By Robert W. Bradford
Note: The following article was first published in 2008 but seems timely today.
It shouldn’t be a surprise to you that going green can be an extremely useful strategy in today’s markets. Without question, our strategic planning clients who have pursued environmental friendliness as a part of their strategies are reaping noticeable benefits. Indeed, in some areas — such as metal machining in the Midwest — we are already noticing that “green” markets are driving demand growth in otherwise depressed markets, where alternative fuels and wind power are showing real growth.
These benefits are most pronounced where companies began working on a “green” initiative years before any competitor. Interestingly, some of these initiatives started at a time when ideas like hybrid vehicles, alternative sources of energy, and green buildings were not yet clearly winners in the marketplace. Looking at how companies have fared with the rise of a major new customer preference can tell us a lot about how strategy works.
First, it’s clear that the strategy of catering to this customer preference has worked best when it is clearly visible. Prospective customers need trustworthy ways to distinguish your company from the crowd when assessing whether you are the best at meeting the new need. There are several ways to make your advantage (in this case, “green-ness”) visible: advertising, public relations, awards, certifications, alliances, “packaging” (not just boxes, but the way you present your products or services), and vendor relations, to name a few.
Advertising is obvious, but we need to be wary of wasting money on vague claims that develop little credibility with customers. The best “green” advertising has made specific, verifiable claims about distinctive environmental benefits derived from the purchase or use of a product or service. Public relations should be treated similarly, but don’t forget that proactive involvement in environmental activism can do a lot to build your credibility. This is an investment that is best made before you need credibility — not after.
Awards and certifications seem to be sprouting like mushrooms in a wide variety of industries. For example, in the construction industry, LEED certification is a way of showing that your building uses less energy and has less harmful impact on the environment that other building. Breadloaf Corporation in Middlebury, Vermont has taken steps to assure they have more LEED-trained architects and construction managers than their competitors, and they have successfully used this distinction to become one of the fastest-growing construction firms in Vermont.
Other ways to make your advantage visible will vary by industry. A good general rule, however, is to ask if your choices can make your strategic advantage more visible when you are, for example, designing products, choosing vendors, or designing your packaging.
The second way to assure you profit from a visible claim to an advantage like “green-ness” is to be able to back up the claim with reality. An excellent example of this was Toyota’s decision to back hybrid vehicles as a good short-term way to reduce automotive emissions. Millions of dollars in research and development money were poured into the hybrid concept years before anyone at Toyota — or anywhere else — knew for sure that there would be a payoff in the marketplace. Toyota’s strategy paid off because — rather than just pursuing the technology for its own sake — they carefully analyzed what factors would make it successful, including pricing, features, and impact on the experience of using the product. Today’s reality for Toyota is a growing fleet of reasonably priced vehicles with strong fuel economy and lower overall emissions — which translates into growing market share for the brand.
Backing up your claims is a serious issue in consumer products, largely because there are few regulations regarding what you can claim or how you can claim it. As a result, customers have become wary of false claims, and they won’t likely rely on a vague claim in their decision-making. One way around this issue is to use a sales or distribution channel as a proxy for a claim. A good example of this is the rise of “organic” grocery chains in North America in the past eight years. Many consumers will trust the purchasing processes of a chain like Whole Foods to screen out false claims for organic or sustainably-produced food. It’s possible that we will see more players in different distribution channels pumping up their purchasing processes to cater selectively to such focused markets.
Probably the most cost-effective way to back up environmental claims is to have a clear, visible, measurable difference in the way your products or services affect the environment. This can come from obvious differences in product design (such as in hybrid vehicles), or it can come from measurable differences (such as in energy efficient fluorescent light bulbs). Either way, if there is a way to measure the effect, you will be able to make much stronger claims than your competitors if you design your offering to create that measurability.
Third, the Toyota experience suggests another strategic concept that we have suspected for some time: starting early, while riskier, can deliver a more sustainable competitive advantage. I can remember hearing Toyota executives discussing hybrid vehicles at a conference of the Association for Manufacturing Technology in 2001 — long before “green” was a popular concept in marketing circles. While the money invested in hybrid technology might not have crippled Toyota, it was a very real and substantial investment made long before the market benefit of the “green” advantage was perceived to be a sure thing. This is important because the companies that waited until the “green-ness” was a sure thing are now playing catch-up with companies like Toyota that started down the path years before. Playing catch-up will hit you in three key areas: first, product technology will lag behind the leaders, second, your process technology will lag, and thirdly — perhaps most importantly — your image in the marketplace will not be associated with the new advantage.
It’s useful to note that Toyota did not abandon their profitable core product line when they decided to start down the hybrid path many years ago. They did, however, invest substantial money and key personnel in the initiative, and kept it on the burner for years before it generated a single dollar in profit.
A good example of “late start” competitive advantage can be seen in the electronics industry. At the 2008 Consumer Electronics Show, “green” products — those that, for example, consume less power — are being featured prominently. In fact, where the latest technologies have typically been touted at CES, this year, some of the biggest product announcements have essentially been last year’s products, made more energy-efficient. One common certification — “Energy Star” — indicates that a computer can be configured to consume less energy during periods of inactivity, and even turn itself off when left unused for a long period. While this designation has largely been the domain of laptops — where energy efficiency translates into highly valuable battery life — this year’s CES features a much larger number of desktop units sporting the “Energy Star” logo.
The electronics industry does show an example of how starting early can fail to produce results, too. Toshiba introduced a laptop made of polymers derived from corn in 2006 in Japan, and will be introducing this product in 2008 in the US. This is obviously an early start with a technology — and it is also obviously not taking the laptop market by storm. This is likely due to two issues, both of which should be considered when you are considering “green” technology advances. First, the reality of making a durable laptop case still requires some petrochemical based resins in the case, so it is not really biodegradable. Second, there is a strong disconnect between the environmental value — biodegradability — and the customer’s perception of value in the product. Clearly, we do dispose of old electronic devices, and this is a growing problem in waste management. Just as clearly, no one likes to buy an expensive gadget like a laptop thinking about throwing the device away. Technical issues aside, it’s highly unlikely that “green” disposal will motivate consumers to buy products that they prefer to think of as durable.
So here are the key learnings about how to use a new, emerging customer preference to gain market share:
- Make it Visible
- Make it Real
- Make it First
Also, based on the Toshiba experience, be wary of using new advantages in ways that don’t fit well with customer perceptions and preferences, and — when you are first — be aware that the current technology may not deliver the benefit customers are really looking for.
There is no substitute for good, structured strategic planning in assessing and choosing the rising new customer preferences that you will serve. Many of tomorrow’s winning companies will succeed because they made great choices in their strategic planning in 2008. Will your company end up riding the wave of the “next big thing”? Doing the best job you possibly can at your strategic planning will dramatically improve your chances of leading — rather than following – your industry in the future.
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