Business 2.0, Sustainability

Case Study: Haul

This post is part of a series outlining my learnings from interviews with a number of small and medium businesses exploring how they have benefited from a shared value approach. These case studies support a paper I wrote exploring strategic CSR (PDF 1.3MB).

The interview upon which this case study is based was undertaken with Haul’s founder, Scott Kilmartin, in April of last year—nearly 12 months ago (yes, it’s taken me that long!). A quick visit to the Haul website will show that Haul is no longer in operation, having closed their doors earlier this month. In his blog post announcing the closure, Scott cites a variety of personal and business reasons for winding down the business.

When I heard this news I was firstly saddened to see one of my favourite companies calling last drinks. But I also considered whether I should publish this case study, given that the business was no longer operating. Upon reflection I felt that there were many valuable lessons in what Scott shared with me in our interview that I felt the broader business community might benefit from. And I also think that Haul remains an exemplar of a shared value approach that is worthy of consideration and examination.

Perhaps, then, this post can be considered a homage to Haul and the inspiration Scott and the team provided me (and I’m sure many others) over the last 14 years. I’ve left the case study as it was originally written (in the present tense, as though Haul is a going concern).

Haul describes itself as an “independent design brand”. Based out of Fitzroy, an urban destination on the outskirts of Melbourne, Victoria, Haul produce bags, laptop cases and sleeves, photo albums, and other accessories from waste materials such as discarded advertising billboards, number plates, inner tubes and rubber printing mats. Haul diverts wastes that would otherwise end up in landfill and “up-cycles” them into high value products. In the words of company founder Scott Kilmartin:

we’re not melting it down and turning it into the padding that goes into speed bumps or children’s playgrounds. That’s recycling. We take a low value, no value item and turn it into something of significant value.

Haul was started in 1998, with Scott converting old number plates into wallets and photo albums, after seeing similar products during some time spent in the USA. Initially the products were sold at Salamanca markets in Tasmania (Scott’s father continued to sell the products there until early 2012) but the business quickly grew to include a combined retail outlet and production facility in Fitzroy.

Indicative of Haul’s success, five years ago Haul converted 36 tonnes of materials into products. In the financial year 2010–11 that number has grown to 85 tonnes—a 236% increase in that time—with that quantity projected to double in the financial year 2012–13. A majority of Haul’s business is from customers within Australia, with overseas internet sales, predominantly from New Zealand, the USA, UK and Japan, accounting for approximately 7.5% of sales.

Inherent in Haul’s business is a positive sustainability outcome. Scott estimating around 75% of the sourced material being utilised in Haul’s products, a further 10% being distributed to secondary markets such as theatre companies and local schools.

While an integral part of the brand, the sustainable attributes of Haul’s products have proven to be less important to the business’s success. Instead, the individual nature of each product has been a stronger selling point: due to Haul’s production process every piece is unique. Haul established itself as a retail brand, initially positioning itself in the “eco” or “green” category. However, a shift in strategy that saw the business framed as an “art-house” design brand, emphasising the uniqueness of the product, was rewarded, as Scott explains:

I got it wrong in the beginning, I thought we were a green business playing in the fashion space. We’re not. We’re a fashion business using green materials. And the difference in that is not just semantics, it’s we sell on a look and a feel and a story. …

And the biggest story that I can sell is “if you buy this Macbook case here, no-one else on the planet’s going to have it.” Walk down the street in Sydney, Stockholm, Shanghai, that’s the only one like that. And that’s a claim that very few products can make. Whether you’re a super premium brand like a Hermès or a Prada, there’s still 20,000 others exactly the same handbags that you made. … And that was the perception where the value in this wasn’t that it was a recycled material, it was the fact that it’s a one-off kind of art piece.

So we pulled out of a whole bunch of kind of green and eco stores and went to design and fashion stores. Instantly things changed overnight.

The strength of the retail brand resulted in Haul receiving inquiries from corporates wanting to create unique and memorable merchandise. Companies like Shell, RMIT, Seek and McGrath Real Estate are engaging Haul to transform the wastes from their own advertising activities into merchandise for their organisations. For example: shopping bags made from sales signage; iPad cases for sales reps; merchandise for students or conferences. Products made from a company’s own marketing materials result in personalised products that reflect the company’s brand (e.g. colours and logos). Other businesses are also looking to Haul to whitelabel Haul’s retail products.

In contrast to Haul’s early experience with the retail market, corporate customers have a greater emphasis on sustainability criteria:

With the corporate business it’s completely the reverse, the first questions you [get asked] is how it’s made, what are the recycle credentials, … what have we been audited on? … So they absolutely love the design and the uniqueness, but ultimately the first part is what can we say, what are the eco-credentials of this thing? And so … [while] we’re effectively making the same product, they’re purchased for quite different reasons.

The strength of Haul’s product, its uniqueness, also proved to be a significant challenge in meeting the demands of corporate clients. The larger quantities required to supporting such customers presented significant challenges in scaling up operations. Firstly, there are limited economies of scale in Haul’s production process—the cost to manufacture one item is virtually the same as when manufacturing one thousand. Scott sees cutting as Haul’s “core business”, noting that “what ends up on the front of each product has a big impact on whether it sells or not.” Each billboard or other raw material needs to be evaluated individually and cut to ensure that the most interesting elements are featured—ultimately a design decision that requires experience and skill.

Additionally, scuff marks, crinkles and fold marks, and other imperfections in the raw materials need to also be taken into consideration. This means that multiple panels, even of the same billboard design, can’t be cut to the same template, ruling out automation of processes that would more commonly enable reduction of costs at scale. This has resulted in Haul establishing close and trusting ties with overseas manufacturers to deliver at a competitive price point, with specialised training programs to support staff in these companies.

Strong supplier relationships closer to home have also been critical to Haul’s success, with the cluster of businesses supporting the textiles, clothing and footwear sector has been beneficial. Haul ensure favourable terms for local sewers and suppliers, in some cases providing specialised equipment such as heavy duty machines typically used by saddleries or sail makers, to outworkers. This commitment has resulted in suppliers going ‘above and beyond’ to find new methods of manufacture and supporting new product development.

The development of strong customer relationships, especially through the creative use of social media tools such as Twitter, have also been critical to Haul’s success to date. Scott credits early engagement with Twitter in particular as playing a significant role. Social media is a natural fit for Haul’s story-based approach to marketing:

…we’re a business that’s a story telling business and we’ve got a story behind us. It’s not just “this jacket comes in three sizes and three colours” … For us it’s “this used to be a billboard, you may have thought billboards were paper, they’re actually vinyl and this is what happens when they come down. This is how we made it, we individually cut it. It’s made by this guy here. You know, we’ve got this dog [@GusTheBoxer on Twitter] in the store.”

Scott acknowledges that “we wouldn’t exist if the community that we both work with and, for want of a better term sell to, didn’t help us along.” Haul have also successfully engaged customers in helping develop new products and customers have also provided important word-of-mouth referrals.

Haul’s story illustrates a number of benefits to taking a shared value approach. Firstly, reconceiving products and services using a sustainability lense created a product with unique selling potential that clearly differentiates Haul in the crowded accessories market. The story behind the products has enabled opportunities for authentic dialogue in social media channels. This engagement with customers has also helped to both differentiate the brand and generate significant referrals and word of mouth marketing. The sustainability benefits also opened up new market opportunities in the corporate sector, where sustainability criteria have a greater influence in purchasing decisions. Secondly, Haul’s connection and support of their supply chain partners, strengthening the local cluster of textiles producers, has reaped dividends in creating new products and high quality of service and products. These deeply embedded practices have set the stage for strong continued growth as Haul’s corporate offering expands.

Business 2.0, Sustainability

Case Study: MTC Group

This post is part of a series outlining my learnings from interviews with a number of small and medium businesses exploring how they have benefited from a shared value approach. These case studies support a paper I wrote exploring strategic CSR (PDF 1.3MB).

The MTC Group is an Australian-based specialty coffee importer and roaster that has grown out of the Mountain Top Coffee Estate, an Australian coffee plantation. MTC supplies coffee to local and overseas markets, sourced from Brazil, Indonesia, Ethiopia and Papua New Guinea in addition to that sourced from the local plantation.

The business has demonstrated strong returns during its three years of operation, with revenue more than doubling year-on-year over that period and volume increasing 300% according to Andrew Ford, MTC Group’s CEO and President. During this time the business has grown from two to six full-time staff and has established successful joint ventures with partners in Indonesia and Papua New Guinea. The group is continuing its expansion with the recent appointment of an Australia-based group manager and the opening of its first international office in Hong Kong to better service customers in the Asia Pacific region.

The Australian specialty coffee market—which Andrew estimates is roughly 10% of the total local coffee market—is highly competitive, with pressures impacting importers from both directions in the supply chain. Upstream pressure is caused by the significant rise in coffee prices in recent years. Additionally, downstream pressure has been applied by retailers and distributors, who are themselves facing tough trading conditions, for roasters and importers to maintain, if not reduce, prices. Lastly, importers are facing increased competition not only from competitor importers, but from their own customers. Andrew explains:

…the retailers that were the core business of these specialty coffee roasters, and they were the core business because they were good at what they did, they owned one or three or five stores at high- volume … those same guys now are saying well, “why am I buying coffee from the wholesale roaster? Why don’t I set up my own roaster and become my own roaster/retailer?”

MTC’s vision is to develop the Asia Pacific market, both as a sales target but also for sourcing. Regions play an important role in the marketing and positioning of produce within the international coffee market, with highly-regarded regions commanding premium prices. MTC is an early mover in the Asia Pacific region, seeking to gain a deeper understanding of this new market and stronger relationships within it, which Kanter1 highlights is a key to successful corporate social innovation. This has resulted in MTC supporting the development of key infrastructure to support traceability and market transparency in Indonesia and Papua New Guinea, where the coffee trade is less established. Andrew explains:

Kenya [is] highly regulated, highly structured, government intervention, everything runs from an auction so just by us being there and participating we’re providing the same sort of presence if you like, traceability and vision to our client base just by being there, participating at auction level. Indonesia [is different, it’s]: deregulated, no government intervention, dysfunctional…

Such active engagement with the community to develop the capacity of these local, emerging markets, is an investment in cluster development. The impact of such infrastructure on business competitiveness is noted in the context of both shared value2 and cluster development in general.3

A key differentiator of MTC’s business is its close direct relationships with producers throughout the coffee production stages, from red cherries through parchment, green bean and roasting processes. This is part of an overall strategy to differentiate MTC Group from competitor importers. Andrew explains: “as a business we want the market to perceive us not only in quality but in terms of innovation and in terms of … being an origin-based seller not [just] an importer.” MTC Group has developed a multi-tiered approach to its origin-based offerings, with brands being developed at a variety of regional levels. An example of this is the Tairora Project in Papua New Guinea, where MTC source coffee from a variety of villages and suppliers in the region, but have also developed sub-brands for beans sourced from Bonta (village) and Baroida (farm).

MTC values these relationships highly and invests significant resources in their development, providing support in the form of training (e.g. to evaluate bean quality) and market intelligence (e.g. sharing MTC’s experience of coffee market dynamics and buyer expectations). Andrew characterises this support as building “the capacity within the supply chain of our business, our exporters and even at the farmer level, to ensure we meet the market’s demand”, illustrating with an example:

What we’re doing is supporting Baroida farm to put in place quality initiatives … in terms of processing, drying, batching, garden collection, cupping and review matching the garden to the cuppings … giving guidance, … saying ‘the market’s asking for this’… ‘this involves steps A, B, C, D,’ … they’ve got the skills and the ability to do it on their own but we’re providing that feedback. … [we support them in] the evaluation process … in terms of building the database and the management of data or data collection so the comparison between activity ‘A’ and what your result is in the cup.

These skills not only support MTC’s business through increased quality of supply, but they also build the skills and feedback to growers about market trends and expectations, ultimately enabling them to command higher prices for their produce. This depth of relationship with suppliers helps provide MTC with competitive advantage that new entrants (including MTC’s customers) will find more difficult to copy. This re$ects Scott-Kemmis’s contention that a business model that is “deeply embedded in the specialised capabilities and collaborative links that a firm possesses”4 is a key component of innovation in the Australian market. It is also a key dimension of sustainable business practice, where “[r]elationships with suppliers and buyers are based on greater trust through which long- term contracts and relationships are emphasized, providing greater traceability of both products and their impacts.”5

This advantage may deepen into the future, if the market continues to shift towards what Andrew calls the “relationship business model” in the coffee market:

…the way I view our industry is that right now at trade/retail level to the consumer, the big buzz is relationships, in other words it’s all about the coffees… I guess the ‘90s was all about fresh and local and they do roast it locally, “we’re round the corner, we pack it fresh” … the 2000 decade was all about baristas, it was you know, “my barista’s the best barista, barista champion”, … and this decade is all about relationship properties in the market. And in this decade where it has never been more important than knowing where your coffee’s come from and having the integrity…

A key challenge with this shift within the broader market is that customers who see appeal in this model have not adjusted structurally to adequately the longer-term view that is required to support it. Andrew explains:

…we’ve built the relationship model with our Sumatran supplier, great relationships, you know, we refer to each other as our “brothers”, it’s that genuine, good honest, partner of mine, brother of mine. We’ve built the relationship; [our customer,] they buy two or three containers a year—we bring it in. They turned down an offer from us because they got a price discount effectively from another suppler of 5% … I rang the owner of [our customer] and said, “guys you can’t ask me for a relationship-based business model and then go to tender on every contract that we discuss.”

MTC’s experience demonstrates a reconceiving of products and services where relationships and the origin of produce are valued and act as a heuristic for quality. MTC has built a strong reputation for quality and transparency, developing a premium product in a commodity market. Transparency across the supply chain—an approach championed by leaders in other industries such as Patagonia (clothing & textiles) and Investa Property Group (see other case study)—is also emerging as an important aspect of the coffee commodity business. Certification schemes such as Fairtrade and Rainforest Alliance are one way the industry is adjusting to this shift. MTC’s approach signifies that redefining value in the value chain—developing direct, supportive, trusting, long-term relationships with suppliers—is another. Strengthening clusters through education and infrastructure also provide MTC with a competitive advantage in building the Asia-Pacific region’s profile in the international market, commanding corresponding premiums to the benefit of both MTC and its supplier communities.


Notes

  1. Kanter, RM 1999, ‘From spare change to real change: The social sector as beta site for business innovation’, Harvard Business Review, no. May 1999, pp. 122–32.
  2. Porter, ME & Kramer, MR 2011, ‘Creating Shared Value’, Harvard Business Review, no. January–February 2011, pp. 1–17. [http://hbr.org/2011/01/the-big-idea-creating-shared-value]
  3. Porter, ME 2000, ‘Location, Competition, and Economic Development: Local Clusters in a Global Economy’, Economic Development Quarterly, vol. 14, no. 15, pp. 15–34.
  4. Scott-Kemmis, D 2012, ‘Responding to change and pursuing growth: Exploring the potential of business model innovation in Australia’, Australian Business Foundation. [http://books.google.com.au/books/about/Responding_to_Change_and_Pursuing_Growth.html?id=kxuqMwEACAAJ]
  5. Hutter, L, Capozucca, P & Nayyar, S 2010, ‘A Roadmap for Sustainable Consumption’, Deloitte Review, vol. 2010, no. 7, pp. 46–59.
Business 2.0, Sustainability

Case study: Investa Sustainability Institute

As I mentioned in my last post, I had the chance to speak to a number of small and medium businesses last year about how they have benefited from a shared value approach. This is the first case study that supports the paper (PDF 1.3MB) I wrote exploring strategic CSR.

The Investa Property Group owns and manages commercial and industrial buildings across most Australian capital cities and the ACT1, managing assets worth AUDfi8.6 billion2. With 230 employees as at 20113, Investa is just over the nominal 199 employees that represents a medium-sized business according to ABS criteria. However, the Group’s experience remains worthy of examination as an example of shared value applied in an Australian context.

Sustainability credentials and building efficiency are key competitive factors in the Australian commercial property market, not only infiuencing operating costs, but also building valuations and rents achieved. Beck Dawson, Sustainability Manager at Investa, expands:

…in commercial office, there’s a very competitive market. That competition has bred a lot of forward momentum on sustainability compared to a lot of other industries, because we’ve had that intrinsic industry pressure.

With a desire to encourage greater industry transparency, Investa took the bold step in 2009 of releasing seven years’ worth of historical building performance data as part of their sustainability report. Reported data ranged from energy consumption and water use through to recycling and tenant complaints. The online report included an interactive tool to make this information more engaging and easier to work with. Beck highlights the tool was effective at engaging senior levels of management in understanding the importance of efficiency and to identify key areas for further investment:

[the tool allowed] for the first time that whole portfolio view of environmental performance of the organisation. [It] engaged more people … particularly at the higher level within the organisation, because it was visual. It has specifically encouraged investment in buildings that were not performing. … So the organisation’s gained through making that investment, seeing an improvement and with those come potential valuation uplifts, investment returns and the ability to attract different and more engaged tenants.

Many organisations might consider this kind of transparency radical and/or risky. However, the Investa team see this as a key competitive differentiator, as Beck explains:

At the moment you’ve got five different property companies saying “we’re sustainable.” How do you prove it? So now our partners are saying “well what does a green building really mean?” How do you classify that? How does anybody, any normal ordinary citizen or tenant look at this and go “well that’s a green building, and that’s not?” Well they don’t really have a way of doing that right now, because the detailed data’s not there.

This high level of transparency serves to build Investa’s credentials, providing evidence to support the company’s claims and strengthening their competitive positioning within the market.

Also in 2009, Investa launched the Investa Sustainability Institute (ISI) as a vehicle for action research, leveraging Investa’s building stock and the data it generates as a “real world ‘testing ground’ where promising ideas, investments in technology and non-technological interventions can be applied and analysed by researchers working with the Institute.”4 Part of the impetus for establishing a separate research arm, particularly one with a non-profit structure, was to reduce barriers to participation by external stakeholders, according to Beck:

…we wanted to participate in research and make good partnerships with other external bodies including academics, other property companies, … clients, tenants in the industry in which we work. … [We wanted to] develop a forum that would allow all those parts to come together to do really good action research. … We really wanted to be an engaged partner in research projects. And that’s much easier to do when you’re a research body.

Such an approach to data sharing and industry-wide collaboration is highlighted by Porter and Kramer:

Major competitors may also need to work together on precompetitive framework conditions, … Successful collaboration will be data driven, clearly linked to defined outcomes, well connected to the goals of all stakeholders, and tracked with clear metrics.
Investa’s initiatives also recognised that efforts at bringing about new innovations would benefit from multi-disciplinary dialogue.

This open innovation approach, incorporating network relationships into their business model, features in the innovation strategy of an increasing number of firms, as outlined by Scott-Kemmis.

Dawson points out the ultimate goal is “improving the environmental performance of the buildings [leading to] improved financial performance.” But while these insights are valuable internally, the Institute has also made efforts to engage a wider group of interested people. This is in part to build a wider awareness and skill set within the local market, to help skill up local practitioners to better support Investa’s goals. But it also aims to educate Investa’s potential customers, “to raise the level of the debate from ‘oh, it’s got green stuff stuck on the outside like solar panels,’ which is very visible … aren’t necessarily very material in terms of carbon emissions from commercial office buildings,” as Beck explains.

External engagement initiatives include the Green Buildings Alive (GBA) program, which seeks to provide “an in-depth look at how meaningful data can trigger actions in buildings that improve performance and services to occupants at the same time.” GBA seeks to provoke multi-disciplinary dialogue between interested parties within the industry.

Pulse building insight

Investa are continuing their drive towards greater data transparency, releasing the Pulse tool in early 2012. Pulse enables near real-time data from a sub-set of Investa’s building portfolio, providing more timely feedback to Investa’s building managers. In keeping with ISI’s action research approach, Pulse builds on the learnings from previous initiatives, aiming to better support building managers in making decisions.

Where earlier efforts to publicise data were in part an attempt to spur a competitive spirit between managers, Craig Roussac, Investa’s General Manager, Sustainability, Safety and Environment, explains that this emphasis has now shifted:

[Previously] we were talking about using an audience or external communications as a means to motivate. It probably doesn’t really motivate [building managers] very much. … rather than someone telling them there’s a problem, fix it, there’s actually this [tool] to give them feedback. And they would have a better idea than anyone else as to what might have contributed to that out performance or under-performance yesterday. … and further, because they’re in charge of whether an issue is worth pursuing or not, they can prioritise their time a lot better that someone saying “what was that six kilowatt hours they’ve used at 3:00am three weeks ago, I want to find out?”

The property market is being transformed by demand for reconceived products and services, with sustainability criteria and so-called “green buildings” emerging as a significant competitive driver in the local market. Investa’s experience demonstrates the need for engagement across the value chain in delivering community benefits (more sustainable building stock), which also illustrates the increasing expectations on suppliers to larger organisations in engaging in the delivery of shared value outcomes. Investa’s transparency agenda provides both internal benefits, but aims to strengthen local clusters by increasing the capabilities of practitioners working towards greater building efficiency. The boundary of this cluster extends beyond the property market, encompassing academics, information technology infrastructure providers, property managers, and more.

Business 2.0, Work

CPA Congress South Australia

I’ve had a lovely time in Adelaide the past two days – it’s a lovely city (I’ll have to come back sometime soon). Thanks to CPA for inviting me (and putting me up in such lovely digs at the Sebel Playford).

The reason for my visit was to present to a CPA Congress session on “Maximising Opportunities in the Online Marketplace”. Whilst similar to the previous sessions I presented, I did shorten and restructure things a little.

You can also download a PDF of the slides with notes (PDF 10.4 MB).

Bonus link: Laurel Papworth’s talk from the Congress is also available online.

Social media & networking, Work

Web Directions South Government – Workshop notes

Yesterday I lead the Social media and government workshop that was part of the Web Directions South Government conference. I hope the participants enjoyed and benefited from our time together as much as I did – it was a great day from my perspective. Thanks again to those of you that attended.

Thanks also to Maxine, John and the Web Directions team for the opportunity to meet with you all and for putting on such a great day.

As promised, here are the workshop presentation with associated notes (PDF 12.8 MB). I didn’t put this up on Slideshare as it was designed to support the workshop across the day and doesn’t really “read” as a slideshow. (If you think I should put it up anyway, lemme know…) Video slides have also been removed…

There are a number of links in the notes to further information and sources. Unfortunately the links aren’t clickable (does anyone know how to get that to work in Keynote?), but you can copy and paste into your browser to access. I hope that you find the slides and notes useful.

Update 28 May 2008: In the presentation notes I state that MySpace is larger than Facebook. Seems this is no longer the case.

The results of the “Live Wiki” exercise, where we brainstormed the many benefits of social media are also available for download (PDF 40 KB).

I will write up the brainstorming session ideas in the next few days and post them here once they’re done.

One of the side effects of a great brainstorming session is that there are a lot of notes to write up! Sorry for the delay – you can now download them from here (PDF 88 KB).