Innocentive’s customer profile, the concept of open innovation can be considered applicable both on and off-line by the fact that the “boundaries” existing between firms are “porous” (when applying the open innovation concept), and this allows the use of licences or technologies that belong to a particular firm in another firm as a core business.

The Future of Open Innovation
With the rapid growth of technology, competition, and need to increase profit margins, “open innovation” I should say, can be considered as a sustainable business model because of the advantages it avails to many businesses for example; by spinning in ideas and innovations from outside, this enriches the services offered by the company, and reinforces networking and co-operation on ideas by shared facilities and technology.

Industries Involved
According to the study I have undertaken regarding open innovation, this concept is very beneficial to almost every business sector, and more especially in industries which undergo extensive Research and Development.In a further research, I discovered that some industries have been in the open innovation mode for a long time. The Hollywood film industry, for example, has innovated for years through a network of partnerships and alliances among production studios, directors, talent agencies, actors and scriptwriters. In addition to the film industry, modern investment banking has been using external ideas as well, adopting the new, exotic investment instruments devised by newly trained finance professors.
However, many industries are still in transition between open and closed innovation concepts for example; automobiles, biotechnology, pharmaceuticals, healthcare, computers, software, communications, banking, insurance, and consumer packaged goods, even military weapons and communication systems. Innovation in these industries is moving beyond the boundaries of the central R&D laboratories of the largest companies to start-ups, universities and other outsiders. In so doing, the company can renew its current business and generate new business. As a particular case study, this could be the case of Millennium Pharmaceuticals and Philips, the world market leader in the lighting, electric shavers, and DVD recorders sectors.

Case Study: Millenium Pharmaceuticals
To begin with Millennium Pharmaceuticals which is focused on the goal of developing breakthrough treatments that will make a real difference in patients’ lives, it has strategic alliances and business partnerships with some of the world's leading pharmaceutical and biotechnology firms. The relationships range from disease-oriented therapeutic collaborations and technology-transfer arrangements, to marketing and licensing agreements. For example, in June 2004, Millennium and GlaxoSmithKline (GSK) entered into an agreement in which GSK exclusively will market INTEGRILIN in Europe. The commercialization alliance is designed to provide significant sales and marketing support to capitalize on growth opportunities for INTEGRILIN in Europe and is designed to enhance the GSK cardiovascular care portfolio and presence in the European acute care market. Under the terms of the agreement, Millennium is entitled to license fees, milestone payments and royalties from GSK on INTEGRILIN sales in Europe upon the achievement of certain objectives.

Case Study: Philips Electronics
In as far as Philips is concerned, the company has developed and introduced many successful technologies. An atmosphere of collaboration which has been crucial to these achievements led to a decision at Philips to start developing technology more from the philosophy of open innovation: High Tech Campus Eindhoven in the Netherlands. Ever since this campus was opened in 1999, people have been working on an environment that revolves around interaction, networking, sharing knowledge and developing groundbreaking technologies in joint efforts. The site is open to business and non-business visitors. During office hours, anyone who wants to do so may enter the site on foot, on a bicycle, or by car and use some of the facilities.
As a Hotspot, High Tech Campus Eindhoven currently occupies an important position in the region. The campus road network has been added to the street map of the City of Eindhoven and all buildings have official addresses. This makes High Tech Campus Eindhoven even more part of Eindhoven and the Eindhoven region. The campus is in the very centre of the area, not only geographically but also, particularly, as the cradle of knowledge and innovation, and the matchmaker between businesses and knowledge institutes.
Philips’ case as illustrated in the slideshow below, clearly shows how companies can create a stimulating environment for cooperation and open innovation. Therefore, the Open Campus idea perfectly embodies what open innovation originally was about.

THE NEW HIGH TECH CAMPUS IN EINDHOVEN, THE NETHERLANDS

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The "Freemium" Concept

• The « freemium » concept is a business model usually applied by software companies. It mainly consists of attracting clients by giving away a service for free, and then charging them a premium price for full or special features such as value added services or an enhanced version of your service to your customer base . With this approach, the seller is capable of acquiring a lot of customers very efficiently through word of mouth, referral networks, etc.

• Among the many users of the “Freemium” model, two are to be taken into consideration because of the scope of their businesses:
- Skype, the software program which allows users to make telephone calls over the internet to other Skype users free of charge, or to landlines and cell phones for a fee adopted the freemium model and has since then experienced a successful development of the business. Additional features of the services provided by Skype are: instant messaging, file transfer, short message service and video conferencing.
- Netscape , the most popular browser was also founded on the concept of the freemium model. As an internet browser, netscape is composed of a suite of software components for sharing, accessing, and communicating information via intranets and the internet.

• The “freemium concept is beneficial to the service providers and the users for the following reasons :
- Clients are acquired quite easily and fast enough because of the “free” or “give” away approach of the services offered.
- The model includes free services with an upsell to a premium level of service which is not very costly for the clients.
- There are little chances of hesitation to consume the services, because the user is not obliged to pay immediately.

However, the freemium concept has set-backs for example:
- Difficulties in connecting with users of the same service due to technical breakdowns, especially when it comes to long-distance communications .
- Although the services are said to be free, sometimes they may be “more expensive” than what is expected, basing on the definition of the concept of the freemium business model.

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THE LONG TAIL CONCEPT

The Long Tail concept refers to business models with distribution power that can sell a greater volume of hard-to-find items at small volumes than of popular items at large volumes.
From this definition, I would say that this concept brings back to life old memories and lifestyles for two major groups:
Ø For customers who are seeking products that are rarely available on the market.
Ø For suppliers who may benefit from this phenomenon to increase their profit margins.
As a living example, Amazon.com and Netflix are mostly known distributors who practice the Long Tail business concept, thanks to the internet which is used worldwide for buying products online: vacation trips, air-tickets, household commodities, books, electronics, digital media….

In my opinion, this has definitely had an impact on consumer behaviour, because there’s less need to do shopping physically in the sales points since a lot can be done on the internetand has thus made life easier.