Competitiveness & the Digital Innovation Opportunities Last Call to Europe 2020

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1 Competitiveness & the Digital Innovation Opportunities Last Call to Europe 2020 Milano Expo 2015 Peter Lacy Sustainability Global Lead London, UKI

2 Major market forces and uncertainties make growth challenging in a margin squeezed environment Global Economic Risk Globalization & Regionalization Supplier Risk/Traceability Volatility Uncertainty Complexity Ambiguity New Demanding Customers Commodity Cycles Government & Politics Copyright 2015 Accenture All rights reserved. 2

3 Digital is creating extraordinary new challenges and opportunities The ME Economy Creating one to one experience at a scale of one hundred million Digital Disruptive Speed product and service development lifecycles are changing from years or months to weeks New Contestable Markets creating and disrupting industries, markets, products, services and value chains The New Value Equation companies must simultaneously deliver value for customers AND society AND shareholders Copyright 2015 Accenture All rights reserved.

4 Competing to Win in this complex business environment requires a Triple A Advantage To create superior value compared to competitors companies must be: Agile capabilities, cost base and operating model Adaptive growth and innovation engines, exploiting the ecosytsem Aligned with stakeholder demands Triple A Advantage Trip Adva Copyright 2015 Accenture All rights reserved. 4

5 Creating the Triple A Advantage is a Journey where to start on the journey is unique to each organisation Profitable Growth A Responsible Growth A Triple A Advantage Create an aligned vision on the what the future looks like for the organization Fuel for Growth A Create Agility: Take out non-working money and building new operating models with lower fixed costs. Create operating models that deliver greater agility and free up investments Be Adaptive: Develop deep customer insight Drive profitable revenue growth with current markets, products and services Develop new growth by making quick and informed decisions on investing and divesting Leverage an ecosystem of players to enter new markets and build new capabilities Create Stakeholder Alignment: Secure the license to operate and license to grow companies create a trusted relationship with consumers and customers is the key to long-range competitiveness Copyright 2015 Accenture All rights reserved. 5

6 Accenture s Responsible Growth Framework Securing your license to operate, innovate & grow for the long-term. Not just acting in short-term self-interest Value Value Shareholder Sustainability as Lens for Value Creation Customer Value Society/Stakeholders Copyright 2015 Accenture All rights reserved. 6

7 Resource Use The link between economic development and resource use is strong Log plot of Resource use and Economic development (2010, 166 countries) 1 Tons/Cap 100 Chile Australia 10! Niger India China Colombia Sweden Germany Bangladesh ,000 GDP/Cap 10, ,000 Economic Development 1 SERI and Dittrich, M. (2014). Global Material Flow Database, World Bank (2014) GDP per capita in current US$ (outliers Mongolia & Bahamas removed) 2 OECD Development Centre, Working Paper No. 285, The Emerging Middle Class in Developing Countries Copyright 2015 Accenture All rights reserved. Copyright 2015 Accenture All rights reserved. 7

8 The supply / demand imbalance is bad news for business GDP and commodity price development Index, 2010= % growth in GDP -0.2% commodity price index % growth in GDP +1.5% commodity price index Energy commodities Non-Energy Commodities GDP Sources: Accenture analysis, The Conference Board, Total Economy Database Key Findings, January 2014, The World Bank, World Bank Commodity Price Data (The Pink Sheet), December 2014, indexmundi commodities Copyright 2015 Accenture All rights reserved. 8

9 A 4-dimensional view on waste is required to see the real potential Wasted Resources Wasted Capacity Material and energy that cannot be continually regenerated Sourcing Manufacturing Marketing & Sales Underutilized or unused products and assets Components, material and energy not recovered at disposal Reverse End of Life Disposal Product Use Premature end of working life of products Wasted Embedded Values Wasted Lifecycles Copyright 2015 Accenture All rights reserved. 9

10 A 4-dimensional view on waste is required to see the real potential Wasted Resources Wasted Capacity Introduce renewable energy and bio-based fuel, chemicals and materials $1.7trillion Sourcing Manufacturing Marketing & Sales Increase sharing, co-owning, co-using, resource pooling, etc $1.3 trillion Elimination potential 2030 Product Use $0.6trillion Increase recycling, upcycling, component harvesting and energy recovery Wasted Embedded Values Reverse End of Life Disposal $0.9trillion Lifecycle services for resell, maintain, repair, remanufacture, etc. Wasted Lifecycles Copyright 2015 Accenture All rights reserved. 10

11 Accenture and WEF YGL have studied 120 successful circular pioneers 50 Executive Interviews 120 Case Studies 5 Business Models Circular Supply- Chain Recovery & Recycling Product Life- Extension Sharing Platform Product as a Service 5 Capability Shifts Strategy Innovation & Product Development Sourcing And Manufacturing Sales & Product Use Return Chains 10 Enabling Technologies Life & Material Sciences Modular Design Technology Cloud Analytics Mobile Social M2M Communication 3D Printing Trace and Return Systems Advanced Recycling Tech Copyright 2015 Accenture All rights reserved. 11

12 Copyright 2015 Accenture All rights reserved. 12 In our research we found five circular economy business models Business models of the circular economy Circular Supplies B. Waste as a resource Other loop C. Returning byproducts Manufacturing Circular Supply-Chain Recovery & Recycling Product design Sourcing A. Resell B. Repair/Upgrade Marketing & Sales Product Life-Extension Sharing Platform Product as a Service A. Re-/ upcycle C. Remanufacture Reverse End of Life Disposal Product Use Share Waste leakage (eliminate) Copyright 2015 Accenture All rights reserved. 12

13 Three types of technologies are key Circular Economy enabling technologies CISCO Modular design technology Life & Material sciences Product design Sourcing Advanced recycling tech $400m refurbished equipment take back and remarketing 3 Manufacturing Reverse Trace and return systems End of Life Disposal Cloud Marketing & Sales Product Use 3D Printing Waste leakage (eliminate) Google 380m supporters for $50 modular handset to be released in 2015 Analytics Mobile Social M2M Communication Uber $40bn taxi company in 45 countries with zero cars 1 Verizon Launching a share anything platform starting with cars 2 Digital Enabling entirely new ways to access and understand product use-phase and aid customers in use efficiency Hybrid Enabling moving physical objects back and forth from value chains with digital services to drive down cost Engineering Enabling production and supply of new types of resources as well as new product designs to use them 1 Ingrid Pan, Uber s Breakneck Growth: How the Company Grows and Makes Money, YAHOO!Finance, June 23, 2014, 2 Barry Levine, Verizon plans to create a sharing platform for virtually anything not just cars, Venture Beat, September 8, 2014, 3 Cisco, Corporate Social Responsibility Report, 2013, accessed November 24, 2014, Copyright 2015 Accenture All rights reserved. 13 Copyright 2015 Accenture All rights reserved. 13

14 Leading adopters experiment with 5 new business capabilities Circular Economy capability shifts 2. Innovation & product development Design for many lifecycles and users Manufacturing 3. Sourcing and manufacturing Cascade resources Renault Indra Product design Sourcing Sourcing 1. Strategy Engage in circular ecosystems Carlsberg Marketing & Sales Product Use 5. Return chains Do opportunity driven takeback CISCO Reverse End of Life Disposal Waste leakage (eliminate) 4. Sales & product use Excel in lifecycle customer engagement SKF Source: Circular Economy book project Copyright 2015 Accenture All rights reserved. 14

15 Reduce negative Increase positive Case 1: How Accenture Strategy is improving a global consumer goods company License to Operate & Grow through Circular Economy We have identified a direct potential of up to 40m and to cover 20% of current material use with secondary sources Scope of collection Beyond 2020 Manage flow of all types of home furnishing products Volume potential (share of current material use replaced) Value potential (full value of return material flow) 20% 450m Profit potential (recovered bottom line opportunity) 40m Sustainability Value Levers New Products/ Services License to Grow Driving upgrade in Range & supply Differentiation / Intangibles Boost in Brand image Up to 2020 Manage flow of internal waste & post-consumer packaging and textiles 7% 200m 7m 100m additional value opportunity identified in the long term from leveraging the Resource Chain platform for other benefits Resource Efficiency Current value License to Operate Driving efficiency & volume Risk Mitigation Controlling resource challenge Future value Copyright 2015 Accenture All rights reserved. 15

16 Reduce negative Increase positive Case 2 How Vodafone is using sustainability challenges as an opportunity for growth in new markets for digital products & services Accenture Strategy identified $28bn in potential new revenues across 30 opportunities, as well as significant outcomes for society Carbon Connections Connected Agriculture Connected Worker 43 billion reduction in energy costs $138 billion increase in agricultural income $31 billion increase in productivity Sustainability Value Levers New Products/ Services 1.7bn new connections Resource Efficiency Current value License to Grow Differentiation / Intangibles Boost in Brand image, new markets License to Operate 43 billion reduction in energy costs Risk Mitigation Stakeholders alignment in new markets Future value Copyright 2015 Accenture All rights reserved. 16

17 Conclusion $4.5 trillion size of prize through 5 Business models 10 enabling technologies 5 capability shifts Five questions to get you started: What are the risk and opportunities of moving to a Circular Economy? What is the core value we deliver to customers? How can digital and other technologies deliver this value in new ways? What new capabilities are needed to turn the value chain circular? How do we time action to capture low hanging fruit and long term disruption? Copyright 2015 Accenture All rights reserved. 17

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