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Pitch

Removing inefficiencies of industrial innovation by facilitating collaborations and accelerating R&D solutions toward earlier adoption.


Description

Summary


This proposal focuses on the “Industry” category. Our proposed actions focus on building a platform for collaboration and facilitation of communication amongst the major players in the United States’ industrial sector. The following action plans, stems and expands from the success of Canada’s Oil Sands Innovation Alliance (COSIA) organization (Canada’s Oil Sands Innovation Alliance, 2015). Our plan will impact four major stakeholders: the companies operating in industry, the United States government, the general public, and the environment.

Our proposal focuses on creating a platform where industry leaders share innovative technologies that reduce industry’s cumulative effect on the environment. Our organization, United States Industrial Collaboration Agency (USICA), will use top-down specification to create several broad industry areas which each contain specific project lists of potential technological solutions and concepts. The organization will bring together member companies into structured joint venture contracts to foster collaboration on these specific projects. Member companies will all share the benefits based on their contribution levels.

The goal of USICA is to accelerate innovation and wide-spread usage of new technologies that will allow industry members to grow sustainably while positively affecting the environment.


What actions do you propose?

The core objective of the United States Innovative Collaboration Agency (USICA) is:

The sustainable advancement of technology solutions to improve society and industry, and the acceleration through collaboration of R&D to produce useable results.

While the basic foundations of USICA can be traced to Canada’s Oil Sands Innovation Alliance (COSIA) organization, its wide-arcing scope expands beyond the reach set by it’s Canadian sibling to a wider industry application. The following section will explain several aspects governing the actions of USICA:

1.    The current policy of the United States government with respect to industry, technology development, and climate change

2.    The current inefficiencies and shortfalls that exist due to a competitive corporate environment, and the steps that provide direct, positive impact on climate change and social actions

The United States is a leader in technological innovation that maintains a solemn commitment to the environment. Direct evidence of this includes their short term emissions reduction target of 17% (below 2005 levels) by the year 2020 (United States Climate Action Report, 2014). This commitment extends to the medium and long term as G7 leaders (including the United States) recently agreed to develop and deploy innovative technologies to transform the energy sector by 2050, with a goal of full decarburization of the global economy in the year 2100 (CBC News, 2015). The United States Environmental Protection Agency shows that the domestic industrial sector currently accounts for 29% of the country’s greenhouse gas emissions. The United States has ambitious, but transparent, objectives for decreasing industry impact on environment and climate. This industry impact will need aggressive planning and constant improving technology to achieve the lofty goals that have been set for the future.

There are thousands of ideas for technology solutions that can allow global industry to grow without compromising the future health of humanity and the planet. Many of these ideas, however, often remain in the New Product Development stage, never progressing to commercialization (Brands, 2014). This can be attributed to the early adoption of technology carrying a high amount of risk, with potentially limited value of rewards (Hall and Khan, 2002). Companies have to expense large amounts of Research & Development costs prior to running a trial of their concepts. At this point they have two possible outcomes:

1.   Failure of concept, resulting in the abandonment of the idea or additional research to find corrections

2.   Success of concept, resulting in new advances by the creator and/or potential copycatting by competitors

Initially this seems like an appropriate and acceptable result, but when framed in reference to the protection of our world’s climate, success of a new technology is a long way away from providing meaningful benefits. The success may provide sustainable growth, but for whom? History shows that most technology breakthroughs require decades before reaching the mass market. An innovative company will likely protect costs incurred while researching by registering their Intellectual Property (IP) (American Intellectual Property Law Association, 2015). This restricts and increases the cost of use for this climate-saving concept for other companies. If the innovating company does not effectively protect their IP, other competitors will wait until the benefits of the new technology outweigh the costs of adoption. At this point, they will use the concept without sharing in either the time or capital expenditure necessary to develop the product. As displayed by Roger’s Adoption Curve below, this decreases incentive to be the first or even the second innovator. The result is an extended length of time before implementation and potential climate protection; researchers have found that clean technology can take up to 30 years to reach mass market (Rau, Toker, and Howard, 2010).

figure 1: Roger’s Adoption Curve (Harris, 2013)

The redundancy of R&D spending by competing companies has resulted in a prolonged process for new technology acceptance, ultimately posing a challenge to saving the environment. Data from Statistics Canada (which likely inspired COSIA to action) can represent the capacity for improvement for a similar operation in the United States.

Industrial R&D spending eclipses corporate spending on Capital Expenditures, Current Expenditures, and Wages and Salaries (Statistics Canada, 2014). This spending can be broken down further by industry sector to roughly show: 46% Manufacturing, 45% Services, 6% Mining/O&G Extraction, and 3% other. By specifically looking at energy-related R&D outlays we can observe a 10%-18% annual increase to $2.0 Billion (2012). Canada’s energy-related R&D costs is comparable to those of the 10 largest international O&G companies who individually spend $485M-$1622M each (Terrapinn, 2013). It can be said that a substantial percentage of this industry research, in Canada and internationally, is going towards directly or indirectly improving energy efficiency, which in turn has the potential to reduce environmental impact from industry.

figure 2: Industrial research and development expenditures by type (Statistics Canada, 2014)

figure 3: Share of industrial research and development by sector (Statistics Canada, 2014)

figure 4: Energy-related industrial research and development spending by area of technology (Statistics Canada, 2014)

The hundreds of millions of dollars spent by industry for Research & Development are currently divided across many companies. This can lead to a large amount of redundant spending. For example, if Company A spends $10M and comes up with a solution to restrict carbon emissions during operation, they will probably use that technology and protect their IP. Then Companies B through F, who were also spending $10M to research a similar technology will see Company A’s work and take shortcuts to create a similar product. The single new technology, which cost Company A $10M to make first, has now cost the industry as a whole $10M + $50M to produce. There is a large opportunity to improve efficiency in the various streams of industry by reducing the spending of many companies for a single solution.

The challenges that oppose the success of the United States in meeting their decarburization goals amongst other environmental targets are immense. Implementation of a centralized approach such as USICA can make these goals achievable. By facilitating the connections between corporations and governments, USICA uses holistic means including but not limited to joint ventures, cross-licensing agreements, tariff exemptions, to reduce industrial impact on climate. The following section defines USICA’s proposed operations.

USICA is a platform and facilitator that brings companies in industry together to tackle the challenges of Research and Development. With the consultation of industry experts and lawyers, USICA’s member companies will be governed by legal agreements based on equitable contribution. Equitable contribution is not the same as equal contribution; companies that benefit the most, based on relative market share sizing, will contribute the most (refer to Timeline for specific example) (Wicklum, 2014; Canada’s Oil Sands Innovation Alliance, 2014). Equitable contribution ensures that USICA members contribute fairly to achieve common goals while accelerating the pace of improving environmental performance.

USICA has a defined but broad set of Environmental Priority Areas that affect industry. Each EPA will include a project list, containing individual Joint Industry Projects (JIP) that cover specific technological concepts. Any technology developed in an individual JIP will provide user rights to all members of entered into that JIP. The member’s expenditure towards the JIP will count towards their contribution level. Equitable contribution is based on GHG emission levels. Members are able to share any previously developed technology which will be counted as credit towards their contribution level. This credit is given once a member has agreed to share all proprietary knowledge of the technology.

The USICA organization structure is made up by the combination of a CEO Council and Immunity from Suit (IFS). The CEO council is composed of a Chief Executive Officers (CEO) representative from each of the member companies. This council reinforces the culture of accountability. Every year USICA members are assessed on their performance in each EPA. If one member is underperforming, the council will consult the concerned CEO and create a plan for improvement. IFS allows member companies to retain IP. The IFS protects all JIP members from getting sued.  For instance, if a proposal for a JIP is presented and a COSIA member has similar proprietary knowledge that they are planning to share, both the presenter and the sharer are protected.

USICA doesn’t generate any revenue for itself. A membership fee allows member companies to fund the day-to-day budget including: administrative costs, Chief Executive and Environmental Priority Area (EPA) Directors salaries, and facility costs. Each member will supply a VP representative to a Shareholder Steering Committee determining the direction of the organization. Voting power is distributed based on relative market share.

Not only a meeting place for collaboration between companies; USICA is also a cohesive body for government policy lobbying and public communication. The shared vision between USICA members creates a platform of open communication unheard of in traditional industrial sectors. While acknowledging the barriers regarding proprietary knowledge, this platform focuses on the active implementation of methods to overcome the challenges. Similar to many scientific alliances, USICA can promote any work to the public under a common banner. A cohesive industrial sector will have greater voice when it comes to advocating or initiating policy change.


Who will take these actions?

Collaborative communities encourage members to apply their various talents to group objectives; an agile organization mobilizes talent to increase resource efficiency and expedite technology scalability.  USICA will initially involve industrial members and university faculties combating climate change. By identifying, supporting, and implementing technological projects, industry members will collectively benefit by improving their operational efficiency and reducing GHG emissions. University faculties will be given the opportunity to participate in research projects with a potential for reaching mass market.

As the organization grows, so will its community outreach. Thus, the general public will also have the opportunity to have their voices included in the overall process.


Where will these actions be taken?

We propose that a pilot program for USICA be created to focus on the United States’ Oil and Gas sector. Since a majority of the competitors in US are currently COSIA members in Canada, they will be familiar with the model and more favourable to creating another chapter. Due to Texas being the hub of major US energy operations, the state will also be USICA’s headquarters. Based on the success of USICA, it will expand to include other industrial sectors such as mining and agriculture.

Success will come from four steps: defining a shared purpose, cultivating the value of contribution, simplifying the collaboration process through transparent project specificity, and building a system which rewards contribution (Adler, Heckscher, and Prusak, 2011; Weber, 2012). Collaborative working will increase responsiveness to issues through resource availability and scalability, increase capacity of knowledge sharing, reduce inefficiencies through centralized decision making, and consolidate research spending to eliminate overlapping projects.


How much will emissions be reduced or sequestered vs. business as usual levels?

The effect of GHG emissions can be illustrated by a case study.

Steam Assisted Gravity Drainage (SAGD) is a method used by companies to extract bitumen from the oil sands. SAGD operation has a higher GHG intensity than conventional extraction. To reduce this intensity, COSIA led the creation of a molten carbon fuel cell which integrated power generation with oil sands facilities (Canada’s Oil Sands Innovation Alliance, 2014). The pilot project, hosted at University of Calgary’s 14 MW co-generation plant, is expected to have a 10 tonne/day reduction of CO2. A study conducted by Suncor, another COSIA member, shows that innovations integrating power generation with oil sands facilities can reduce a country’s GHG emissions by up to 5%.

With USICA’s presence in the United States, we can safely assume that future technologies can lead to similar results. USICA expects all members to create technology for environmental performance; a mandate currently absent within industry.


What are other key benefits?

Our platform provides companies the opportunity to create, test and share technologies mitigating their cumulative effect on the environment. While a member can refuse to enter IFS and stop a JIP’s progress, USICA requires all member companies to work with those concerned and find compromise. This ensures continuous technological advancement and reduces member fears regarding competition. The concerned member is still required to meet their equitable contribution quota. By removing proprietary hurdles, companies remain competitors, and maintain a strict standard for environmental performance.

COSIA’s success is the constant source of collaboration between industry competitors. This transparent exchange of environmental technologies can be implemented in any sector contributing to greenhouse gas emissions. USICA’s consistent set of guidelines ensure collective dedication towards technological innovation and provides the United States a better opportunity to meet emissions targets.


What are the proposal’s costs?

There will be challenges to the implementation of USICA. The connections and communications needed to create an initial membership company base would be difficult. Thankfully we have connections to COSIA that will be able to advise and assist our start up and communication to COSIA member companies, who also operate in the United States, that would be willing to enter into similar agreements in the United States. USICA start up fees will be initially expensive due to legal fees and an expected acclimatization period for gaining understanding of United States government and legal procedures. Collaboration itself is difficult because companies are not the same size, decision making can be fragmented between members, delays to benefit realization can create frustration, return on investment may be difficult to measure, and perceptions of member contribution levels may be negative (Learning Pool, 2015). These issues exist and are not going to disappear unless our organization is completely transparent, fair, and honest. Legal contracts will be worked on to prevent the goodwill of collaboration from being lost. Annual evaluations, subsequently reinforced by the CEO council will ensure that all member companies perform equally. While the initial startup cost is high, USICA focuses on creating a unique alliance establishing the understanding that the only way for Industry to reduce GHG emissions is by removing IP for environmental performance.


Time line

We recommend a phased implementation system focusing on both short and medium term objectives.

Short Term:

This proposal will be refined to first cater to the oil and gas sector. We will conduct meetings with existing COSIA members and establish a similar framework. A steering committee will be created, with one representative per member company. We aim to complete all one-on-one stakeholder meetings by the end of 2016, with the Shareholder Steering Committee established by early 2017. USICA will complete all legal agreements by the end of 2017.

Medium and Long Term:

The steering committee will identify major areas of research. In order to improve the research quality, we will also create an outreach program to include universities. Once projects are decided, the list will be released to member universities. This ensures that all experts in relevant fields are involved in creating a solution. An example of a project framework is provided below.

Consider four members creating a Joint Industry Project (JIP). While project costs are split based on market share, each member has equal access to the technology. This ensures that when a technology is released, all members can use it and proportionally reduce their GHG emissions.

A proposed framework will involve the following steps (MacDonald, 2013):

1.    Identify the business impact

2.    Define process required for the business impact

3.    Create collaboration activities necessary to support process

4.    Identify potential roadblocks and developing plans of action

5.    Create technological initiative to improve process

Assuming that JIP projects are implemented within 10 years, the lessons learned can be used to create USICA branches in sectors such as mining, transportation and agriculture. In the long term, USICA will continue to create and implement projects within a structured system involving periodic assessments.


Related proposals

There are other directives, organizations, and pre-existing initiatives in the United States with similar goals as USICA. “Energy Star” for example is an Environmental Protection Agency program motivating companies towards improving energy efficiency. This program focuses on consumer products and building structure- not industrial processes. The Department of Energy (DOE) “Better Plants” aims to curb industrial energy consumption, but lacks USICA’s technology sharing structure. This is a crucial part of accelerating  the adaptation of climate saving technologies. Finally, the Technology Innovation Program (TIP) created by the National Institute of Standards and Technology is a sponsorship program for joint ventures in scientific fields. The TIP integrates white paper submissions from the public to generate ideas, but doesn’t include a commitment to slowing climate change. USICA is a unique and novel organization that fills a major gap for industry stakeholders in the United States. 


References

1. United States Climate Action Report 2014. (2014). Retrieved June 6, 2015, fromhttp://www.state.gov/documents/organization/219038.pdf

2. Adler, Heckscher, and Prusak. (2011, July 10). Building a Collaborative Enterprise. Retrieved June 4, 2015, fromhttps://hbr.org/2011/07/building-a-collaborative-enterprise

3. Rau, Toker, and Howard. (2010, January 10). Can Technology Really Save Us from Climate Change? Retrieved June 1, 2015, fromhttps://hbr.org/2010/01/can-technology-really-save-us-from-climate-change/ar/1

4.  Brands, R. (2014, March 9). 8 Step Process Perfects New Product Development. Retrieved June 10, 2015, fromhttp://www.huffingtonpost.com/robert-f-brands/8-step-new-product-development_b_4556363.html

5.  Hall and Khan. (2002, November 1). Adoption of New Technology. Retrieved June 4, 2015, from http://eml.berkeley.edu/~bhhall/papers/HallKhan03 diffusion.pdf

6. Harris, D. (2013, February 6). Startups, take heed from hip-hop: Sampling holds the key to success. Retrieved June 8, 2015, fromhttp://qz.com/51429/startups-take-heed-from-hip-hop-sampling-holds-the-key-to-success

7. Industrial research and development characteristics  (2010, August 19). Retrieved June 1, 2015, fromhttp://www.statcan.gc.ca/daily-quotidien/140819/dq140819a-eng.htm

8. Terrapinn, C. (2013, May 21). Top 40 Oil and Gas Companies by R&D Investment. Retrieved June 3, 2015, fromhttp://www.oilgaspost.com/2013/05/21/top-40-oil-gas-companies-investment

9. MacDonald, M. (2013, December 11). Redefining collaboration. Retrieved June 7, 2015, fromhttps://www.accenture.com/us-en/blogs/blogs-redefining-collaboration

10.  Prime Minister Stephen Harper agrees to G7 'decarbonization' by 2100. (2015, June 8). Retrieved June 9, 2015, fromhttp://www.cbc.ca/news/politics/prime-minister-stephen-harper-agrees-to-g7-decarbonization-by-2100-1.3104459

11. Contributing equitably, not equally. (2014, February 1). Retrieved June 7, 2015, from http://www.cosia.ca/newsletter/6/319/Contributing-equitably-not-equally/d,detail_current_issue&tag=Innovation

12. Wicklum, D. (2014, September 10). Canada’s Oil Sands Innovation Alliance: Collaboration for the Good of the Environment. Retrieved June 7, 2015, fromhttp://policymagazine.ca/pdf/9/PolicyMagazineSeptember-October-14-Wicklum.pdf 

13. Weber, B. (2012, October 21). Ethical investors say oilsands industry must cut environmental risks. Retrieved June 11, 2015, fromhttp://o.canada.com/news/ethical-investors-say-oilsands-industry-must-cut-environmental-risks

14. Five Benefits and Five Challenges of Collaborative Working. Retrieved June 3, 2015, fromhttps://www.learningpool.com/five-benefits-and-five-challenges-of-collaborative-working

15. Molten Carbonate Fuel Cells. (2014, January 10). Retrieved June 4, 2015, fromhttp://www.cosia.ca/initiatives/greenhouse_gases/molten-carbonate-fuel-cells

16. GHG Roadmap. (2014, June 10). Retrieved June 4, 2015, fromhttp://www.cosia.ca/initiatives/greenhouse_gases/ghg-roadmap