World population 2.5 billion by 2030 and many entering middle class, so total demand and consumption to continue to grow.

1Source: RESOURCE REVOLUTION, How to capture the biggest business

opportunity in a century, Stephan Heck and Matt Rogers, 2014 Amazon Publishing

Since 2000,

Energy–up 225%

Metals–up 275%

Food–up 125%

Global material costs

Creating value out of less, little or no resources at all!

Using less, providing

more!

Waste reductionEnergy supply increase,per person demand decrease

Standardized operating efficiency expansion

Information sharing & exchange expansion

Material development & substitution 2

From relying on water wheels, firewood and animals for power, fossil fuels just started to became the main power source.

Machine inventions replaced many handmade work at home by organized factories. The limited liability company was founded.

With the steam engine, machines started to replace animal power.

3

People thought man could not live

without horses!

This period was not good for all industries.Horse riding equipment demand fell due to the introduction of steam engines.The limited liability company started replacing local guilds. Textile guilds couldn’t compete with factories with five to seven year apprenticeships required. A factory could be set up in less than a year and new workers trained in weeks, not years.Sailing ships gave way to steamships.Waterwheels for flour mills and other uses were replaced by steam-powered operations.Many people fought this displacement of traditional methods.

4

Holding on to what is known is always easier than imagining the future which is untested and unknown.

This period was mainly influenced by the availability of electricity, oil, andsteel which provided the ability to stock goods for longer periods of time. It was the beginning of the assembly line.

This lead to the creation of modern cities and advanced transportation systems, like railroads and highways.

5

Now, people think we can not live without oil.

1. SUBSTITUTION OF MATERIALS – Replace expensive, scarce material with

inexpensive abundant material. Finding opportunities or developing substitutes.

2. WASTE REDUCTION – Reduce the amount material, time and other resources

being thrown away, not fully used or wasted throughout any process.

3. RECYCLE PROGRAM EXPANSION – Turn waste into the raw materials of new

and valuable products. Upgrading, reusing or recycling used products.

4. OPTIMIZATION & UTILIZATION EXPANSION – Improve processes to get more

value out of what is done now for more efficiency, convenience, safety and

reliability.

5. MORE VIRTUAL, LESS PHYSICAL ACTIVITY – More widely share information

to reduce duplication of information gathering efforts. Moving activities from the

physical to virtual like from shopping mails and internet selling.

6

Substitution

Waste reduction

Recycling waste

Optimizing processes

Virtualactivity

1. We will find substitutes with better performance, more output and less input (consumption).

2. We will replace scarce resources, toxic materials and non biodegradable substances with alternatives.

3. Lists of resources that are becoming scarce will determine what the future substitute materials must replace.

4. Material science is applying nanotechnology with today’s computers to find substitutes with superior qualities.

5. Material surface properties, absorption characteristics, optical properties and electrical properties are being discovered all the time.

7

Substitution

Waste reduction

Recycling waste

Optimizing processes

Virtualactivity

1. Plant-based eggs may replace eggs from chickens.2. Carbon fiber may be replacing steel.3. Solar power is slowly replacing oil, coal, uranium power.4. Battery power is replacing gasoline power.

Carbon fiber - Stronger, lighter than steel. It is already below

the cost of aluminum now.

Battery powerperformance and cost

are coming down.

Solar power - Pricing and purchasing terms improving all the time.

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1. We will start to eliminate waste throughout all processes from production through to the end user.

2. Energy in the form of steam and heat is greatly being wasted now in industrial processing. There will be much better air-conditioning systems and heat control in processes.

3. There will be less water waste from leaks and more water reuse.4. The waste materials from many industries will be the raw materials for

new industries in the future to reduce discharge.5. Products will be designed to cut waste and reengineering will be a growth

industry for equipment coming to the end of their original use.6. Even food products will be reengineered to grow in more arid

environments with less water, have more nutritional value and require less land to grow.

7. Most cars have 5-6 seats, but average car occupancy is 1.6 people/vehicle. The other seats are wasted. Cars are parked 96% of the time. Can’t they be shared to increase utilization time? People want transportation, not cars. The future is a self-driving taxi on demand system.

9

Substitution

Waste reduction

Recycling waste

Optimizing processes

Virtualactivity

1. LED Light bulb – Reduces waste of electricity, has room sensing and information gathering abilities, thus can go off with no movement in the room.

2. 3-D printing - Reduces much of the stamp-out waste in fabricating processes. This will reduce both in-process parts inventory and throw-away waste. Now, they can be used to form steel, titanium, gold and other materials. More specialty parts will be made locally and long distance part shipments will go down.

10

LED lights use 10% the electricity that

incandescent bulbs do, but are only used among

2% of users currently.

RECYCLE PROGRAM EXPANSIONWhile waste is being reduced, some waste could be modified or processed into valuable low-cost products.Many developers are looking for new uses of obsolete, worn out, toxic or rare materials that are in the original application.In the future, there will be raw material buy-back programs like the lead in batteries. The lead will be extracted from the used battery and be used in a new one. The lead will stay in use.Products will be designed with component reuse in mind.Raw material reuse locator systems (e-waste) will expand, reducing the chance a valuable material being thrown away.Companies will start converting equipment sales into services.The general rule in the future will be that the more a product’s components can be developed to be reused, the more competitive that product will be.

11

Substitution

Waste reduction

Recycling waste

Optimizing processes

Virtualactivity

ENGINE RECYCLING – For many years, specialty, heavy-duty or highly popular engines have been reengineered into new engines.Currently, there are five major components reengineered.

12

“5-C’s” of engine reengineering1. Cylinder Block2. Cylinder Head3. Crank shaft4. Cam shaft5. Connection rod

①

②

③

④

⑤

RECYCLE PROGRAM EXPANSIONSorting technology is being developed all the time. Some waste is hard to sort now. Not so in the future. This should make some material in land fill very valuable.

13

For many processes, there will be optimization for efficiency, convenience, safetyand reliability.Along and throughout all supply chains more in depth, timely and valuable information will be shared to reduce bottlenecks, inventories and processing time.Items that are only partially used will be rented, leased or shared on an hourly basis, weekly basis or project basis to increase utilization.With more information sharing, product standardization will streamline many operations. What is a special-made expensive product now will be an inexpensive standardized product with more flexible production equipment.Sensors in a wider range of processes and equipment will provide more information for improved efficiency and safety. What equipment is turned on but not providing any needed function? It will be automatically shut off.Underutilized expensive equipment will be replaced by simplified multifunctional machines. What energy-intensive equipment is only used part of the time? These will be redesigned to handle other functions.

14

Flexible equipment will turn specialty items into standard goods.

Substitution

Waste reduction

Recycling waste

Optimizing processes

Virtualactivity

15

Business integration

Medical information integration

Transportation information integration

Maintenance information integration

Purchasing & product development integration

Business Integration – Businesses share information through computer networks within the company as well as with supplier and customers.Medical Integration – Sensors will monitor the body condition of people for quick response.Maintenance Integration – Equipment and machines will be installed with sensors to determine maintenance and repair requirements.Transportation Integration – GPS systems will report the exact location of every vehicle on the road. Travel will be totally automated without human drivers.Marketing Integration – At purchase, information will be directly shared with developers for rapid product modifications and improvement.

INFORMATION INTERACTION EXPANSIONWith more information sharing and technical advances, many activities and process that are done by people will be automated and be accomplished when no one is around. Japan is to invest in robots for the health care industry, office and home cleaning and a wide range of services for an aging society.Products, services and processes will move out of the physical world (an item or activity) and into the virtual realm (visual image and simulation).Drone aircraft will continue to be applied in more situations.

16

Substitution

Waste reduction

Recycling waste

Optimizing processes

Virtualactivity

17

Conference Integration – Both for business meetings and friend’s meeting, there will be more teleconferences which will reduce the need for excess travel.Online Purchasing – Online purchasing will increase while some outside shopping will decrease.Simulation – An expansion of simulation and less physical testing.

Home shopping

Mall Shopping

Teleconference meetings

18

Process Less output

More input

Less input

Process Less output

More outputProcessLess input

Problem #1

Product Concept

Development

Problem #2

Production Process

Development

Problem #3

Market

Development

19

Consider the process new innovations going through from the original

concept to full use worldwide. There are three major problems (activities)

that must be addressed, and each problem has its own requirements.

Equal concerns

The longer it takes to develop the final version, the more expensive it is.

Problem #1 - Product-Concept Development

20

Problem#1 – It starts with a valued product concept and product development.

Once the concept is decided a prototype is produced to explain and test the concept.

After that, the first version is put on the market to learn how it is accepted.

Usually, there are production quality issues and market requirements that are learned at this time.

This leads to the 2nd version.

Once the 2nd version is accepted, total market demand is learned and more volume is required which

leads to the 3rd version that must be modified again to comply with volume production requirements.

Moving through these versions could take months, years and sometimes decades.

1st version product

development

3rd version product

development

2nd version product

development

2nd version1st version 3rd version

Version 2 ~ 3Version 1 ~ 2

Problem #1

Product-Concept

Development

Timeline

(The longer it takes to get into full production, the more expensive it is.)

Problem #2 – Production Process Development

21

Even if the product has many advantages over what is currently used, it must be

produced and supplied in high volume.

This is problem #2, the production process.

There are three types of production methods.

One is a handmade prototype. This is usually for tests and showing the concept to

customers and investors.

Then, if all goes well in the market a low-volume pilot production line is developed.

Finally, if all goes well, full volume production begins.

Supply chain capacity influence & supplier development

Pilot ProductionPrototype Volume Production

Timeline

Problem #2

Production Process

Development

Prototype production

Full volume production

Pilot volume production

Pilot to Volume

Prototype to Pilot

(The longer it takes to gain market acceptance, the more expensive it is.)

Problem #3 - Market Development

22

In spite of the product value, it takes some time to convince the users to move away from something

known to a new, untested solution.

This is problem #3, developing the market and getting market acceptance.

There are three stages to market entry also, starting with selling to enthusiasts only.

After their acceptance and testimonials, a narrow part of the market should accept the product. This

helps bring the cost and price down to some degree, and a narrow marketing program is appropriate.

Then, after a narrow part of the market accepts the product, it can broaden its market base and

become a global product. This is when mass marketing and detailed marketing distribution should be

explored.

Avoid or use existing marketing channel?

Find initial users, supporters

Find market, promote to it.

With testimonials from the initial markets, go global

Problem #3

Market Development

Enthusiast market

acceptance

Full scale market

acceptance

Narrow market

acceptance

Pilot to Volume

Enthusiasts to small market

Narrow marketEnthusiast Mass market

Timeline

Problem #2

Production Process

Development

23

In review, there are three problems with three stages in each problem.

Specialty market

acceptance

Full scale market

penetration

Narrow market penetration

Initial version product

development

3rd version product

development

2nd version product

development

Prototype production

Full volume production

Pilot volume production

Problem #3

Market

Development

Problem #1

Product-Concept

Development

Production decided for low cost, high quality

Full product awareness & market acceptance

Final version decided for best performance

24

Stage #1 Stage #2 Stage #3

Product Development

Initial version 2nd version improvements

3rd version improvements

Production Development

Prototype Pilot Production Volume Production

Market Development

Specialty enthusiasts Narrow market acceptance

Wide market acceptance

Funding sources

1. Inventor’s personal funds

2. Government subsidies

3. Non-profits & donations

4. Venture capital5. Small sales income

1. Venture capital2. Inventor’s

personal funds3. Sales income4. Government

subsidies5. Non-profits &

donations

1. Public funding (shares)

2. Sales income3. Venture capital4. Inventor’s personal

funds5. Non-profits &

donations

In review, the longer the final version product, final production line set-up and full market acceptance takes, the more expensive the project will be. Fund scheduling, time and planning are critical to insure cash is always available.

Financing along this timeline

Stage #1 Stage #2 Stage #3

Keys to success 1. The product has superior performance over existing method/product – faster,

safer, cleaner, more convenient

2. Clear pathway to significantly lower costs

3. Ability to supply in high volume

4. It is compatible with supply chain

5. 50-80% productivity improvement with 2-year payback timing

25

Components for success1. Interchangeable parts – Parts with many application and high utilization rate

2. Systems integration – Wide network of computer to computer

communication and interaction

3. Embedded software for instant monitoring

4. Remotely upgradable software to insure improving performance

5. Nanotechnology and biological methods delivering new discoveries

6. Simulation - Computer aided testing for rapid reliability confirmation

7. Rapid 3-D printer prototype creation for rapid product development

26

Resource oriented organizational structure1. Standardized, written execution operating system

2. Information sharing oriented network

3. Committed personnel to resource productivity

4. Talent and high productivity resources available

5. Freelance innovation promotion and crowd sourcing

6. Management measures return on energy/resources used.

27

Routes to Resource Productivity1. Substitution – Replace current material with lighter, stronger, cheaper, less

toxic, more available material (replace the expensive material need)

2. Waste – Apply processes that reduces what is discarded now (reduce throw-

away of material)

3. Recycle – Take valueless waste and turn it into a valued product (extend

use by introducing waste in new applications)

4. Optimization – Apply processes that reduce inputs and increase outputs

through high utilization rates of time and all material resources (improve

processing)

5. Virtualization – Increase simulations of processes and physical items.

(Reduce physical activity through mental/virtual activity)

You will find your business strategy for the years and

decades ahead within these five routes.

28

Substitution

Waste reduction

Recycling wasteOptimizing processes

Virtual activity

29

Source: RESOURCE REVOLUTION, How to capture the biggest business

opportunity in a century, Stephan Heck and Matt Rogers, 2014 Amazon Publishing

Our memories of tradition are always stronger than our

imagination of how things will be.