Vox Populi (Episode Two)

In the first episode of this new thread I introduced you to Open Innovation, a practice that is rather new and consists of involving outsiders into the act of designing new products, or improving existing goods. Now, why would companies listen to what a bunch of people that is not part of the workforce have to say?

The most immediate reason is, perhaps, the fact that a company’s pool of talents can be expanded without enlarging the size of the workforce. In the last few years, consumers have been connecting through blogs and online forums, sharing their points of view on products’ features, rating them, telling about their experiences when using the products, and even recommending solutions they implemented when they found problems. So why not take advantage of all that energy and orient it towards the creation of new products or the improvement of a brand portfolio? It can be faster and cheaper than conducting focus groups or traditional polls; plus, blogs and similar applications can be used for creating expectation for upcoming launches.

This same phenomenon -groups of customers speaking their minds online- can be translated into another benefit: demand forecast. LEGO invited customers to create new models and then financially rewarded the people whose ideas proved to be marketable. Fluevog and Threadless are websites where members can submit shoes and T-shirt designs respectively, and the ones that get the largest number of votes are manufactured. Some consumer goods brands have designed marketing campaigns where customers could choose among possible flavors or scents for new products, and only the most popular ones made it to the market.

Customers are not the only crowd a company can turn to: in fact, professional and scientific online communities can be more suitable for certain businesses. The pharmaceutical industry is strictly regulated, and the researches that are carried out for the development of new drugs usually take several years. According to a McKinsey study on open innovation, scientists from five universities have accepted a sharing agreement that will let the Myelin Repair Foundation (MRF) retain the rights to license discoveries to pharmaceutical companies. This novel medical-research model is based on co-creation among a closed group of researchers who aim to develop a drug that will treat multiple sclerosis; and MRF hopes to complete its work within five years… 75% faster than the time required by current research models. DuPont, the global chemicals and health care company, is also taking advantage of online networks of researchers and technical experts, awarding cash prizes to people who can provide solutions for R&D problems.

So far, Open Innovation seems to be a fantastic thing: it can reduce the time that is needed to develop new solutions, reduce the uncertainty of demand and bring some new ideas to the table. Of course, it’s not as easy as it sounds to implement an Open Innovation program, but you can find some real-life cases on how and when to apply this practice… in the next post :)

Vox Populi (Episode One)

A couple of weeks ago I created tags for the blog, just in case someone is more in the mood for reading about one of the topics than about the others. Once I divided the posts into the different categories, I discovered that Resources and Customer Revolution have been in the spot for quite a long while, so this new series is on Innovation. Let’s get to it, as usual, with a question: have you ever wondered what do companies go through before they launch a new product? I’m not only talking about manufacturing, I’m going even backwards, to the very beginning of the product’s life: its design.

The traditional way of designing a new product is basically composed by four stages. First, the concept of the product is developed: what it would be useful for, who would buy it, what its basic architecture would be like. Once the outcomes of these issues are approved, it's time for planning: a market has to be created, a small-scale test has to be conducted, and investing and financing plans have to be developed. The third phase corresponds to the detailed engineering of the product itself and of the technology that will be used; ultimately, after testing the prototypes, the product is launched and the production volume starts to grow so as to achieve the commercial goals.

This process proved to be highly inefficient in some cases: a lot of time is wasted because a failure in one of the latest stages means that all the tasks that have been already completed need to be redone. This is why some companies started to implement the concurrent engineering approach: instead of working in series, the teams involved in designing the different features of the product -target market, general and detailed design, manufacturing infrastructure- work simultaneously and share the results of their tasks in real time. This way, any possible problems appear in the earlier stages of the process and are easier (and cheaper) to solve.

Some companies are going one step further by creating networks with suppliers, independent specialists and even customers. Now, if outsourcing some of a company’s processes to a specialized third-party is already complicated, why would anyone involve people that are not necessarily experts? It’s pretty obvious for cases like Wikipedia, TripAdvisor or YouTube, where most of the content is created by outsiders. But for companies in other industries -fashion, transportation, IT solutions- there are also a number of reasons… I hope you read the next posts to find out about them!

It takes two to tango (Final Episode)

I could use this last episode for making some comments about the benefits companies could potentially obtain from producing and selling eco-friendly products. I’ve mentioned one in the Starbucks case: raising the bar for competitors (or creating barriers… po-tay-to, po-tah-toe). Another one is getting into markets that are niches today, but are expected to grow strongly in the upcoming years... I’m not only talking about sales here, but also about shaping a new market so that the rules set by the first players are the ones the companies that enter later have to play by.

I could also speak about how eventually all of us will have to consume products that are not harmful for the planet because, breaking news, the Earth happens to be finite.

But instead, I came up with a list of What-To’s and How-To’s that companies could implement (or have already) in order to stimulate the consumption of eco-friendly products, and that are the product of all the reading and thinking and writing of these posts.

Knowledge is power There’s a curious thing about the awareness stage for green products: companies can educate consumers while getting into their minds as a possible choice. Sometimes the limits between awareness and interest are a little blurry, and a company will be saying “Hi, I have a product that could be suitable for you” and “My product has these benefits to offer” at the same time. So let’s say one of the benefits is that you can save energy by using the product, why is that relevant? Because you’ll save in your electricity bill, ok, but also because we all have to try to save energy and be more conscious about the usage of natural resources.

By now you should know I love to give examples: Wal-Mart and GE partnered for promoting the use of efficient light bulbs. Wal-Mart put the bulbs in the most desirable position in retailing -the shelves at eye level-, adding an educational display from GE so that the consumers could learn more about the product and about energy saving. What we have here is the best kind of availability you can get at a supermarket store, making the bulbs appear as an attractive option and informing the consumers about an important issue. Remember when in Association of ideas I spoke about the new role that companies have in societies? Educating consumers is part of it.

Engage, entertain, give a role to people This is a little Marketing 101, but it’s always more effective to send a message when you say things that are relevant and understandable for your target market. Maybe it was not so difficult for Timberland, but what if you need to address a customer that can’t easily see the link between your product and the impacts it causes in the environment? Well, there’s a number of things a company can do.

You can shape the message so that it’s entertaining. I have two videos that are excellent examples of this: one is from Epuron, a German company that supports large-scale renewable energy projects. Check it out here, I think it’s really sweet: http://www.youtube.com/watch?v=cQbl1c63Ofo. The other one is for inviting people to walk instead of riding a car, an initiative proposed by Do the Green Thing: http://www.dothegreenthing.com/actions/walk_the_walk.

You can also pick a messenger that is attractive to your audience; in the case of the Surf Excel add, the people from Unilever chose a famous Indian actress. Or you can show people how to be part of a change towards green, like Ariel’s Turn to 30 campaign.

The more, the merrier Even if a company decides to operate in a sustainable way and actually does, polls show that consumers trust more in nonprofits and environmental groups. It’s a respectable perspective, since reading “We’re sustainable” in a company’s website guarantees nothing. So why not inviting a competent third party? They add credibility to the company’s operations; plus, they have been in the “green business” for a while, so companies can learn from their expertise… Starbucks had a successful experience partnering with Conservation International. I know that it is not related to the environment, but Unicef joint efforts with a lot of companies, P&G and Unilever are two that I mentioned in this series.

Timberland did not partner with a nonprofit -at least that I know of-, but created a group called Earthkeepers, just like their eco-friendly line of shoes. This invites people to be part of their actions and gives a role to consumers, like I said in the previous bullet.

It’s not rocket science! It is absolutely true that consumers are more informed that they used to be, and that gives them the possibility of making wiser choices when they have to buy something. But this doesn’t mean that people should read an encyclopedia before buying every item on their grocery list! There are some products that have a clear sign on their packaging showing they are less harmful for the environment. A common example in the US is the Energy Star sticker that efficient appliances have, showing that the Environmental Protection Agency certifies they are true energy savers. I think this is great, because consumers shouldn’t need to solve differential equations to tell whether or not a light bulb or a heater will make them save electricity.

On the other hand, while writing these posts I checked the websites of some products we use every day I found a lot of environmental and social programs the companies that produce them have. Unilever is changing the fridges where their ice creams are displayed in Europe in order to cut climate change, reducing the use of energy and the waste of water in one of its frozen food plants in Italy, and implementing several packaging recycling programs in Brazil, among other examples. I thought it is too bad you don’t get to know these things until you visit their sites… Of course over claiming how fantastic your company is is not exactly a good idea, but a little information doesn’t hurt!

The good news for all of us, the younger generation: we have a lot of work ahead of us! :)

It takes two to tango (Episode Six)

Let’s say that a certain eco-friendly product went through all the first stages: it made it to the possible-alternatives list in the consumers’ minds, its features were relevant and interesting enough to generate desire. A number of people are willing to buy it (yay!)… what happens next? Well, there’s a huge chance it will be more expensive than the traditional version, and price does matter when we make a purchase decision.

There are two main reasons for the higher prices to happen. The first one is related to how young green products are if we compare them to their old equivalents: whenever a new service/product/knowledge/technology sees the light, it will be more expensive than the existent options. Maybe it’s because of lack of scale, maybe it’s because it’s exclusive and niche-oriented, but the point is that it takes a while for its price to lower and to make the good comparable to other possible choices.

The second reason could be simply stated as “It’s expensive to be sustainable”. Companies that are really committed to living up to sustainability standards have to invest a lot of money and time supervising their own operations, their suppliers’ and their commercial channels’. This might involve:

• Making sure their suppliers and distributors don’t have underage employees.
• Buying raw materials that are certified by competent authorities that ensure there’s not overuse of a certain resource.
• Modifying their production processes in order to reduce the amount of energy used, reduce their emissions, and treat effluents before discharging them.
• Redesigning distribution routes in order to reduce carbon emissions from the trucks.

... and so on and so forth. So it’s not that crazy that part of that cost is eventually transferred to the final price. There are people willing to pay a premium for this, but let’s face it, not all of us would. However, price is sometimes tricky and can include a benefit that can't be seen at first sight. Energy efficient lamps last way longer than the traditional ones, and help cutting electricity bill amounts down. This last feature is also valid for other appliances, such as efficient washers and TVs.

There is one more potential barrier: what if you go to the store looking for a particular item and you don’t find it? Chances are you’ll feel disappointed and buy a substitute, and perhaps won’t try to find the green option in the future. That turns you into a huge lost for the company, because you went through the whole purchasing process, and the lack of availability ruins it at the very end of it. It could get worse if you decide to tell other people what happened to you and they also feel disinclined to give green a chance. Bottom line: availability is just as important for eco-friendly options as for any other kind of product.

With this sixth episode we’ve gone through the whole purchasing or selling process, depending on where you decide to stand. I hope you enjoyed the ride so far, and that you come back for some final comments!

It takes two to tango (Episode Five)

In the last post I told you that making green products attractive is particularly difficult because people don’t think their quality and durability reach the “good enough” standards, and because they don’t always believe products are green at all. We have an explosive combo for this barrier: bad perceptions and lack of trust.

Apparently, consumers are more likely to trust environmental groups and scientists than the government, the media or the companies when it comes to these issues. Sadly, they are not so wrong because some companies haven’t been completely honest claiming their products were eco-friendly. Some “don’t do it at home” examples:

• Labeling a product as eco-friendly because it doesn’t contain a substance that is forbidden. The classic example is the one about the CFCs in aerosol cans that damaged the ozone layer… when CFCs are not used for this purpose since 1996!
• Making fallacious comparisons like stating that a certain SUV is greener than its competition because it makes more distance with the same amount of gas when, hello, SUVs are not exactly what we could call fuel efficient.
• Using complicated, pseudo-scientific terms that regular consumers cannot understand, and lead them to the conclusion that purchasing the product is not harmful for the environment.
• Giving figures that seem to be good for, let’s say, emission levels, but mean nothing at all if you don’t provide the legal standards as well. There’s this motto engineers use all the time, “You can’t improve what you can’t measure”… well, neither you can tell whether something is wrong or right if you don’t know how it should be in the first place.

Don’t panic, I have good examples too! You probably know Timberland, a brand that sells shoes for outdoor activities. A couple of years ago they started sticking a label on the boxes explaining the impact each pair produced, dividing it into three categories(*):

• Manufacturing, detailing where the pair was produced (factory and country).
• Environmental impact, explaining the amount of energy that was used for the production of the shoes, and what percentage of that energy was renewable.
• Community impact, showing the percentage of factories evaluated by Timberland against its Code of Conduct, and the number of hours employees volunteered in the previous year.

Remember this post and the previous one were about emphasizing products features for raising interest and creating desire? Well, Timberland kind of had an advantage because its target market is mainly composed by people who love to be out and enjoy nature, and therefore reducing environmental damage is relevant to them. They saw they could take advantage of that and went for it, so claps to them! And by the way, guess the word they actually used instead of impact: footprint. Accurate, yet a bit obvious…

(*) You can learn more about this by going to their site (http://www.timberland.com/earthkeepers/index.jsp)

It takes two to tango (Episode Four)

While I was writing these posts I started to pay attention to what points companies focus on here in Argentina when trying to raise interest in their products. Of course it depends on what is being sold, but some general concepts I thought of are:

For hygiene products -both personal and for the house-, performance. Dishwashing liquid will eliminate grease and perhaps take care of your hands. Shampoo will leave your hair clean and make it grow stronger, shine more, look frizz-free, or any other possible hair issue you want to solve. Cleaners for the home will remove all sorts of stains and sometimes kill bacteria. Detergent for washing clothes will leave them clean without ruining the colors.

For cars, performance, lifestyle and status(*). The general idea is to show how the vehicle’s features will make it fit into your familiar/adventurous/spontaneous/fast-lane/(fill-in-the-blanks) way of living.

For food and beverages… well, it depends. I’d say it’s mostly about showing that consuming the product is equivalent to adopting a way of living, whether it is you choose to be healthy or happy and positive or super cool or very exclusive and with a busy social life. Occasionally the product has an additional benefit -besides satisfying the specific need-, like helping you save money, or making your life easier because you don’t need to put too much effort into, let’s say, cooking.

For technology gadgets… it depends again. Some focus on the real-life feeling they provide, like flat screens. Some of the benefits are all about lifestyle, about belonging to an exclusive group... yes, I’m thinking about a certain brand that has become very popular because of its mp3 players and laptops and cell phones. Speaking of which, cell phones have the obvious benefit of making people reachable virtually 24-7; and then all sorts of additional features like cameras and music players and games. One more, digital cameras: what matters is the quality of the image and the versatility of modes (for different lighting conditions, for capturing motion)… a “more emotional” benefit could be the possibility of having captions of situations your life.

In the first of these posts I said consumers show concern about the impact the products they purchase have on the environment… then why haven’t I mentioned companies that emphasize eco-friendly features in their products? (I’m aware there are some, but I’m speaking in general terms). Because what people put first are performance, reliability and durability… I would add price because I live in a country where it happens to be a major purchase driver.

Let’s go a bit further… why is this the set of drivers? I would say mainly because old habits die hard: these are the things that have been important to people for decades, and purchase behaviors take a (long?) while to change. According to some articles I read, there’s another reason: the first green products that ever existed were not as good as the traditional ones. The first energy saving lamps didn’t fit properly into most normal appliances, took a while to turn on and did not provide enough light. The first cars that didn’t use gas had less power than the traditional ones.

We’re dealing with a very delicate issue here, consumer perception, which is extremely hard to change. And it gets even worse: people don’t only doubt the quality of green products, but how eco-friendly they actually are. How is it possible to make the products attractive and to create desire, then? Find out in the upcoming posts!

(*) Thanks for the expert insight, A :)

It takes two to tango (Episode Three)

Let’s go to the first barrier to be tackled, lack of awareness. Most of us don’t know about the eco-friendly options in products we use or consume every day. Of course I could go straight to how all of us should switch to more efficient vehicles -which is indeed important, because these emissions are the main cause for global warming-. But since changing a car is a pretty important decision and efficient technologies are still being developed, quite expensive and not even available in all countries, I prefer to focus on other products we all buy: consumer goods. I chose cases related to Unilever and Procter & Gamble because they are the two main players in the consumer goods market, and have been making efforts for a while to educate their customers on how they can make an impact by consuming their brands.

P&G’s Ariel is a brand of products for washing clothes, and a couple of years ago launched a campaign in the UK, for which the slogan was Turn to 30. The idea was to show people that they could wash their clothes at 30°C and still get great results by using Ariel Excel Gel. The numbers behind: 40% or more of the energy used in each load can be saved by washing at 30 degrees and that implies a double benefit, because consumers save on their energy bills and reduce their carbon footprint at the same time. I think this particular campaign should get bonus points for showing people how to get involved! You can check out the TV ad by going to http://www.tellyads.com/show_movie.php?filename=TA3446

In this same product category we have Unilever’s Surf Excel, which is sold in India. The brand changed their formulation and launched a campaign that aimed at tearing down the myth that more soap lather means cleaner clothes. More lather means more rinsing, and therefore unnecessary water wastes, which is particularly critical in dry states where the money people spent on the water was more than the money spent on the detergent. Although I can’t understand the words on the TV ad (http://www.youtube.com/watch?v=GL62PHbKK4g), the promise the brand made was that consumers would save two buckets of water a day without compromising stain removal. We have a win-win situation again: consumers save money, and less water is wasted.

I think these examples are very accurate for the awareness stage that I told you about: both brands got into the consumer minds as possible options for washing clothes. Their offers of saving money -whether on energy or water- are actually related to interest stage of the process, but sometimes it’s difficult to separate the steps from one another. Anyway, I found the results of the Surf Excel’s campaign: sales increased by over 50% in Tamil Nadu and Andhra Pradesh, two dry Southern Indian states. Not bad, uh?