Friday, February 12, 2010

Water Shortage: Crisis or Opportunity?

Featured Panelists:

Lee Addams: Practice Expert / Engagement Manager in McKinsey & Company.
Dan Bena: Director of Sustainability, Health, Safety, and Environment for PepsiCo.
Peter Karlen: Vice President of EarthWater Global, LLC.
Sharon Nunes: Vice President of Big Green Innovations in IBM Systems & Technology Group.
Michael Dworkin: Director of the Institute for Energy and the Environment and Professor of Law (Moderator).

The water panel engaged the audience on a very difficult yet timely question of how business leaders should think about water scarcity. The panelist presented some of the multidimensional implications that water shortage has imposed on topics related to global health, food security, energy calamity, among other things. But they also shared their insights on how these auxiliary concerns along with the main issue of water shortage can be overcome with the right combination of talent, innovation, and partnership.

The panel represented companies that deal with water issues in vastly different ways. For example, Dan shared how PepsiCo, though not a big user of water from an operational perspective, is concerned about water from supply management perspective. Sharon provided a completely different viewpoint for IBM, which does not provide any goods related to water, but utilizes large amount of water in its operations. Peter of EarthWater demonstrated how innovation has allowed his company to deliver water from previously untapped sources to developing countries in a cost-effective manner. Lee shared how McKinsey advises business institutions and regulatory agencies on innovative ways to navigate within and tackle the water issue. And Professor Dworkin brought to light the interconnectedness of water and energy issues how these problems cannot be viewed in isolation. Though the panel highlighted different vantage points, the panelists were all in agreement that the situation can be improved if we act quickly, intelligently, and collaboratively to solve this pressing issue.

To read more about the topic, please find below the resources mentioned on the panel:
http://www.ibm.com/smarterplanet/us/en/water_management/ideas/
http://earthwaterglobal.com/documentary.htm
http://www.mckinsey.com/clientservice/water/charting_our_water_future.aspx
http://www.pepsico.com/Purpose/Environment/Water.html
http://www.circleofblue.org/
http://www.globescan.com/
http://www.sustainability.com/

Cleantech VCs: What wave are we going to ride?

This morning's keynote panel on cleantech VC investing was a remarkable discussion between 5 well-informed, experienced practitioners. The consensus view was that VC plays a key role in helping companies "bet the farm" on new technologies, but that the VC model may not meet the capital needs of many cleantech businesses in reaching commercial scale.

The panelists made a number of excellent and provocative points in support of this argument, which we'll summarize in a separate post. But I wanted to draw particular attention to something Jon Karlen of Flybridge Partners said. VC investors earn their returns from the "homeruns" in their portfolio, which, by definition, will comprise only a handful of their investments. A key success factor in these homeruns is the timing of the investments; that is to say, a great many investments fail because their products are simply too far ahead of where the market is.

As Jon put it: early-stage companies cannot create the demand for their products, so the question for those companies (and their backers) becomes "what wave are we going to ride?" What demand-side trends are large enough to fuel the growth of these companies? How good are investors at detecting those trends? What external forces (e.g. social changes, behavior shifts) are poweful enough to support those demand trends? And how do we better understand those forces?

These questions were a terrific reminder (I thought) of some of the natural constraints of investors and companies in this space, and evidence of our continued relevance as the Business and Society Conference here at Tuck.

Connecting with your customer and redefining your brand

The ‘Connecting With Your Customer and Redefining Your Brand’ panel discussed the ways in which organizations are creating new techniques for responsible business conduct and incorporating sustainable thinking into their brand strategy and DNA.  The panelists were:

Susan Coté, Director of Brand and Consumer Marketing, Green Mountain Coffee 
Daniel Gisser, Director of Corporate Marketing, Eaton Corporation 
Jennifer Rushmore, Global Sustainability Leader, Procter & Gamble 
Jonathan Yohannan, Senior Vice President, Cone Incorporated

The panel: The panel began with introductions of our distinguished panelists. We then delved into how the sustainable practices at different organizations have evolved. Sustainability at P&G focuses on both social and environmental responsibility. Sustainability has strong heritage at the company which has been awarded and recognized in different parts of the world. P&G focuses on strategic social responsibility which has paved the way for a more environmentally and socially responsible business model. 

Sustainability is addressed differently in a B2B business like Eaton. Eaton focuses on efficiency issues related to fuel consumption and greener buildings. The company has embraced green solutions in its best practices as such practices are a big revenue draw and a chance for the company to build its brand.

Green Mountain Coffee Roasters have sustainability embedded in their DNA.  They built a tremendously efficient system involving sustainability in all aspects of their business processes.  GMCR’s various brands are involved in different areas such as supporting local communities, protecting the environment, taking care of the employees. The triple bottom line concept resonates throughout the company. 

Cone was able to address similar issues from a unique perspective, those of the customers themselves.  Cone works with different companies to help them improve their communication and corporate responsibility strategy.   It is critical for most customer and consumer facing companies to understand and become more engaged with its customers whether it is through cause branding, corporate responsibility, employee management , or others. 

Obstacles Companies Have Come Across While Developing Sustainable Initiatives: The panel discussed various issues encountered while addressing sustainability in the products and processes of organizations. The most significant challenge most panelists have come across is the cost of the final product.  P&G’s consumer research found that customers on an average are willing to buy green products as long as they function similar and are priced similar to other available products. The company has numerous innovations it would like to bring to market but has postponed doing so because of these concerns. 

One of the other concerns facing these companies is how to integrate best processes into the systems of their manufactures and suppliers. For example, GMCR worked with the cup manufacturing company to help integrate better processes in its value chain which led to greener cups and helped reduce its environmental footprint.  A company can achieve a better and greener system by not only making its processes better but also by involving other stakeholders in the process building.

The panel also discussed the marketing challenges associated with such initiatives and how companies walk the thin line between making the right communication and avoiding green washing. Both GMCR and P&G work within their strategy which enables them to stay on course for making the right communication with their customers.  Eaton mentioned how B2B business are able to deal better with such challenges because it works with its customers throughout the entire process. 

Insights from the panel: One of the interesting insights of the panel was how to decide which products and processes are worth investing green innovative ideas and energy. Many products and processes do not have as much ‘green’ potential as one might assume.  For example, many products can be designed to be bio-degradable, but would involve chemicals during manufacturing (does this make it no longer sustainable?);   A product could be made from glass instead of plastic but the transportation of the heavy glass packaging would have a larger carbon footprint and would reduce the benefit of having glass packaging in place of the plastic.  Among several such difficult choices companies have to decide which would make more environmental impact and better business sense. A company has to recognize these challenges and develop its strategy accordingly. 

The panel also navigated the predicament companies may face while making such decisions in different geographies, specifically developing countries. The consumers in these countries may not be aware of such issues or may not be really concerned about such products. For a consumer products company it is essential to be aware of regional concerns and address these concerns appropriately.

Finally, the panel had an interesting discussion involving social media – using Facebook and Twitter in the marketing strategy of the company. These channels open the company to an honest dialogue with their customers.  However, these channels also must be closely managed as consumers may use this avenue as a safe place to vent and ‘think’ with little consequence to the consumer, but a much larger consequence for the company.

Thursday, February 11, 2010

Out of Africa: What Innovation in Africa Can Teach the Business World

Panelist:

Jonathan Bloom, Deputy Vice President, Department of Compact Implementation, Millennium Challenge Corporation

Acting as a one man show because of the last minute absence of 2 of the 3 panelists due to travel delays and the blizzard in DC, Jonathan Bloom presented engaging commentary on the Millennium Challenge Corporation's (MCC) work with businesses and governments in Africa. MCC's work is focused on poverty reduction through economic development. While Bloom highlighted the need for financial solutions ranging from traditional lending to microfinance, he stressed that before finance comes entrepreneurs, and before entrepreneurs comes markets. "The difficulty in Africa," he said, "is that the economies are sub-scale."

Citing examples as diverse as banks in Tanzania, an increasingly mechanized pineapple plantation in Ghana, and the development of a water treatment system in Mozambique, Bloom is encouraged by the increasing level of innovation and economic development he sees across the continent. The MCC must agree, as it works with more countries in Africa than in any other part of the world.

The business case for strategic partnerships with the social sector: A literacy case study

Featured panelists:

James Cleveland, President, Jumpstart
Kathleen VanDernoot, Alliances and Programs, Pearson Foundation
David Murphy, President and CEO, Better World Books
LuAnne Zurlo, Founder and Executive Director, WorldFund

Partnership lifecycle overview: The panel began by exploring the lifecycle of partnerships from birth to exit. The discussion aimed to uncover answers to some key questions: How do partnerships begin? How do they evolve? What kind of tensions emerge in a non profit - for profit relationship, and how are they managed? What happens to partnerships when there is a downturn in the market?

Key insights of partnership lifecycles:
The formation of the Jumpstart and Pearson relationship was not random - it was due to a deliberate search on Pearson's part to find the right organization to partner with. Specifically, they were looking for a "like-minded partner that was aligned with our goals." Jumpstart originally engaged in the partnership with grand plans to form a large Teacher Fellowship program to address the issue of teacher quality in the United States, but ultimately discovered that this goal extended outside the bounds of their core competencies, and their grand goals would likely not be reached. Together, Pearson and Jumpstart evolved their relationship to create a new program, Jumpstart's Read of the Record campaign, which met both of the organizations' objectives and worked well within their key capabilities. A key to success was the combined drive to a solution; the partnership evolved not unilaterally, but rather, with both sides as equal players in making decisions.

The partnership between Better World Books and WorldFund began serendipitously: Better world Books was in need of a credible literacy partner to reach the underserved population in Latin America, and a member of the organization had a common connection with WorldFund. The partnership has seen less evolution since its beginnings primarily due to its relatively short time frame. Better World Books' entire business model relies on the mission of its partner organizations, for it is primarily these partners who drive book donations to the organizations.

Value creation overview: The second key theme of the panel was the exploration of value, and the incremental value provided to each partner organization because of the partnership. Without question, value is not just about money. Money is important, but it can be limiting as a metric. Thus, the panelists addressed key questions that dug into the value creation process of their partnerships: How do the organizations think about value creation? How about value capture? What makes it sustainable? What unique resources do partners offer in collaborations? How do they work with partners that might share their values (literacy) but are organized differently (non profit vs. for profit models)?

Key insights of value creation:
The Pearson-Jumpstart relationship has helped open many new customer relationships for Pearson, which they would not have been able to have without the partnership because of their "big corporate status." Often, when potential customers realize that Pearson is heavily connected to Jumpstart and its Read for the Record campaign, they are far more open to continuing the dialogue than they may have been previously. Likewise, Jumpstart has been able to grow tremendously as an organization because of this partnership with Pearson. Not only has Pearson's resources helped grow a campaign that allows them to reach more children, but they've also provided invaluable strategic support. These intangible means of value (versus just dollars) are some of the most important value areas that allow Jumpstart to have a higher impact in child literacy.

To have a business, Better World Books is faced with the challenge of needing to create a high level of trust among its constituents (the donors of books and the buyers of books). It is their nonprofit partners that provide them the credibility to create the trust with its constituents. Through the integrity created from partnerships with organizations like WorldFund, Better World Books has been able to scale its business to a very high level: they provide $7/minute of donations to their partner organization, which translates to $4M of donations per year. In turn, WorldFund is able to focus its efforts on its programs, its area of greatest strength, and lean on Better World Books to fill its skill gaps on the business side.

Final insights: seven key takeaways to a successful partnership:
  • Build strong relationships within and across the partnering organizations
  • Foster clear communication between each partner organization
  • Be clear on what you can and cannot do; manage expectations and be honest
  • Understand the business objectives of the corporation and try to align your own work within those objectives
  • Ensure senior level buy-in
  • Have complementary skills and objectives
  • Focus on values: long-term viability of partnership relies on understanding the values of each partner organization

CSR at IBM?

Given the Smarter Planet strategy of harnessing IBM's core business capabilities toward social ends, what is the necessary role for IBM's CSR department? If the dog catches the car, now what?

(credit to Harry for the good question)

IBM's Iwata on Toyota

In a small group roundtable, a Tuck student asked Mr. Iwata how he would advise Toyota in its current crisis. He cited a top communications official at Domino's Pizza, following their handling of their own social media crisis:

"People want to watch you put the fire out"

Even though a company's first instinct is to investigate internally and get the facts straight, today's consumers want to witness more of the internal process. Is this realistic? Can companies manage their response in a more transparent way, even as they are figuring out exactly how to respond?

The Commercialization of Microfinance: From Muhammad Yunus to J.P. Morgan

Panelists:
Caroline Allen (Vice President, Creation Investments)
Dana Dakin (Founder/President, WomensTrust)
Shedd Glassmeyer (Assistant Fund Manager, Developing World Markets)
John Wilson (Analyst Frontier Investment Group: ACCION International)

Moderator:
Richard McNulty (Adjunct Associate Professor of Business Administration, Tuck)

The Microfinance panel provided a lively discussion surrounding the spectrum of approaches to serving the micro-lending need. The panel started with with thoughts about the profit-driven approach to micro-lending employed by Compartamos in Mexico as opposed to a non-profit model. Questions got at the issues of usury rates, transaction costs of a local institution, the education and training involved, and the impact of the financial crisis on microfinance.

The panel represented a diversity of vantage points within the microfinance "value chain" and highlighted the importance of different micro-lending models to meet the array of needs. The issue of "scale" was raised on several occasions during the conversation. While there was agreement that the non-profit model is important to support the on-the-ground education and ultimate success for communities, however, the for-profit institutions facilitate growth and have been vital in helping to provide increased access to funds.

"Smarter Planet: A Leadership Agenda"

Tuck's eighth annual Business & Society Conference kicked off this afternoon with a keynote address from Jon Iwata, senior vice president of marketing and communications at IBM.  Mr. Iwata spoke about the new realities of global business today, the requirements for businesses to meet those realities, and how IBM is changing the game through it's Smarter Planet initiative.

We have all heard of the two big new business realities of the past few decades, namely globalization and the digital network revolution (Internet, technology, or however one chooses to define it).  The third new business reality is stakeholder empowerment, or the ability of stakeholders to exert influence over the actions of companies.  Not surprisingly, this increased empowerment of stakeholders has been enhanced and perhaps influenced by the other two realities of globalization and digitization.

These drivers of change have key implications for businesses across the globe.  The first is that the new competitive battle between companies will be based on experts and expertise.  As companies find themselves no longer in complete control over the messaging and communication around their products or services, they will begin to expose their own experts and expertise to the outside world.  The second implication is that there will be a shift from marketing to audiences to creating constituencies.  These customers must be defined, built, and fed.  Apple, for example, doesn't just market products to consumers.  Rather, the company teaches consumers how to get the most out of their Apple product through the "genius bar" in their retail stores and through online video tutorials.  In so doing, Apple creates a customer who will champion the product and company.  Finally, the third implication is that every business will become a "technology company" and must face new policy challenges because of this.

IBM has faced these new implications and challenges head on, with the creation of their Smarter Planet initiative.  Smarter Planet represents the intersection of economic comparative benefit with social issue and technology.  Essentially, IBM is helping large customers become "Smart" by both improving their business and, at the same time, doing good for society.  One example Mr. Iwata cited was a project to create a "Smarter Train", where a company knew that operating their trains at 1 MPH faster would generate greater profits while also creating significant social benefits.  With improved transit time, the company could take 250 locomotives and 5,000 train cars off the tracks, and could redeploy hundreds of employees.  It was unable to do so, however, because at that speed a single "wobbly" wheel would derail the entire train.  IBM is collaborating with this company to create sensors that would track heat and vibration on all the wheels of these massive freight trains, enabling the train to drive 1 MPH faster with the confidence that problems could be spotted early and derailment averted.  With this, the company will be reducing its carbon footprint, decreasing energy usage, and improving safety for employees and others.

Smarter Planet is a perfect example of a company doing good by doing well.  IBM estimated that its addressable market could increase by 40% with this initiative, which is substantial considering the company plays in a $1.3 trillion industry.

In all, Jon Iwata's keynote speech set a great tone for the Business and Society Conference.  Watch this page for summaries of the discussion and key learnings from all of our interesting panels and speakers over the rest of today and tomorrow!

Friday, January 22, 2010

Welcome!

Welcome to the Tuck Business & Society Conference live blog!  We will be live blogging the conference on February 11-12, 2010.

In the meantime, please take a look at our conference website for information on panels, keynote speakers, schedules, and much more: Tuck Business and Society Conference 2010.