Responsible for 40% of global CO2 emissions and beset by its gas-guzzling image, the construction industry knew as far back as the 1990s that it was a likely target for eco-warriors.

Caterpillar, the world's largest maker of construction equipment, decided to seize the initiative by giving its heavy-duty industrial tractors - its biggest product line - an eco-friendly makeover, involving its customers every step of the way.

The solution
Although the environment was a key driver for Caterpillar, it was oil prices that really kick-started innovation. "Did we know oil would be $140 a barrel today?" says engineering manager Mike Betz. "Probably not. But the price of oil was a key factor."

It became clear the answer was an entirely new machine - a hybrid diesel-electric tractor, targeted at the construction and mining sectors. Caterpillar wanted to produce one that had the power and capabilities of the market leaders, including its own D7R (launched in 1996), but with much less effect on the environment.



Tractor (CAT)Betz and his team fine-tuned the technology to make a hybrid tractor workable, using generators and wires instead of some heavy mechanical parts and bulky batteries.

Betz made sure groups of key customers were involved in the design process. This was useful because, he says: "They could be very critical, but felt an obligation to tell us the truth."

Reducing operating costs was one key message, but feedback from operators helped make the new model more user-friendly. New innovations improved operator visibility and handling, reduced noise and introduced and electronic parking brake and air conditioning - essential when you're shifting piles of rubble all day in the glare of the sun.



Through a process of analysis, dubbed 'quality function deployment' (QFD) Caterpillar helped to balance customer needs with the tractor's overall cost, aligning both with the firm's business objectives.

The result of more than 50,000 laboratory and machine hours was the launch this summer of the D7E - the first tractor of its class with an electric drive. The new machine, promoted with the slogan "A dozer that conventional wisdom said could not be built... until now" could revolutionise the industry. The D7E arrived in the nick of time - the rollout of Environmental Protection Agency (EPA) Tier 4 rules in the US means emissions from construction vehicles must be 90% lower than their mid-1990s levels by 2010.

The outcome
The new tractor's turning circle may resemble an oil tanker's, but in its way the D7E is as groundbreaking as the Toyota Prius hybrid. Caterpillar says the new tractor uses 30% less fuel, costs 25% less to service and is 10% more productive than other top-ofthe- range models.

Innovation does come at a price - the D7E is 17% more expensive than the D7R, and that may slow take-up as businesses struggle to justify the extra investment in a slump.

Still, the feedback about the machines placed with customers for trials has been very positive, and Caterpillar hopes long-term gains on fuel - and the D7E's eco-credentials - will win clients over and position it as the must-have brand in the upturn.

Caterpillar's track record suggests it may be right. In the Great Depression, it kept making sturdier, costlier models, and introduced its signature Hi-Way Yellow livery. The strategy increased market share in the long term and created such a strong brand it even spun off into a fashion range.