Can oil prices drive Innovation?

Sorry all regarding the delay in activity, I have been away.  Back to regular blogging directly. Here's a  starter.

In a recent conversation with a close colleague, Craig Briggs, who is located in Asia, the idea of oil pricing driving innovation came up and sparked a vigorous debate.

Here are Craig's thoughts on the matter; 

Will $120 Oil Drive Design Innovation? In the West, design is playing a vital role in the creation of eco-friendly and sustainable products. Motivated by corporate responsibility and ‘inconvenient truths’, these product designs have advanced rapidly beyond recyclable, recycled and/or biodegradable designs that sacrificed aesthetics for the cause. Now product designs are balancing function and form – products are being designed beautifully and responsibly. There is a market for it – consumers in most developed countries may make their purchase decision based on a brand’s environmental character and philosophy. In many cases, they may even pay a premium for it. It’s shared business- and consumer-led movement. But, in Asia this is not the case. Not yet. With the notable exception of Japan, Asia at large is too busy developing to pay much attention to eco-friendly and sustainable design. China opens a new power plant every 9 days. Business is becoming hyper-competitive and aesthetics overrule "friendly". Consumers are just not interested. They are not basing their purchase preference on such design, and they are a long way off from paying a premium for such well-designed products.

But $100 oil may change everything in Asia. Oil is the universal, driving energy and material source for every fast-moving good, and its rising costs are putting pressure on Asian marketers who are at the same time pressured to innovate and grow. Asia can no longer rely on cheap labor costs (by the way, labor costs are sky-rocketing in China, too) to buffer the increasing costs of materials. Marketers can’t pass along these costs in full to value-conscious Asian consumers, so they now are pressured to cut other costs – distribution, promotion, staff, and, production costs. That’s where the oil comes in.

 The first move marketers will take with production is to try to remove the volume of materials from the product. Take a PET bottle, for example. A 500ml PET bottle may have 25 grams of plastic in it. How do you take out 20% of the weight, and thus 20% of the costs? It’s not easy. Take 20% of the plastic out of your favorite mineral water bottle and you may feel like you are holding an intravenous drip bag. Removing costs can mean removing functionality and aesthetics. And this is where design can again play a vital role – designing for savings and innovation. For Asian marketers willing to invest in this kind of innovation there is competitive advantage and savings in the long term. Design can be sustainable, functional, save costs, AND be aesthetically pleasing. Companies and designers that combine imagination with functionality and that have the technical expertise in materials and structure are poised to lead products and brands toward this winning combination. Good, Fast, Cheap and Green (Pick Any 3) "Good, Fast and Cheap. Pick any two." This was the adage my first boss used to give to clients to demonstrate the innovation tradeoff - that innovation required a considered investment in time and money to reach fruition. But over the last 20 years, competitive demands dove-tailed with production efficiencies and created "good, fast and cheap – pick all three" as the standard – the cost of entry for marketers to compete and win. Now, a fourth variable is being added to the list of three – "friendly". The new adage: "Good, fast, cheap and friendly – pick 3". But we marketers are greedy, so we’ll soon want all 4. How will we get it? But the sky-rocketing cost of oil, now reaching triple digits, is presenting a renewed challenge to this scenario. Let’s face it, oil is the universal, driving energy and material source for every fast-moving good, and with pressure to grow markets and market shares, "cheap" may be falling back out of the equation. Or is it.. How do you innovate and remove costs out at the same time?

The answer is design – designing for innovation and savings. How do you design functionally superior products that are aesthetically pleasing, while simultaneously reducing the cost of production? This is a dilemma facing marketers today, those challenged to compete as the cost of oil ascends toward triple digits. Addicted to Oil and Innovation As marketers, we’re addicted to oil. Oil is the universal, driving energy and material source for every fast-moving good, and growing markets and market shares, we’re consuming more to make more. At the same time, we marketers are addicted to innovation. Innovation is how companies, products and brands are going to survive and grow in today’s ever-changing, competitive marketplace. But oil and innovation are in conflict. This priority to innovate, particularly with fast-moving goods, is made all the more challenging with the cost of oil reaching triple digits. Oil here being the universal, driving energy and material source for most every fast-moving good on our planet. How do you design a product that is functionally relevant, aesthetically pleasing and that uses less material? It’s not impossible, but certainly isn't going to be easy…

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