Cut costs or hyperscale? Yes.
Cut costs or hyperscale? For green business, the imperative is to do both. Fast.
That’s because green businesses face a dual challenge: scaling their operations to meet demand and reducing costs to ensure their products are accessible and competitive. Achieving this balancing act is critical because without reaching cost parity with carbon-intensive alternatives, green products risk remaining niche and unaffordable for the broader market.
At our recent Green Business Building Global Summits, around the world, we have heard from players across the spectrum on the challenges of this delicate balancing act. But what is inspiring is how many success stories we also saw – and how large incumbents are stepping into the green business arena. For example, in Stockholm we spoke with Harald Mix on how he’s growing multiple low-carbon, high-capex companies simultaneously, and using lessons from one to cut costs and speed up the others. And in San Francisco, we heard from HP on how incumbents can profitably incorporate circularity to existing businesses.
It's a tall order, which is why we recently hosted a live webinar, sharing real examples of how businesses are achieving significant cost reductions using the strategies we outline below.
Five elements for green businesses to accelerate cost-reduction strategies:
- Ambitious Target Setting: Establish aggressive cost reduction targets based on theoretical minimum costs to drive innovation and efficiency.
- High-Paced Innovation: Leverage artificial intelligence to enhance the innovation process, reducing time and cost while improving outcomes.
- End-to-End Supply Chain Integration: Control costs by managing the entire supply chain, potentially through vertical integration, to ensure supply and reduce unit costs.
- Design to Value (DtV): Focus on optimizing product design to minimize costs while maximizing utility, using standard components and established supply chains.
- Excellence in Capex Management: Implement best practices in capital expenditure management, including the plant-as-a-product strategy to reduce costs and enhance efficiency.
By focusing on these strategic areas, climate tech companies can overcome the dual challenge of scaling and cost reduction, positioning themselves to lead the transition towards a sustainable future while innovating new sources of revenue.
We encourage you to read more about implementing these elements in A radical approach to cost reduction at climate tech companies.