CleanTech WebLog

Over the Thanksgiving weekend, I spoke with a friend who was involved in green product certification back in the early 1990s. My friend came away from her green certification experience feeling that it wasn’t really worthwhile for companies to certify their products as green. She concluded that the vast majority of consumers would buy “green” products that don’t cost more or that don’t cause any significant inconvenience. Granted there was a niche market of consumers who would pay more and would inconvenience themselves in order to be green. But this niche market was very, very small.

I wondered whether things had changed enough in the 17 years since Earth Day 1990 so that it’s finally worthwhile for mainstream companies to get serious about greening their product lines and operations. Of course, the biggest impetus behind any “greening” initiative is still likely to be pure economics. If a company can save money by adopting clean technology or green practices, then the decision is easy. But, aside from rising energy costs, has anything else changed about the market landscape that would drive companies to adopt environmentally sustainable business practices?

Clearly several things have changed since 1990. The data about climate change is more dramatic and more widely publicized, fueling interest and concern among two very important stakeholder groups for corporations – customers and employees.

There is increasing customer willingness to pay more for “green” products. The recent Deloitte Annual Holiday Survey of over 10,000 U.S. consumers reveals that nearly 20% of consumers will purchase more “eco-friendly” products this holiday season and that 17% say they are willing to pay more for them. My guess is that this group is much larger than the “niche market” of the early 90s.

There is emerging pressure on corporations from their employees. McKinsey & Co. recently surveyed CEOs about strategy and social issues. Among those surveyed, the stakeholder group with the most influence on their company’s social issues is employees – outstripping the influence by consumers, government, suppliers, boards or investors.

Companies that can articulate a vision of sustainable business practices may have an easier time attracting new employees. A recent MonsterTRAK survey found that 80% of those seeking entry-level jobs are interested in working for companies that have a positive impact on the environment.

The combined influences of customers and employees may finally produce the tipping point that makes it worthwhile for companies to take action on devising and implementing sustainability strategies. Indeed, more than 90% of CEOs surveyed in the McKinsey study say they “are doing more than they did 5 years ago to incorporate environmental, social and governance issues into their core strategies.” It’s a step in the right direction. And every such step makes for a more viable market for cleantech solutions – even those that do not have a high, immediately demonstrable ROI.

At last week’s Cleantech Crossroads* event in San Francisco, architects were well-represented among the attendees. It’s clear that architects play a pivotal role in green building. They do something every day that most businesses, institutions and individuals may undertake only once a decade. Because architects design large and complex building projects that have long-lasting effects on energy and resource use, their recommendations and decisions about everything from construction materials and windows to lighting and HVAC systems have very significant, cumulative impacts on the environment. By and large, architects take their environmental responsibility very seriously. Most large domestic firms have at least some staff accredited by the non-profit U.S. Green Building Council. And 88% of architects recently surveyed have received some training in sustainable design.

But what’s really interesting to me is that architects are well-positioned to know the needs of a potentially enormous marketplace for clean technology. In the U.S. alone, the construction business contributes almost 5% of our nearly $14 trillion gross domestic product. That’s a $600-700 billion dollar market!

For cleantech startups and for businesses that aim to develop cleantech products, architects can be a source of ideas. What sorts of lighting problems exist and what are some ideal solutions that architects dream about? What sorts of waste water capture and re-use systems are possible but currently not available? How could roofing be adapted to capture photons for solar energy or to heat water?

Beyond the ideation stages, architects can also vet product concepts, assisting new product developers with practical matters such as explaining when, in a typical project timeline, certain product decisions will be made. They can highlight code-compliance issues and describe how to best reach and influence the architects and others who have a say in the decision process. Architects can also be the connectors to commercial construction firms that could assist in testing products in a real-world environment and evaluating the ease or difficulty of incorporating new cleantech products into the construction process itself.

Developers of cleantech products would do well to ally with forward-looking architects to source new product ideas, improve product concepts and even devise ways to get new products to market.

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* The Cleantech Crossroads event was held on 11/15/07 and jointly hosted by the Bay Area Council, the California Commission for Jobs and Economic Growth and the Urban Land Institute.

KJ’s recent post on ROI suggests that one way for Cleantech vendors to move beyond a straight ROI pitch is to sell higher in the organization where other factors can affect the decision process.   After reading her post, I started thinking about what selling higher entails.   It’s absolutely true that the needs, and the ability to make a “risky” decision (one not based entirely on ROI) vary greatly by position.  It’s challenging to find the different kinds of buyers in an organization until you understand what the goals and strategies of your customer’s business are.  This is true not only in Cleantech but in any industry.   In the end, it all comes down to this: the customer must have a problem that needs to be solved, which in most cases, means that there must be some economic advantage to solving the problem. That means that ROI is always relevant, even if not the sole condition for the decision.  Even in cases where there are other drivers, like compliance, or addressing environmental concerns, if it’s not good for the bottom line, it’s really going to be a tough sell, particularly for Cleantech vendors with innovative, yet unproven products.    

How do you sell high?    

• References
• Networking
• Chutzpah
• By understanding your own product well enough to describe the problem it solves to a variety of different people.
• And finally, by understanding your buyer’s buying process, and where in the organization the value of your product is most relevant.

Start your selling process at the highest level you can find, with the knowledge that you will get pushed down eventually, but that by then it will be with sponsorship from above, which carries clout and gives you credibility.  Use your network to find someone that can make an introduction to the person you want to talk to, or find someone who knows someone in the right position to make a “risky” decision.  And be ready to tell your story, with the benefits tailored specifically to that person’s needs.

Many clean technology vendors rely on return on investment (ROI) calculations to justify a sale. The idea is that customer makes an upfront investment and that investment (plus some) is paid back over a period of time. Many vendors will work with prospects to collect data and develop a set of assumptions about costs and savings. These assumptions are fed into an ROI calculator or spreadsheet model that spits out an estimated ROI percentage. See the Advance Green (Canadian Tire) ROI calculator for an example.

The problem with ROI is that even if the cleantech vendor can show that the investment will ultimately pay for itself, that’s not good enough. That’s a 0% ROI. The prospect can get a better return just by parking cash in money market funds. Even a nicely positive ROI, say 7%, may not be enough to persuade a buyer.

Most companies have more investment opportunities than they can fund and can end up ranking these opportunities, one against another. A 7% ROI may not “make the cut.” (For a sobering account of the pitfalls of ROI justification, see Little Green Lies in the October 29, 2007 issue of Business Week.)

Thankfully, in most cases, ROI is not the only criterion used in making a purchase decision. Clean technology vendors have an opportunity to market and sell the value of their offerings against other key customer goals that can include:

• addressing environmental concerns of the company’s key stakeholders (e.g. customers, partners, resellers, investors, employees)
• complying with government regulations
• meeting corporate sustainability commitments or social responsibility missions
• improving the perception of their brand

Cleantech vendors must uncover these other customer needs and values and sell against all of them. This can sometimes mean selling higher in the organization than you might have originally planned, finding the prospect contacts with a broader view of the company’s needs. Then ROI is a piece of the pitch, but only a piece.

Why is an “elevator” pitch so important? And why is it so difficult? And how does it differ from the value proposition that KJ described in her last post?

Our elevator pitch is important because it is the likely to be the first introduction a prospective customer or investor has to our company, and it’s live, not on paper. It’s difficult because it is challenging to distill all we know about the value our company brings to customers into a mere 100 words or so, and to make it compelling at that! It differs from the value proposition by expanding on it, and going into specific benefits that differentiate us from the rest of the pack, and if successful, leaves the recipient saying “tell me more”.

When someone asks, “So what does YOUR company do?” we must smartly, quickly, and confidently deliver the essentials. “My company <does this >, and provides <these benefits>. Companies who use us have <this characteristic> and have found that <benefit>. If you’d like to know more <call to action>.”

For example “My company provides ways for manufacturing companies to waste less and recycle more, thereby reducing their carbon footprint. Our innovative technology changes the way that manufacturing companies process materials. In addition, companies who have used us have found that that they were able to create more efficient processes that increased profitability. If you’d like to know more, I’ll be happy to have a longer conversation.”

Why is an elevator pitch so hard? It doesn’t need to be if you do these things:

• Know your benefits inside out
• Write down your speech
• Practice it, and practice it again…and again
• Teach it to everyone in the company