Big companies aren’t good at breakthrough innovation. Disruptive innovation usually comes from start-ups or entrepreneurs. (See Big Business’s big innovation problem.)
Big companies are even worse at innovation when it threaten to cannibalize their existing business. Think about why newspapers failed to create a Craigslist or why the music industry missed the chance to invent iTunes. It’s scary to embrace a new venture that just might upend your old way of doing things.
Yet Waste Management, the nation’s largest trash hauler, is doing exactly that–it’s embracing a new business model that is designed to erode its traditional business of collecting garbage and dumping it in landfills. Instead, the company wants to find the highest, best use for waste in an effort extract the value of what we throw away–value that’s estimated by CEO Dave Steiner to be worth as much $8 to $10 billion a year.
I’ve got a story about Waste Management in the current issue of FORTUNE. (Cover date: Dec. 6) It’s the latest in a series of profiles of FORTUNE 500 companies that I’ve been writing for the magazine. Here’s how it begins:
Reusable grocery bags. Online media. Concentrated laundry detergent in small packages. All are good for the environment because they reduce waste, but they’re a threat to the business of collecting and disposing of garbage.
No wonder executives at Waste Management (WM, Fortune 500), America’s biggest trash hauler, got nervous when Subaru’s TV commercials boasted that its Indiana auto plant sent nothing to the landfill. Or when Wal-Mart (WMT, Fortune 500) embraced the idea of zero waste. In a world where people throw less stuff away, the future of a traditional garbage company looks bleak.
That’s why David Steiner, Waste Management’s chief executive, is turning the company in a new direction. Instead of simply trucking trash to the dump, the Houston-based firm will look for ways to extract value — energy or materials — from the waste stream. When companies like Alcoa (AA, Fortune 500) or Caterpillar (CAT, Fortune 500) want to reduce their waste, the company has a team of consultants that will help — even if that means cannibalizing the core business of burying anything and everything in landfills.
“Picking up and disposing of people’s waste is not going to be the way this company survives long term,” Steiner says. “Our opportunities all arise from the sustainability movement.”
There’s a lot more to the story, including a look at a series of venture investments that Waste Management has made (alongside such VCs as Kleiner Perkins) in companies that are recycling organic waste, or trying to extract energy from waste in new ways. This company is very much worth watching.