Eco-Advantage Blog

November 16, 2006 | Andrew Winston | Jump to: Comments (0) | Post A Comment

Using regulations to drive advantage (or not): Cummins engines

Here’s a quote from a recent New York Times article titled “Turning Toughened Rules Into an Advantage”:

When engineers at Cummins, a diesel engine maker, first saw the suggested new federal clean-air standards for their engines in the early 1990s, they argued that the standards would be impossible to meet…But in October, when the Environmental Protection Agency needed a place to trumpet the success of the standards, it came here, to Cummins’s headquarters. A day after the E.P.A. event, Cummins followed with more good news, announcing that it would invest $250 million to revive a partly idled plant and hire 600 workers to build state-of-the-art light duty diesel engines…What had changed at Cummins, and at other diesel engine manufacturers, was not just that they had learned to adapt to tougher environmental regulations. Instead, the new, cleaner engines have become a point of pride.

One of the eco-strategies we talk about in Green to Gold is getting ahead of regulation for advantage. In most cases, companies do not use regualtion for advantage, but fight and fight, like Cummins, until they realize they may actually see a benefit in meeting or beating the regulations. The story goes on to describe the competition between Cummins and Caterpillar over who has the greener engine. Then, this quote:

Pleasing the E.P.A. with an integrated, fuel-efficient, low-emissions engine is not the point of the exercise for Cummins or its big rival, Caterpillar, which is heavily marketing the environmental and performance attributes of its Acert engines. Rusty Dunn, a Caterpillar spokesman, wrote in an e-mail message, “We’ve invested heavily in what we believe is a very competitive, clean diesel technology.” Mr. Wall of Cummins said: “As we remind our engineers, the E.P.A. has never bought a single engine from Cummins. This is really about how do you create customer value.”

I couldn’t have said it better. Of course, it would be far better to realize there’s a customer value proposition before regulations force you down the greener path. The title of the Times article is actually a bit off — neither company turned it to advantage because they both waited until the regulations forced them. Imagine if Cummins had beaten Caterpillar to the punch and then lobbied for tighter regulations. That would’ve caught competitors by surprise and created real eco-advantage.

 

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