Bart Kozdras' Blog

The concept of triple bottom line company is recently very popular. Traditionally, the companies were analyzing the financial balance sheets to determine how successful they were. Triple bottom line companies assess their success in view of their financial, social and environmental impact.

This holistic approach potentially brings many advantages: it can be seen as a Point of Difference, cement customer loyalty and improve firm’s relationship with employees. However, if badly managed and communicated, it can provoke accusation of, for example, green washing. Therefore, before declaring the company as green or socially responsible, the real impact should be assessed.

Let’s look at the example of company that tries to project itself as a triple bottom line.

Wal-Mart’s implemented a greening strategy in 2005. It has let the company significantly improve its image among the customers; nevertheless, initiatives as Wal-Mart Greenwash provided by ILSR are continuously challenging Wal-Mart’s  practices, accusing it of being dishonest, which could in medium term hinder the company’s image.

Wal-Mart has also stated that it has positive impact on the local SMEs. However, research shows that in fact its impact is negative for companies that provide similar products and services in first place, but also for other businesses. This can also hinder giant’s image and be considered as a proof of dishonesty.

Wells Fargo & Co., the fourth biggest American bank, has been accused of abusing and defrauding US government’s mortgage insurance program. Starting from 2001, the company has developed a mortgage program addressed to the borrowers that couldn’t normally classify for a loan. In order to bust the business’s growth, company’s employees were paid based on the number of approved loans, rather than the reviewed loans. This have led to a dramatic fall in the loan quality and “hundreds of millions of dollars” in loses, as reported by the Federal Housing Administration.

Many banks have committed similar mistakes prior to the current economic crisis that has started in 2006. The issue may be in the organizational culture of the companies like Wells Fargo. Only the best rewarding firms get the best talents and there is a fierce contest on the market. Nonetheless, the companies should analyze better risks stemming from this kind of motivation practices, as the price they may have to pay has proved to be higher that anybody might have expected.

To read more on Wells Fargo’s troubles: http://www.economist.com/blogs/schumpeter/2012/10/wells-fargo-and-mortgages

Inditex’s (Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho) business model is based on a revolutionary supply chain that allows the company to deliver new products from design board to its stores in less than 1 month. As a result the company boasts one of the lowest ratios of discounted sales as the product lines are changed frequently and clients must get the merchandise they desire before the sales (most of the models is gone by that time). This is not enough for the ambitious Spaniards who have found yet another way of increasing firm’s benefits.

Lefties is Inditex’s low-cost outlet. It offers its own, low-cost basic products (simple t-shirts, jeans, shoes) and “lefties” from other INDITEX’s brands (with new Lefties brand tag). This strategy lets the company monetize the inventory that would otherwise affect its balance sheet, at the same time addressing lower-income customer segments, thus further expanding company’s market share.

This is yet another example of how innovative business model can create a significant advantage to the companies.

Social entrepreneurship is present everywhere. One example is Vancouver-based Climate Smart. The firm has a clear goal: to help small and medium firms (with fewer than 500 employees) limit their carbon footprint, and, eventually, become carbon-neutral.

The process is continuous: companies learn how to measure their emissions of CO2 (and  CO2 equivalents for other gas emissions); next step is reduction of emissions; finally, communication strategies for leveraging the benefits of the process are presented. Process is gradual and the companies can repeat it annually to further improve their results.   Climate Smart’s experience proves that the companies not only cut their emissions but also reduce costs. 1 ton reduction saved companies an average of $400.

One of Climate Smart’s success stories is collaboration with Van Houtte Coffee.

The City of Vancouver has set itself an ambitious goal of becoming the greenest city in the world by reducing carbon emission by 33% by 2020 and 80% by 2050 (compared with 2007 levels). Climate Smart collaborates with the local authorities to reach this goal by addressing small and medium businesses which account for a 45% of Canadian GDP.

Newsweek has been around for over 80 years. Nonetheless, last years have been especially difficult for the magazine, with annual losses reaching $40M, and subscriptions shrinking from over 3M in 2001 to only 1.6M in 2011. Acquisition of The Daily Beast to reach broader audience on-line didn’t bring expected results; nonetheless, the company recently decided to go even further and become all-digital in the US.

This is how Tina Brown, magazine’s CEO, explains thit step.

Newsweek assumes that the number of tablet user will keep growing as fast as in recent years when it mushroomed from 13 in 2010 to estimated 70 million by the end of this year in the US alone, and that advertising will keep fluctuating from printed media to the Internet. According to Ms. Brown going all online is inevitable.

It’s true that the early bird catches the worm, and certainly press is heading towards digital future. However, it’s difficult to tell if it is the right moment for the new, exclusively online business model for press as still less than 30% of Americans own tablets. One is sure: cutting printing and distribution costs will help to reduce the losses (if readers prove loyal), which will help company’s operational efficiency; this step is not enough though to be called a new business strategy.

Want to know more?

After 80 years in print, the newsmagazine adopts an all-digital format: http://www.thedailybeast.com/articles/2012/10/18/a-turn-of-the-page-for-newsweek.html

Newsweek had unique troubles as industry recovers: http://www.cnbc.com/id/49472740

At Newsweek, Ending Print and a Blend of Two Styles: http://mediadecoder.blogs.nytimes.com/2012/10/18/newsweek-will-cease-print-publication-at-end-of-year/#h[DhbDhb]

Strategy vs. Operational Efficiency

Recently, while reading Business Model Generation by Alexander Osterwalder, I’ve come across the concept of “Long Tail” Businesses: firms that make profit selling less quantity of greater variety of niche products. One example is the Danish toy producer, LEGO. Customers can design their own products and company produces and supplies them (of course, for premium price). Furthermore clients can publish their designs so that other customers can buy them. In this case designers and LEGO make profit.

This example attracted my attentions as it’s an interesting idea for creating value to customers. It may help improve customer relationship and loyalty as well as attract new customer segments. It boosts company’s innovation potential at a low cost. These advantages will likely offset higher costs of production and supply chain.

Have you ever heard of hydraulic fracturing? This technology let the US see its natural gas prices fall to the lowest level in years and become one of the leading producers of natural gas!

Presented as totally safe and benign to the environment, the technology is not received quite as well in Europe. Namely, France has vetoed use of hydraulic fracturing on its territory because of environmental concerns.

Nontheless, the american EPA presents the natural gas as “nation’s clean energy future“, but isn’t that clean’s energy past? It’s true that the emissions from burning natural gas are lower that these coming from coal; however, in 21st century, shouldn’t we invest in new technologies that will radically change our economy and help to combat the climate change?

There are many ethical issues concerning hydraulic fracturing. The most important is its impact on water reserves. To perform hydraulic fracturing more than million gallons of water, sand and chemicals are pumped underground; many times the drillings take place in zones that suffer from lack of water (Texas, New Mexico) and if a technology is transferred to other, less developed countries, it may limit the resources of drinking water for the local populations.

On the other hand, the industry states that there are little emissions from gas fields. Jeff Tollefson in a study published in Journal Nature proves that it may be false.

 

So who are the stakeholders of hydraulic fracturing apart from oil and gas industry (and, not surprisingly US government)? Is it really the change we are waiting for? And is it ethical for the US government to present it in such a “glorious” way while the consequences for the environment are still unknown?

While watching some videos on YouTube I came across the following commercial:

It made me think about the Pepsi vs. Coca-cola ad that we’ve seen in class today, and eventually reflect on current marketing strategy of Samsung.

To begin with, I first thought it was new commercial of the iPhones5 but soon I perceived the exorbitant dose of sarcasm. When young guy takes out his Samsung Galaxy 3S it’s clear that it’s all about comparative advertising.

A few catchy slogans come along to better engage the viewer: “This year we finally get all we didn’t get last year” (meaning: Apple throws at us new models all the time), “I moved on”, etc. Enumeration of series of characteristics like big screen and full 4G aims at emphasizing Points of Parity and Points of Difference.

PoP: 4G, big screen

PoD : Samsung’s Galaxy 3S has bigger screen, can share videos instantly, can display videos while email is in use, has new options like music list exchange.

Value: We are better and faster; we are more open, relaxed and younger.

Benefits: better hardware means better user experience; you are first; you are cool; you’ve made a good deal (no changes in chargers, adaptors, etc.).

Finally, Samsung’s motto makes reference to the one adopted by Apple:

iPhone: The biggest thing to happen to iPhone since iPhone.

Galaxy 3S: The next big thing is already here.

So what do you think:

Can these kind of maps change Points of Refrence in consumer’s minds (will Samsung go higher than apple on the ladder of “innovation”?

Has Samsung gone too far? Will making iPhone fans look ridiculous make them more likely buy Korean giant’s phone or just the contrary?

Will we be witnesses to yet another legal dispute between Apple and Samsung because of the dubious nature of this kind of advertising?