Dots, camera, mirror. Image source: https://www.flickr.com/photos/fate2012/15544805688/
Business 2.0, Sustainability

A (financially) sustainable internet of things (pt. 2)

I “grew up on the internet” during an era when open source and ideas like the Creative Commons were just the “way things were done”. There were often warnings from key influencers like Dan Gillmor, Dave Winer, Doc Searls and others about the threats impending on this ethos and our rights as citizens of the internet. I hold these values pretty dear to my heart.

So I’m finding it challenging to reconcile the conundrum relating to internet of things business models that revolve around the data collected.

While the IoT ideas I am experimenting with may never come to market (I did say “early experiments” in my last post, right?), I am thinking about business models etc. If, as I’ve argued previously, the return on investment rationale doesn’t stack up for energy monitoring devices in an apartment/small-space living context, one thought is that it would be advantageous to cross-subsidise the costs through other means. For example, to provide the device at close to cost (or less than cost, possibly even free) and generating revenue through “other means.” Those other means are likely to involve some way of leveraging the data you have collected. Continue reading

Grid of connecting nodes on a screen. Image source: https://www.flickr.com/photos/jason-samfield/7906765044/
Business 2.0, Sustainability

A (financially) sustainable internet of things (pt. 1)

I read with interest a recent post by, well… (ahem)… The Internet of Shit (herein IoS) that calls out the internet of things’ dirty little secret.

The article starts by making some (valid) points about the plethora of devices that are starting to emerge that are connected to the internet for no real purpose or value. Sure, they might be cute or novel (and sometimes that can help us rethink things or look at the everyday from a different perspective). But in a time of relative affluence, and declining wellbeing and environmental health, it begs real questions about value and the need for more crap.

But the crux of IoS’s argument runs a little deeper, looking more specifically at how internet of things (IoT) products are often only financially sustainable by “monetize the monotonous that was never even interesting to any at-scale business”. Continue reading

Business 2.0, Design

The new MBA: Mastering Business Ambiguity

Lisa Kay Solomon has a great post entitled The New MBA: A Masters in Business Ambiguity:

Long gone are the days of “Mastering Business ‘Administration.” (What are we administering anymore?) Today, the model we should be teaching is more appropriately titled: “Mastering Business Ambiguity.”

It’s a great piece—I’d recommend checking it out.

But it also sparked for me some thinking about the role that we (at Zumio, but also designers more generally) play, and I think that a critical part of our value to our clients is in working through ambiguity—the so-called fuzzy front end of business and product development.
Continue reading

Business 2.0, Sustainability

Case study: GoGet CarShare

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). This case study is based on an interview undertaken in 2012 by Allison Heller, who at the time of publishing is Social Strategy Advisor for the City of Sydney.

The distinctive orange side mirrors of GoGet CarShare cars are an increasingly familiar sight across Sydney’s urban neighbourhoods, along with those in Melbourne, Adelaide and Brisbane.

GoGet CarShare car.  Image: neeravbhatt @ Flickr http://www.flickr.com/photos/neeravbhatt/8653599067/

GoGet CarShare car. Image: neeravbhatt @ Flickr

Australians are notoriously wedded to their private vehicles. But attitudes to car ownership are shifting in inner city areas when good alternatives are available. A lack of private parking spaces in new developments, local government planning controls supporting reduction in private parking, and residents’ desire to not own a car are all driving this shift.

GoGet has both benefited from and actively supported this zeitgeist to establish and grow a highly successful car share business. The firm’s marketing is based on simple, common sense, rather than an overtly ‘green’ message. The appeal of the service is neatly captured in just a handful of paragraphs on the company’s website:

GoGet gives you all the benefits of a car—without the hassle and expense of owning one! As a member, you have access to a network of new cars parked locally which saves you time and money and lets you get more out of life…

GoGet is perfect for people who don’t need a car everyday or want to get rid of that second car. It’s also perfect for businesses or organisations that get the benefits of having a car fleet without the costs. [1]

GoGet CarShare is more convenient than car rental, cheaper than car ownership and a great way to help the environment. Just book any car online or over the phone, by the hour or by the day. Then, take a short walk to the car, unlock it using your smart card, jump in, drive and bring it back to the same spot when you’re done.

Each month you get an itemised invoice, much like a phone bill. What you don’t get are mechanical, insurance and registration costs, cleaning hassles and everything else that goes with owning a car. [2]

Census data for 2011 from City of Sydney, where the firm’s headquarters is based, shows a strong decline in household car ownership and declining figures for car-based journeys to work—a clear boon to GoGet’s business model. But it’s fair to say that GoGet co-founders Bruce Jeffreys and Nick Lowe were well ahead of the curve when established the company back in 2003.

Straight-talking Bruce, who hails from a marketing background, says the business model just made sense:

Aristotle talked about utility being from use, not from ownership. It’s about taking the surfboard out and gaining enjoyment value from surfing on the wave, not from owning and looking at the surfboard. It’s about being on the wave.

The strong demand for the firm’s product is growing exponentially, supported by property development trends and local government policies. Supporting City of Sydney Council’s Sustainable Sydney 2030 Strategy, for example, is a car sharing policy targeting uptake of car sharing to 10% of all households by 2016.

The firm had humble beginnings, grounded in the duo’s inner-western Sydney community ties. Starting with three cars in Newtown and 12 founding members, the business has grown organically to have 800 cars, 18,000 members and 22 employees in 2012. GoGet is now one of the largest car share companies in the world, according to Bruce, and the fastest growing in the English-speaking world.

This success is not only attributable to wider social and political trends, but to the firm’s common sense and ethical approach to business. In this sense, Bruce summarises GoGet’s brand differentiators as:

  • Local;
  • Authentic: for example “if we take a marketing photo of a person for a brochure, it’s a real person, not a model from an agency”—early advertisements featured Jeffreys and his sister, for example, and
  • Connected: internet/networked/engaged.

Starting small and growing organically has had advantages in developing GoGet’s market position. Bruce explains:

A large corporate is by nature global, superficial and disconnected. In terms of trust and values, these things are key. This is how we view our model, brand and success, from a brand differentiation point of view. It’s not rocket science.

It was a sustainable model from the start in relation to business finances. The business has grown organically without the need for external funding. We will continue to grow organically—in Sydney and Melbourne we are leading the market, and we’re interested in other Australian cities.

At the outset, the GoGet co-founders rooted their business decisions in market research. They saw the potential for car sharing through their community’s living patterns.

Our initial market research involved surveying 450 people in Newtown in one day, at the Newtown Festival. The survey was not about car sharing per se. We asked them about their transport patterns—Did they have a car they hardly used?

This was really important [to the foundation of the business]: the most important thing with any business is direct market research. You have to establish your first customers.

Now GoGet is going from strength to strength, Bruce provides a refreshingly straightforward take on the highlights so far.

There have been no real watershed moments. It’s about slogging away day by day. … The big highlight for me personally was the day that me and Nick [Lowe] didn’t have to be on call 24 hours [a day]—we could get a good night’s sleep. Also, putting in the place management team—one that we can trust, that’s delivering.

Like many small business owners, Bruce sees authenticity in relationships with suppliers is critical:

We look for straight-talking, ethical suppliers. Essentially, people we like dealing with.

Sustainability for GoGet is integral to our approach. It’s integral to how we do things; not an add-on. So if a supplier has sustainability as an add-on, it has no value for us. We are only interested in those that do it and get it. We’re just not interested in, for example, a supplier with a green standard as a mask.

The question is: do they fit? We need to discern that, for example, by looking at how a supplier approaches you. You want to have an honest and straightforward relationship with someone who can communicate well. So that when you need to have a discussion, for example, about whether something is too expensive, you’re not dealing with a defensive attitude.

He stresses that sustainability must be a fundamental value for a successful business today—but one that is inherent, beyond the promotional:

A business promoting itself as ‘sustainable’ is a bit like a business saying ‘I believe in world peace,’ when what they do is make pizzas.

It’s about embedding sustainability in what you do on a day-to-day basis, rather than a culture of window dressing. Resilience comes from aligning your values with what you do. And if you aren’t already doing it [i.e. sustainability practices] then what’s stopping you?

As for the concepts of shared value and collaborative consumption, Bruces shared a similar sentiment:

Well a lot of [shared value] is quite common sense. For example, GoGet is about wanting to lessen our impact on the ground, and you can’t do that unless these values are enshrined in local communities.

There is a lot of talk among large corporates of localisation and shared value etc. But it has to be in [the firm’s] DNA.

Bruce is keen to stress that GoGet’s fundamental business model and drivers, along with the day-to-day challenges it faces, are really no different to any other business.

It’s about marketing—to communicate simply what we do; communication; delivery of a seamless service that uses a lot of technology. For GoGet, there is incredible complexity to the system that operates in the background. In the foreground, we have to deliver on the promise of a seamless service. We take on the pressure of the systems; we take care of things so that members just have the driving experience.

It’s about process; systematising; training; feedback mechanisms. There is no special formula. We’re very focused on our market segment. We aim to continuously improve and refine production. We never stand still.

Technology has facilitated a growth in collaborative consumption, which Bruce notes is in itself not a new concept:

The internet is a major enabler of sharing, of cars for example—this market was ready to be opened up, and it’s an exciting time. … [Collaborative consumption] has always been there. Historically, we’re currently going through a whacky period, when Chinese-made things are so cheap, we’ve filled our workplaces and homes with stuff we rarely use.

He adds:

Collaborative consumption to me never went away, but often there was no alternative to owning things. Now you have a choice about owning things, [alternatives to] buying something … expensive that you don’t use much, or buying a cheap thing that you will throw out.

Examining GoGet’s path to success demonstrates a reconception of products and services, applying what Vargo and Lusch term as “service dominant logic” (more on S-D logic: 1, 2) to deliver the utility value of a product with a radical reduction in the drawbacks—social, economic and environmental—of the traditional ownership model.

GoGet represents a Product Service System, a concept pioneered by Oksana Mont among others and highlighted by Rachel Botsman in What’s mine is yours: The rise of collaborative consumption. Such systems place a greater emphasis on the longevity and servicability of the products being produced and provided to users, and rely on and encourage stronger relationships with suppliers. They also enable the recouping of higher production costs of goods such as electric vehicles through greater operational efficiency.

The close community ties highlighted by Bruce in our interview extend to working closely with local governance bodies (such as councils) to provide car share spots and other infrastructure. This in turn helps strengthen local clusters where such shared services are highly valued in attracting talent. All in all, GoGet provides a terrific example of the three pillars of shared value as outlined by Porter and Kramer working synergistically to create business and societal prosperity.

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.