The fractal world of institutional innovation and waste

This post is built around a fantastic article called Institutional Innovation by +John Hagel and +john seely brown.

The article is such a rich source of ideas that it has had my head spinning for weeks. It has given me a vocabulary to clothe my ideas, along with some reputable sages who flesh them out. I've been thinking the ideas through in the context of waste, and as I explore I come to a fractal world where waste is dissolved down into its byproducts, a fractal process of looking deeper and deeper into details to extract ever increasing value.

It reminds me of the Mandelbrot set.

Mandelbrot set. Source: Wikipedia (jpg)

The Ten Faces of Waste Innovation

I have just finished reading The Ten Faces of Innovation by Tom Kelley (of IDEO fame) and Jonathan Littman, and found it sparked an immense flow of ideas on how to develop innovation in waste management.

The book describes ten personas for innovation, grouped into three broad types

• Learning personas
• The Anthropologist
• The Experimenter
• The Cross-Pollinator
• Organising personas
• The Hurdler
• The Collaborator
• The Director
• Building personas
• The Experience Architect
• The Set Designer
• The Caregiver
• The Storyteller

Reducing the cost of failure in waste innovation

In my last post "How to drive innovation in waste", I wrote about a foment of ideas being critical to innovation proceeding. From this foment, good ideas emerge and can then be developed.

Having written it, this model of innovation troubles me a little. Not because it doesn't work, but because it glides straight over something really important - and that is how to select ideas. But first, let me go back a step or two.

Publish then filter

I've been reading Here Comes Everybody by Clay Shirky lately, and the key point that sticks in my mind is the notion of "publish, then filter". Rather than filtering before publishing, the social model for innovation is to publish first, then let something like natural selection filter.

Now this model works where the cost of publishing is very low. It simply happens because it is cheaper (time, money, whatever) to publish than it is to evaluate. In fact, it is so cheap to publish that you can use the audience to filter for you.

Now how might you run a similar model in a waste processing business? Keep in mind that my aspiration for Garbologie is to make waste redundant. Everything becomes reincorporated into the productive economy rather than being siphoned off into large and growing waste streams at landfill, incineration or whatever.

Top-down and bottom-up

Attempting this through centralised data leads to a particular type of top-down approach. That approach is governed by thinking at a scale it can conceive of (large infrastructure), and is motivated by a drive to achieve targets whilst minimising environmental impacts. If you are in the business for long enough, this seems the only way to proceed.

Top down view, Empire State Building. Source: notmyholiday.com

Frankly, having been in the business for a while, this approach is paralysing and stupefying. It's paralysing because it requires massive capital investment, and this investment means that you have to be right. And stupefying because the only way to be right in waste is to go for the broadest, least value adding base.

My thinking is to attempt a bottom-up solution. It would seek to carve out particular materials from the waste stream and reprocess them. It would, necessarily, be formed of a network of loosely connected operations. Businesses even.

Bottom up view, Empire State Building. Source: Aquirkyblog.com

The challenge in bottom-up

The trouble is, how do you identify the materials to be carved out? And what is there to do with them? In building and sharing a scoop.it resource regarding innovation in waste management ("The Future of Waste"), I've come to realise that there is little shortage of ideas for processing a whole slew of materials.

There is no simple source of data that shows how much of a particular material is in the waste stream, and certainly nothing sufficiently fine-grained to enable decision making. There is no way to get help that isn't mediated by the same professionals who are locked into a "bigger is better" mindset. And the costs of failure are large - to test something you have to build it and hope they come.

So to me, the challenge is threefold:

1. Collect data. Lots of it, cutting across the problem on a range of different angle, and making that data as publicly available as possible
2. Be guided by the wisdom of non experts seeing the data with fresh eyes
3. Make the cost of failure low so that ideas can be attempted easily

My proposed solution

To me, many of the challenges are well on their way to being resolved by starting a business that is both broad and shallow. I have decided to do this through Tip/Shop, a site that is both: 

1. A customer oriented waste facility, clean, friendly and utterly focused on recycling as much as possible. As far as the customer is concerned, this is a place that is nice to visit, nothing like a waste facility; and
2. A test bed and incubator, gathering data on the materials coming in, seeking opinions from staff and customers on which materials could be next processes, and testing out micro-scale ventures to process them/

By having a steady stream of materials coming through, and by having sufficient space to undertake small scale trials, you can tinker until something works. That then develops into its own business, perhaps moves away to develop on its own trajectory. 

If you could do this as a myriad of employee centred ventures, each given support to come up with something that might eventually work and they can own a piece of, then you've created a business that is porous, interconnected and retains that "surface area" of a lot of people testing a lot of ideas on the ground. 

So this is how I propose to reduce the cost of failure in innovation. Provide a space where there is plenty of opportunity, and where experiments can be run regularly and easily. Make those experiments deeply personal to the people running them, and you might, just might, reduce the cost of failure.

How to drive innovation in waste

I keep coming back to this idea that waste management must innovate itself into sustainability

My problem is that, even as I write this, I realise that the statement is hollow. It's full of hollow words, like "innovate" and "sustainability" - empty vessels that can be filled with whatever meaning you want to fill them with.

The hollow words are a bit of a warning sign. They usually come out when good intentions go home. I suspect we've all experienced this - anybody ever been inflicted with "high performing teams"? We get a bit cynical when the words appear. They are usually foils to continue with precisely the opposite. Or nothing.

Let me clear here. What I have in mind is that we MUST find new ways of doing "waste" to stop this ceaseless (but rational) flow of materials through our society. That "MUST" has the passion behind it of a full-blooded scream from a cliff top.

How might it be done?

I suspect the innovation we need will not be achieved by decree. It won't happen through 5 year plans, or centralised command and control systems, or some sort of industry focus group. It also probably already exists. Just not where you'd go looking for it.

For me, I think the innovation we need will emerge out of a foment of ideas. An unexpected connection made between two seemingly disparate ideas. I don't know what the connection might be, which ideas might be banged together, but I DO know that you're more likely to find it if you keep knocking the ideas around.

Foment 1 by Arvid Wangen. From http://painting410.blogspot.com.au/

Where do the ideas come from?

Ideas will come from all over the place. As I've suggested above, the next incredible thing probably already exists, but not where you expect it. Let it come to you by exploring all different fields. Follow your nose. Let your interests take you to someplace new.

For me, I love the ideas swirling around emergent design. There are some great thinkers on Google+, Facebook and Twitter. So for me, ideas come from listening to what they have to say, contributing to the conversation, sharing where you can.

For others it will be different. I've had people suggest ideas from science-fiction, from movies, even chats with their mates over a BBQ. The point is not whether the ideas are intellectual or not, but whether they make interesting connections.

Again, the more ideas that bounce around, the more likely it is you'll find connections.

How do you bring that into business?

"This is all very well Adam", you might think, "but I have a business to run, and we can't just sit around and dream up new ideas.

True. But that's not really what I'm referring to. What I have in mind is creating a workplace culture where new ways of doing things are continually sought after, tested and then evaluated.

It is creating a workplace where ideas are tested BEFORE they are evaluated. It is creating a culture that assumes most ideas won't be quite right and a very few are awesome, but doesn't presume to know which is which.

It is creating a certain diversity of function, or background, of personal views and giving each equal autonomy to create. And reinforcing that the only judge is the customer. An idea might seem a dud to all within the business, but be a raging success with the customer. That idea is just as good as one that all staff vote on as being the best idea. And even better if the best idea (as voted by staff) isn't also a raging success.

To get to this point, ideas must be small enough to be "fail-able". There's no point in testing an idea which, if it fails, will bring down the business. I suspect this is where the cleverness comes in. Just as the smart part of science comes in designing experiments to test an hypothesis, the clever part of innovation is designing trials that test an idea.

What do good ideas look like?

I think around to ideas that I've tried or seen tried in waste. One was mattress recycling. Offered $10 per recycled mattress, staff didn't bother with high-tech solutions, but instead got a stock of knives and developed a system to dismantle mattresses by hand.

Similarly timber recycling. I had presumed that the best idea was to recycle timber to woodchip for supply to particle board manufacturers. Indeed, that was (and is) a good idea, but it relied upon chicken growers to buy the dust screened out of the woodchip. And this byproduct market was actually more reliable than the primary market.

It goes on. The best ideas, best markets, best technologies are never (or rarely) what you expect. The best you can hope to do is create the space for them to be tested, and to move in response to your testing.

Why are you telling us this?

I'm writing this to explore the idea for myself. Clearly. But I also write to explore the idea for my Garbologie business. I want this business to make real the thoughts I'm expressing here. To be the space where ideas can be tested, to be a skunkworks through which innovation can explode to change the face of waste.

To this end, the thoughts are expressed to gather ideas. I would appreciate any suggestions, past successes, actualisation frameworks.

Infrastructure or disruption

There is an argument that waste management is about providing infrastructure that services economies.

Under this model, it is the responsibility of government to provide a core service that gets rid of waste as quickly and efficiently as possible. Cheaply too. There is an emphasis on planning, on making sure that you never get into a situation where you can't get rid of the rubbish.

The outcome of this sort of top down approach is that waste tends to get treated in aggregate, and the least bad outcome pursued. The approach tends to reinforce the position of established players, and reduce the chances for innovation. It is safe mediocrity.

An alternative is to see waste management as having ample scope for disruption. That waste is no different to any other industry in a free market, and that is, established players are on a permanent slide to being consumed by nimbler businesses around them.

If you see the potential for disruption, then planning is the last thing you will want to do. Not only are plans impossible, but creating the plan removes the ingredients for disruption. Disruption requires bottom up action, people and businesses recognising and acting on opportunities close to the ground rather than from the stratosphere of spreadsheets built on dodgy assumptions. Planning tends to create solutions that prohibit bottom up solutions.

It would be fair to say that I have a strong bias toward bottom up solutions. This seems more entrepreneurial, more innovative, efficient, alive. It seems to me to create the necessary preconditions for excellence. Nevertheless, there remains a role for base level infrastructure.

There needs to be somebody providing a safety net solution that prevents disease, but a net that can be built upon. I think that is what landfills are all about. They are imperfect but sufficient. They do not suffer greatly from waste being taken out and recycled, and indeed their existence is so repugnant that you feel obliged to do something. They do not demand large volumes to be viable. In fact, the existence of landfills might even be a necessary precondition for disruption in the waste industry.

Landfill, complete with compactor and seagulls. From Zerowaste SA.

And so, like so many things, you have to conclude that it is not a matter of either-or, but both-and.

That is not to defend landfills (though I've run many). It is simply to acknowledge them as an imperfect part of an imperfect world. A part we should not rest within but rather build upon.

Marginal thinking and waste

You would think that finance and economics were a little distant from waste management. Or at least, any theory beyond "get rid of this rubbish at the lowest cost".

You'd be wrong. Reading a summary of Clayton M. Christensen's book How Will You Measure Your Life, you might get some sparks of new perspectives.

Christensen looks at how marginal cost theory is misapplied - a series of incremental decisions based on marginal costs leads to a bad overall outcome. It inevitably leads to the status quo being maintained, even in the face of fatal changes in circumstances. The example used is nimble Netflix devouring the Blockbuster behemoth.

In private lives, according to Christensen, a similar "marginal cost" slippage in values can be catastrophic.

If the principle can be transferred out of economics and into private life, it can also be transferred to waste management. Indeed, on reflection, it transfers very well.

After all, what is waste other than a long series of marginal cost decision that lead to an outcome that is illogical and undesirable, even for the decision maker? 

Only in a marginal cost world can it make sense to recover only 15% of the estimated $21 billion of gold and silver incorporated in electronic goods, leaving the remaining 85% to go to landfill in concentrations 40 to 50 times the concentration of the ore originally mined for the metals.

It is a world where each decision is a little disaster, where the benefits are small and barely realisable by the decision maker, but the path embarked upon is stupid for society. 

It is a world that suggests the standard economic theory unravels, where even if people did make individual decisions in perfect knowledge (which they don't), the aggregated decision would still be dumb because each self-optimised marginal cost decision slips further and further from a sensible outcome.

Christensen suggests that the way to overcome the outcomes that arise from marginal cost theory is to look at things from a sort of "Ground Zero". Consider the world as if you were a disruptor. Ignore your "assets" on the ground. What would the decision be then? If it would be different to what you are doing, change what you are doing.

This has powerful resonances with waste management, and reinforces why entrepreneurs (and perhaps intrapreneurs if they can find the necessary internal support) are so important to overthrow the status quo.

When recycling goes wrong

Having blogged so consistently of the opportunities for great improvements in the recycling of waste, it is worth recalling that recycling can go wrong.

A great (terrible) example among many is the outbreak of Bovine spongiform encephalopathy (BSE) in the UK in the late 1980s and early 1990s. This was caused by the recycling of animal remains (specifically that of contaminated cattle) into meat and bone meal which was then added to cattle feed to improve its quality. The idea was that the animal remains were sterilised, and so no diseases could be spread in this form. On the face of it, this seems a wise use of an otherwise waste resource.

Of course, with hindsight we know this was not the case. The disease led to the slaughter of 4 million cattle in the UK, and the deaths of over 200 people to October 2009 (its long incubation means that there may still continue to be cases). And with hindsight we ask ourselves how it could ever have been considered a good idea to have cattle, naturally plant eaters, in effect cannibalising other cattle.

Cow with BSE, digging frantically but going nowhere. Source: Wikipedia

We can respond to the BSE experience in several ways. One extreme is to demand full testing of all risks before we try anything new. This approach essentially requires that anything new be proven to be ok - formally an impossibility (as Nassim Nicholas Taleb pithily wrote: absence of evidence is not evidence of absence), and crazy insane as a blanket rule. In effect it decides that the status quo remains, and the status quo may be far worse than the unprovable alternative.

The other extreme is to pursue and implement any new idea, stopping only when it proves to be bad. This is easy to do, but built into the approach is an acceptance that bad things will happen, and that they are ok. On big risks this is also insane crazy.

So the middle ground ends up, as always, the best ground. You try to avoid big negative outcomes. This is not quite the same as quantifying the risk, because some risks are unknowable with the current knowledge base. It is attempting to identify what bad things might happen even though we don't know how they might happen, and then trying to guard against the worst.

I don't quite know what the rules of thumb might be for this evaluation. Perhaps it has something to do with not messing with any ordinary order of things (begging the questions "what is ordinary?", "ordinary to who?") and so on. It might look at the natural cycles of materials (though there is not a lot natural about steel manufacture). It might even decide to make things no worse than they are now. But I think something could be derived.

At core, we need to be careful, but not paralysed by fear. We need to be especially careful around food and systems  that are hugely complex and perhaps unknowable in the full scale of potential interactions (such as animals, the environment). But at the same time, we need to keep the course clear for innovation. And from there, be sure to keep a ready eye out for things going wrong.

Perhaps this warning is pointless, obvious and useless. Perhaps, but I think it is worth the reminder that recycling is not always best. Some paths need to be very carefully thought through before they are begun. But this does not mean no path should be begun.

What will the IT revolution look like when it hits waste?

I often wonder about different perspectives on something I'm looking at.

One perspective that has been bugging me lately is the IT revolution and how it might affect waste. Specifically, the sort of hyper-innovation that has ripped computing from the basement and lab coats into smartphones and cloud computing in the space of 50 years.

This is not a question of how computing per se is affecting waste. Of course, there are some interesting things going on with data management and so on, but it is fundamentally a business built on people circling big and expensive plant: lab coats circling big, expensive machines. Computing has not changed this, and isn't really what is bugging at me.

What bugs me is how and when waste will make the shift from mega-machines to become personalised. When will it become something that we can all find out self-expression through? It is the shift in attitude that interests me.

It sounds absurd to even propose that something like waste could ever become personalised, ever be a medium for self-expression. Just as a basement full of wires and punch cards and blinking lights could never be the genesis of an awesome flowering of personality. But it is, and so too waste might not only be disrupted forever, but might even disrupt everything forever.

How? Imagine first a series of business models that permit the citizen to easily take control of his or her waste for financial reward. The resource value within the waste drives this new perspective, and you start to see the sort of massive reverse logistics that so characterises scrap steel. You start to see a self-reinforcing loop, not needing capitalism to be overthrown for it to make sense.

Imagine this then driven by high-tech. You can imagine little bins that don't just store your rubbish, but deconstruct it for sale of the components, pocket sized units that deconstruct your rubbish when you're on the go. Tiny micro-factories at every street corner replacing the vending machine, taking materials in from people walking by and using them to make your next purchase as you wait, bleeping out little calls to people who have the stuff they need. Credits automatically credited for this, the end of bulk logistics, the ushering in of personalised consumption.

But it doesn't need high-tech, and it certainly doesn't need this high-tech, for the disruption. All it needs is a disruptive business model to start us down the path. That little disruption, that upstart, will set us on the path to changing everything. Just like the clunky mini-computer led us to the PC to the smartphone and cloud computing.

I wonder about this stuff. I'm not so egotistical to think I need to make it happen, but I can't help feeling it is about to happen and now is the perfect time to be involved. I am sufficiently egotistical to think I can be part of the happening.

Government in waste - help or hindrance?

Whenever there is talk of waste and recycling, there is talk of how the Government can assist. Should it?

On the plus side, Government obviously has loads of cash, and can make all sorts of laws to reinforce the business model of a recycling business. It can mandate recycling of particular materials, put in place landfill bans, impose landfill taxes and subsidise recycling business.

But should it? Perhaps, under certain circumstances, however this is going to naturally lead to a certain type of industry. It will favour the large and established over the small and nimble. It will favour those who control the market over those who would disrupt it. It will favour the bureaucratic over the free-wheeling. It will favour monumental infrastructure over human scale business model innovations.

Government will take a risk averse approach and channel money to organisations that, whilst they might lead to significant improvement, will not lead to great improvements. Organisations that are exciting and disruptive, that might make massive changes, won't attract support because they could equally fail hugely. Government will look to minimise downside, not maximise upside.

Be this as it may, I would argue that the question is posed the wrong way. Instead, the better question is "should waste and recycling businesses seek Government support?" And I suggest that the answer is resoundingly "No!"

Chasing Government support takes a lot of effort. More importantly, the things you have to do to your business model to meet Government funding requirements will also cripple your business. You will start as a nimble organisation, reliant on none, and end up gummed up with a bureaucracy that you never believed possible. And certainly never needed.

In this field that is ripe for disruption, ready for upstarts, primed for somebody to change everything, you don't need to be wasting your time convincing the Government. Use that time to surround yourself with investors who get what you are trying to do and will help you get there.

What would a Silicon Valley for waste look like?

We are all familiar with the awesome reputation of Silicon Valley as a hotbed of entrepreneurship. It is a classic example of the synergistic effects of an ecology of excellence growing up around an industry. Ideas attract brilliant minds attract venture capitalists.

More important, however, is the prevailing ethos that you have a crack. Trying and failing is better than never trying for fear of failing. Or trying to cover yourself against all risks before you begin. Business is risky. Good business people accept that, minimise their risks and then begin.

This sort of culture is sorely missed in waste management. It is a field that has managed to convince itself that it needs government support, that it is only able to succeed if it is big. An enormous risk averse edifice that grinds out incremental improvement only when led by the nose by government. An industry that leans heavily on public underwriting of private profits, and even then manages to get it wrong (no names here, of course).

Imagine if the norm in waste management was for entrepreneurs to get out there and start creating little eruptions of businesses. Or, more accurately, little disruptions. What might that look like?

You might see some very nimble companies focusing on serious product differentiation in otherwise bog standard markets. This would be great for customers. You would certainly see exciting solutions to avoid the capital intensive and largely monopolised landfill. Indeed, clever ideas would sidestep high capital requirements and barriers to entry across the board. I reckon you'd also end up with an ecosystem that drove landfill close to its deathbed.

A Silicon Valley of waste would emulate the start-up process for technology companies, starting as bare bones business that delight their customers, and growing into business that are so prevalent that you can't imagine the world without them. It would also provide the space for ideas to be tested and abandoned without disgrace.

To get to this point will be a tricky chicken and egg problem. Some sort of venture capital is required to get this off the ground, but that won't happen until there is a track record. And a track record is hard to achieve without funding. And, finally, brilliant minds are especially tricky to attract in the absence of a track record or funding.

I think it is a nut that can be cracked, and will be cracked by innovation in business models. I will blog on this in a later blog. I will also blog on what a constellation of small waste businesses might look like.

Thanks for following this tale, and I welcome any comments or suggestions you might have.

The lessons from scrap steel recycling

In yesterday's blog Scrap steel - the greatest recycling story ever?, I pointed out how significant scrap steel is as a recycling sector. The sheer size of scrap steel recycling through the Electric Arc Furnace obviously diverts large quantities of material from landfill, but it also saves immense quantities of energy and thus greenhouse gases.

Electric Arc Furnace, image courtesy of Made in China

 This is all good, but more interesting is what lessons can be learned. My view on why scrap steel is so heavily recycled is:

Steel is integral to industrial societies

Steel is used in so many applications, from consumer uses like cars, through to heavy duty industrial application such as reinforcing for concrete. Indeed, it is so pervasive that it could be said to define the current era. All of this means that there are a great many buyers each looking to use it in any number of applications. The market drives this.

Translating to other materials, it is vital to let markets drive recycling, a point I return to over and over. Recycling without a market is just another form of waste disposal. Markets thrive where there is competition, and so developing a myriad of uses for the materials within waste will encourage its recycling.

Steel from scrap is high quality and uses less energy to make than from iron ore

It always helps if product generated from recycled material is of high quality. It especially helps if there are energy savings (though these tend to net out through pricing of scrap steel when compared with other raw materials such as iron ore). 

Sometimes these attributes are inherent in the product. Steel, aluminium and glass all recycle into high quality products using less energy. Sometimes it is a decision made by the recycler. In deciding how to sort for materials, the quality of the end product is determined. Failing to remove steel (ie nails) from timber recycling plants means that the chip cannot be used for particle board manufacture.

Steel is a cornerstone of the American economy

The point here is similar but different to my first. Being linked into the dynamic, innovative American economy means that there will always be a seething mass of engineers and entrepreneurs looking to do better. This is one of the great features of the American culture, and why America recycles more than 80% of its steel, far better than any other economy.

Other materials have a great prospect if they too can hitch their wagon to a culture of innovation. You can imagine, for instance, palladium's use in electronics driving all sorts of recovery innovation. This will be the subject of a future blog.

Steel is easily extracted

Being magnetic, it is easy to remove steel. Similar processes can and are being invented for other products, but here is where materials processing engineers with some lateral thinking could be game changers. We need to support this, encourage it, drive it.

Steel is dense and easily transported

There is a lot of cost in moving space around. If you can get a lot of weight into that space, then you are increasing the transport efficiency. Less dense materials can be made more dense through compactors, and this must be (and is) a first step for any recycling operations.

Waste paper baler, photo courtesy of Alibaba

Steel is high value

Leaving perhaps the most important to last - steel has a value that is high and preserved as it moves through the economy. This enables a vast web of collectors consolidating to larger and larger entities, all profitable in their own right. The ecosystem thus created is vital. Container deposit schemes seek to create the same system of cascading value through legislation. Not as good as a natural market, but sometimes these sorts of steps are needed. Any long term recycling and upcycling venture must be financially worthwhile for all participants.

So my thoughts. I'd be keen for comments on how the success of scrap steel can be, and is being, translated to other materials.