1、 2022 Boston Consulting Group1Deep Tech Powers New Net-Zero BusinessModelsNOVEMBER 01,2022 By Jean-Franois Bobier,Nicolas Goeldel,John Paschkewitz,Stefan Gross-Selbeck,Antoine Gourvitch,and Anne-Douce CoulinHow can deep tech help companies stay profitable while becomingsustainable?The answer lies in

2、 a combination of advanced technology andnew business models.CEOs and board members are quick to point out that they understand reaching netzero will require leveraging emerging technologies.They know they need to moveFortune estimates that Fortune 500 companies account for about 27%of 2022 Boston C

3、onsulting Group2greenhouse gas emissionsand they are aware that mature technologies have thepotential to reduce only 25%of current CO2 emissions(according to theInternational Energy Agency).They also understand that advanced technologiesalone will not be enough.True sustainability will require game-

4、changingtechnologies,such as advanced materials,bio-based processes,and new forms ofindustrial automation,plus new business models and associated changes inconsumer behavior.Sustainability is not just good for the climate.Fossil fuel energy prices are expectedto remain high and volatile.Cutting ener

5、gy consumption and emissions oen gotogether,and we have seen new industrial processes that lead to reductions of upto 50%in both.Early adopters can get ahead of tightening energy requirementsand potential environmental-impact taxes as governments ratchet up regulationsin response to growing global p

6、ressure to act.They can also establish competitiveadvantage during the transition as new business models are enabled,openingopportunities to differentiate and create new markets.Understanding the needand the opportunityis the easy part.The hard thing,these same leaders tell us,is determining how bes

7、t to move the needle,especiallyin three big decision areas:Its a tough trifecta.But the benefits in revenue,costs,and shareholder returns,combined with changing regulations that penalize unsustainable practices and therising difficulty of financing emission-intensive businesses,will eventually force

8、 allcompanies to move.Slower firms are likely to find themselves playing technologycatchup from a long way behind.Where to focus:which technologies to bet on and which areas of the businessto transform How to accelerate R&D and sustainable-product development How to productively disrupt existing bus

9、iness models with more sustainablealternatives 2022 Boston Consulting Group3Based on our experience with sustainability leaders,heres how to set yourcompany on the right course.Game-Changing TechnologiesNew technologiessome already in use and others still in developmentpromiseto alter every stage of

10、 the product life cycle,from R&D to raw-material inputs tomanufacturing and supply chain to utilization and end of life.(See Exhibit 1.)Newcompanies in new industries,such as SpaceX with its reusable rockets,are applyingadvanced technologies systemically across the full value chain,including end ofl

11、ife.There are many examples in traditional industries as well.2022 Boston Consulting Group4R&D.In industries such as automotive and pharmaceuticals,companies spendbillions of dollars annually to build and test prototypes and conduct clinical trials.Advances in computing and AI are reducing this requ

12、irement by making possiblefast and accurate simulations of products in development,from cars to drugs.Quantum computers,still in early development,can simulate the chemistry of thebattery,which is too computationally complex for classical computers.Daimlerand IBM are leveraging this emerging technol

13、ogy to develop electric vehicles.Googles DeepMind AlphaFold is able to predict the likely 3D structure of proteins(which translates into biological activity)based only on their amino acid sequence,a key advance for drug discoveryInputs.Petrochemicals are used to make a wide range of products,from pl

14、astics tocosmetics to fertilizers.Advances in biotechnology make it possible to switch torenewable feedstocks(such as sugar cane or organic waste)by using modifiedorganisms to transform these inputs into the desired molecules and materials,orby directly extracting polymers of interest from plants.Fo

15、r example,DuPontsSorona,used in carpet and apparel manufacturing,and Dows Ecolibrium,the keyinput in the latest Crocs footwear line,are made with bio-sourced polymers.ExxonMobil,BP,and other energy companies are working on sustainable aviationfuel,made from biomass,waste,and other non-oil inputs.New

16、 technologiessome already in use and othersstill in developmentpromise to alter every stage ofthe product life cycle,from R&D to raw-material inputsto manufacturing and supply chain to utilization andend of life.2022 Boston Consulting Group5Manufacturing and Supply Chain.Until recently,massive scale

17、 was consideredthe best way to bring costs down,but it came with high environmental and societalcosts since it led to offshoring and extended global supply chains.New incentivesfor regionalization and resilience,renewable-energy sources,and advances inadditive manufacturing,robotics,and AI all boost

18、 the efficiency of localmanufacturing and make it increasingly economical to locate factories near theend consumer.For example,Essentiums 3D printer produces aviation-grade partsfor aerospace maintenance where they are needed,eliminating overproductionand increasing airplane uptime.Utilization and E

19、nd of Life.Heating and appliances for buildings account foralmost a third of greenhouse gas emissions.Advanced materials can improveinsulation,reduce the need for artificial lighting,and even generate electricity.Forexample,View,a Silicon Valley startup,makes smart windows that can yieldannual savin

20、gs of up to 18%in energy use from heating and air conditioning.Green Basilisk,a Dutch startup,is developing a self-healing concrete using bacteriathat prevent the cracks that degrade traditional concrete.Other startups,such asNoveon and Urban Mining,look to address e-waste,as well as the limited sup

21、pliesof rare-earth metals used in batteries and other forms of electrification,throughimproved recycling and reuse.Permutations and Combinations.Innovations such as those described above canbe combined for even greater impact.In construction,cement substitutes(production of cement accounts for 8%of

22、greenhouse gas emissions),newmanufacturing processes,and better building designsuch as the collaborationbetween developer Lennar Homes and ICON,which uses 3D printing to produceconcrete structurescan lead to less embodied carbon,greater energy efficiency,and more affordable housing.In the food indus

23、try,which is responsible for 26%ofcurrent greenhouse gas emissions,alternative proteins,made using new inputs andadvanced processes,have met with a favorable reception from consumers.If theseproteins continue to make inroads,and if technological advances lead to more andbetter products,the industry

24、may undergo a disruptive technology upgrade,with 2022 Boston Consulting Group6value pools shiing upstream toward innovations that improve taste,texture,andnutrition.The Green-Premium DilemmaTechnology is only one of the challenges that big companies face,and oen notthe toughest one.The cost of mater

25、ial or process substitutions,and therefore theprice manufacturers need to pass on to consumers,can be a huge barrier tochange.Bill Gates coined the term“green premium”to describe the pricedifference between green and more carbon-intensive products.From inception,deep-tech solutions typically cost 30

26、%to 240%more per unit than traditionalequivalents:30%to 50%more for bioplastics,75%more for new cements,90%more for meat substitutes,and 240%more for sustainable fuels.These levels of increase are hard to swallow,especially for companies in low-margin industries.Moreover,consumers are fickle.While m

27、ore than 80%say theypay attention to the impact of their behavior on climate change,BCG consumerresearch shows that only about 1%to 7%(depending on category&geography)actually make purchases based on sustainability considerations.Fortunately,many deep-tech solutions can benefit from scale curve econ

28、omics,with unit costs decreasing substantially over time.For example,photovoltaic costsdropped by almost 90%in ten years.Precision fermentation costs fell from$1million per kilogram in 2000 to$100 in 2020.Thanks in part to the kick-startprovided by Tesla and its“gigafactories,”the average price of a

29、n electric-vehiclebattery pack fell from$1,200 per kilowatt-hour in 2001 to$132 in 2021.One way to overcome the green-premium dilemma involves starting a virtuouscycle with the 1%to 7%of eco-conscious consumers willing to pay for greenproducts and then reducing prices with increasing scale to enable

30、 sales to morecost-conscious consumers.Adidas,for example,developed innovative additive-manufacturing processes and materials to make its Futurecra sneakers 100%recyclable.The company brought the new shoes to market in 2017 at a premium 2022 Boston Consulting Group7price of about$350 per pair.The sh

31、oes are now available in the US for two-thirdsthat amount.Meanwhile,they have reinforced Adidass reputation as a leader intechnology and sustainability.Technology Plus Business Model InnovationWhile the premium-entry approach has a proven track record,its initial reach andimpact are constrained unti

32、l the scale curve reduces prices to mass-market levels.Fortunately,production is only half of the equation.The climate change crisis hassparked growing innovation in the more sustainable use of everyday products.(SeeExhibit 2.)The best-known example may be future fleets of fully autonomous vehicles

33、thatwill be shared on demand,enabling a more sustainable paradigm fortransportation and mobility.Others include the following:2022 Boston Consulting Group8These business models are not only more sustainable,they also tend to be costefficient.As a result,they can cancel out the green premium incurred

34、 by newtechnologies,opening paths for broader and faster adoption.We estimate that the Shareability and Durability.Miele is designing and pricing appliances thatincorporate repair and upgrades as a service and are guaranteed to last at least25%longer,on average,than competitors products.Outdoor outf

35、itterPatagonia offers a marketplace for the companys used gear that it claims addsabout two years to the clothings lifetime.REI offers a similar trade-in servicefor many of its products.Customer Involvement.PepsiCo and SodaStream(which PepsiCo owns)arepiloting soda sold as a syrup to which the consu

36、mer adds water and thencarbonates using a SodaStream machine.The new model eliminates the needfor plastic bottles,aluminum cans,and the transport of heavy palettes offinished product.We estimate that this approach could save about 80%ofemissions over the products life cycle compared with traditional

37、 so drinks.Product Performance.Lightyear,a startup,has designed a solar-poweredelectric car that trades acceleration and speed,which many drivers do notneed,for higher mileage.The car aims to reduce emissions by 65%overbattery-powered EVs in California.So-called“ugly produce”companies arecreating a

38、market in the US for fruits and vegetables that would otherwise goto waste.A“frugal innovation”movement in developing economies helpsconsumers“get the job done”with lower-cost and more sustainable products,such as the MittiCool clay refrigerator in India and Spandan ECG,a portableheart-monitoring de

39、vice that connects to a smartphone.Virtualization.Numerous fashion,apparel,and luxury goods companies,including Nike and Herms,offer digital versions of their products for use inthe metaverse.Virtual goods offer consumers some of the same benefits asphysical ones(for example,fun,a desired identity,b

40、elonging in a group,orVIP status)without the direct environmental costs.Nike had sold$185 millionworth of virtual apparel as of August 2022,according to Dune Analytics.2022 Boston Consulting Group9combination of technology and business model innovation has the potential toreduce emissions by up to 8

41、0%.While not all products or services are candidatesfor radical business model innovation,combining premium-entry and marketdisruption strategies will in many sectors be essential to achieving substantialprogress toward net zero.(See Exhibit 3 and the sidebar,Combining Deep Techand Business Model In

42、novations in the Auto Industry.)The mix of technology levers that companies can pull will vary by industry,of course,but there is a high degree of overlap in the types of movescompanies can make to speed their journeys toward net zero.The autoindustry is already racing against the market shi to elec

43、tric vehicles whileit plots a longer-term course toward autonomous mobility.OEMs and theirsuppliers can combine multiple advanced technologies and business modelinnovations along the way,including the following:COMBINING DEEP TECH AND BUSINESS MODELINNOVATIONS IN THE AUTO INDUSTRY Reducing the high

44、cost of prototyping and testing through virtualsimulations using AI and quantum computing and powered by actual 2022 Boston Consulting Group10 Forcing this kind of disruption has always been difficult for incumbents that havebuilt massive businesses and market shares through models of incrementalimp

45、rovement.But climate change is a radical problem that mandates equallyradical solutionsand a lot of them.We have already seen big gambles on newmodels by companies such as rsted in renewable-energy production,Maersk ingreen shipping,Unilever and Nestl in alternative proteins,and Yara International(t

46、he former Norsk Hydro)in new modes of fertilizer production.Four Steps to Get StartedEvery company is different,but here are four steps that any business can use tointegrate deep tech and business model innovations into their strategy andsustainability programs.customer driving data Exploring perfor

47、mance tradeoffs that could be achieved by replacinglithium-based batteries with green hydrogen fuel cells,which are lessconvenient(they need to be replaced and cannot be recharged)Streamlining the production,storage,and transport of spare parts withdecentralized,on-demand 3D printing factories Reduc

48、ing vehicle weight and improving aerodynamics with designchanges and the use of new materials,such as carbon fiber,innovativemetal alloys,and ceramics Addressing low vehicle utilization and low passenger occupancy levelswith advanced carpooling models enabled by AI and embeddedsensors,and with vehic

49、les designed for specific use cases 2022 Boston Consulting Group11Establish the baseline.Progress requires metrics,but most companies cantpinpoint their starting line.Our most recent survey of corporate carbon emissionsfound that only 9%of companies quantify their emissions comprehensively.Thefirst

50、step is a thorough emissions evaluation to identify the greenhouse gasreduction potential across the value chain.Assess the opportunities.Exhibit 4 contains a checklist for both product life cycleinnovations and business model development.An objective assessment of theopportunities will help priorit

51、ize the effort according to value and feasibility byproviding answers to such questions as:Which innovations will have the biggest impact?Which are(relatively)quick and easy to implement?Which require larger,longer-term investment,and which require externalpartners or possibly the creation of an eco

52、system?Which require development outside the core business using incubators orcorporate venture capital?2022 Boston Consulting Group12Remember that multiple innovations can be applied to one product or service andthat the same innovation can be applied to several products or services.Manage a portfo

53、lio.Companies will be operating in uncharted territory.Failureis inevitable.Management will need to make a portfolio of bets that it continuallyculls and adds to over time as progress is assessed,technologies advance,andrelevant models in other sectors come to market.Rethink the operating model.Once

54、 companies move beyond what can beachieved though technical and operating efficiencies,most will need newoperating models and ways of working.Integrating advanced technologies andnurturing new business models require speed and the ability to work in agile andcross-functional teams that can test and

55、learnand test and fail and move on.This is different from the operating model that most incumbents use today and will 2022 Boston Consulting Group13likely require some form of transformation throughout the organization.Sustainability also is not a solo pursuit.Companies will need models for workingw

56、ith partners,such as suppliers,and in ecosystems with customers and others,especially when it comes to tackling scope 2 and 3 emissions.Its been said that no incumbent company has ever been responsible for industrydisruption.This may be true,but times are changing fast.The demands of creatinga more

57、sustainable economy will reinvent how companies use new technologiesand think about innovation.Leaders will be forcing radical,rather thanincremental,change.This is the second in a series of articles highlighting how deep techthe problem-drivenapplication of advanced technologies to address large-sc

58、ale issuescan help deliversuperior value and growth while enabling companies to achieve their sustainabilitygoals.2022 Boston Consulting Group14AuthorsJean-Franois BobierPartner&DirectorParisNicolas GoeldelDeep Tech Lead,Hello TomorrowJohn PaschkewitzPartner&Associate DirectorWashington,DCStefan Gro

59、ss-SelbeckGlobal Managing Partner of BCGDV,Senior Partner BCGDigital Ventures BerlinAntoine GourvitchManaging Director&Senior PartnerParisAnne-Douce CoulinDigitalBCG Technology Programs Senior ManagerParisABOUT BOSTON CONSULTING GROUPBoston Consulting Group partners with leaders in business and soci

60、ety to tackle theirmost important challenges and capture their greatest opportunities.BCG was thepioneer in business strategy when it was founded in 1963.Today,we work closely withclients to embrace a transformational approach aimed at benefiting all stakeholders 2022 Boston Consulting Group15empowe

61、ring organizations to grow,build sustainable competitive advantage,and drivepositive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range ofperspectives that question the status quo and spark change.BCG delivers solutionsthrough leading-edge management co

62、nsulting,technology and design,and corporateand digital ventures.We work in a uniquely collaborative model across the firm andthroughout all levels of the client organization,fueled by the goal of helping our clientsthrive and enabling them to make the world a better place.Boston Consulting Group 2022.All rights reserved.For information or permission to reprint,please contact BCG at .To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and Twitter.2022 Boston Consulting Group16