MBA Life

Wisdom from my Internship

2009-08-18T23:52:00.000-07:00

During my internship this summer, I had the opportunity to meet with many company leaders. Most of them shared sage career advice. Here are bits of wisdom from a few of the fascinating people I met:

VP of Marketing

Find the nuggets you can learn from your superiors. Even managers who you do not wish to emulate in some ways can teach you something important. Learn what you can from them.
Gain advocates who will give you honest feedback.
Prepare for meetings with superiors. Anticipate their questions and needs.

VP of Marketing:

To succeed as a marketer as new marketing channels emerge and existing channels evolve:

Empathize with your customer.
Learn the language of the CFO so that you can communicate to executives.
Gain experience with 3-D Marketing. (This is marketing where your consumers connect with consumers, your consumers can give you feedback, and you can communicate with your consumer- Think social media.)
Seek experience and skills rather than titles.

Company President:

Set goals and communicate to others how they will be measured against them.

Executives in Technology and Operations Roles:

Maintain integrity
Always question
Be open to change. The only thing constant is change.
Stay objective. Make fact based decisions.
Work hard.

Executive in Risk & Compliance:

Learn about systems to drive transparency and accountability in organizations.
Learn how to create a system of governance.
Learn to sort through noise.
Remember the black swan. Many things seem obvious to everyone in hindsight.
Communicate up and down.
Say what you will do, and then do it.
Learn to make complicated issues simple. Tell stories and analogies to bring your communications to life. Use data to support your arguments.

Big Companies Can Make a Difference Too

2009-08-16T08:39:00.000-07:00

It’s difficult for me to tolerate “Better than thou” environmentalists. You probably know one. Those are the people who are such a friend to the environment in their own lives, they make you feel bad for taking smaller but impactful steps to help the environment in your own.

So I was surprised this week when business professionals echoed some of the sentiments of such hard-core environmentalists. I recently attended a webinar about developing a green strategy geared to small or medium sized businesses. Representatives of a sustainable consulting firm, Via Nova Group, made great points and gave some valid information for their listeners. For example, they told the audience that a green strategy isn’t a good strategy unless it saves you money. Great advice. Then, they mentioned how consumers consider other factors in a purchase decision before they think of the environment. Factors like price or convenience often drive purchase decisions before environmental concerns would for many consumers. Very true, and a fact many businesses overlook.

However, just minutes later these same people complained about “a large maker of cleaning products who recently launched a green line but that makes up only 2% of its business.” The company that came to my mind was Clorox with their recent launch of Green Works, a line of natural cleaning products. I get where the speakers from Via Nova Group were going with this. The webinar was directed toward small or medium size businesses, showing them how they can be green even though they aren’t “one of the big guys.” However, to me it seems counter-productive for those in the environmental movement to discourage any company from trying to be more environmentally friendly.

True, Clorox’s Green Works may only be a small part of its product mix, but at least it is part of the mix. A company like Clorox has responsibility to its shareholders. Just like the speakers advised the small companies not to pursue green strategies that don’t make financial sense, Clorox can’t today stop selling traditional chemical cleaning products. If they did so they would not be meeting their responsibilities to their many stakeholders, including shareholders, employees, and consumers who use their products. What they can do and are doing is creating viable alternatives.

I would argue that Clorox is probably doing a lot of good by using their scale and existing relationships with consumers to grow a market for natural cleaning supplies that is today very small.

Clorox can use their scale to distribute their natural line in quantities smaller companies may not be achieve, allowing them to supply large retailers. I've seen Green Works sold in retailers like Wal-mart and Target, who require large volumes and guarantees against stock-outs. As a company accustomed to meeting such demands, Clorox is positioned to reach more households.

In this economy many families are struggling to make ends meet. Clorox can leverage economies of scale to sell Green Works at competitive prices. As a result, families who can’t afford more expensive natural cleaning lines might find Green Works to be in their price range.

Consumers across the country know and trust the Clorox brand. Clorox's creation of natural products might encourage people to try them who might not experiment with such products from companies they are not familiar with.

Clorox is probably growing the entire market for natural products, and isn’t that what we want? It’s OK for businesses big and small to not turn green overnight. It’s better to start small, than to not start at all. After all, Rome wasn’t built in a day. Let’s not discourage any organization from pursuing strategies that are more environmentally friendly.

The Brilliance of Haagen-Dazs: Made (and Communicated) Like No Other

2009-05-07T17:37:00.001-07:00

Recently I have wondered how companies with an environmental focus can effectively differentiate themselves given the increasing numbers of products marketed as “green” and “eco-friendly.” For some products, it seems like an effective marketing strategy could be to choose a value proposition that is closely aligned with customers’ desire for a greener world, yet distinct from it. So many companies for very good reasons choose one of a few terms to describe their environmentally friendly products. Words like “green,” “sustainable,” and “natural,” are loaded with meaning and permeate the market. Because consumers hear these terms applied to so many different products, they have become confused and skeptical. In addition, though many consumers claim a desire for earth-friendly products, other product attributes, including price, quality, and product experience, also drive purchase decisions.

Recently, J. Tyler Johnson, former Chief Marketing Officer of Dryer’s Ice Cream, spoke to my consumer behavior class. After apologizing for coming to campus without samples, he largely discussed the re-launch of the Haagen-Dazs brand. One thing that struck me was how well-aligned H-D’s new brand positioning is with green values, though the brand never uses the words I mentioned above. And, indeed, the intent of management was never to position the brand as eco-friendly. Mr. Johnson briefly mentioned the fact that though H-D ice cream is all natural, its competitor, Ben & Jerry’s had already positioned itself as the socially and environmentally ice cream alternative. Thus, touting the “all-natural” component would not differentiate H-D in the eyes of consumers, and H-D executives searched for a value proposition that would.

How did Haagen-Dazs choose their branding? Market research showed that the H-D brand was viewed as slightly snobby and inaccessible by many consumers. H-D wanted a message that would allow the brand to escape from such negative perceptions. What else did research reveal? Consumers of the premium ice cream segment, those small pints you find in the store, were looking for an ice cream to provide them their moment of indulgence and escape. Based on such insights, H-D and its vendors formulated an incredible advertising campaign. H-D chose to reposition their brand as the simple, pure ice cream alternative. They focused on the quality of ingredients with the tag line, “Made Like No Other.” Later commercials emphasized the indulgent nature of their pure ingredients. How did the Made Like No Other campaign work out for Haagen-Dazs? Mr. Johnson and his team grew a brand previously targeted to just 1.5% of American households into the market leader in its category.

One of the reasons I am so intrigued by this marketing success story is that I can envision the same customer who drives a Prius, shops for organic produce, and uses bio-degradable cleaners, buying H-D ice cream and savoring it at night. The words “simple” and “pure” convey so many positive images, and they have many environmental undertones. I believe an intentional use of terms like these which are aligned with green values could be very effective for some brands.

Check out the H-D re-launch campaign commercial on YouTube:
http://www.youtube.com/watch?v=GEpenoD9-Ts

Later advertisements added indulgence to the value proposition:
http://www.youtube.com/watch?v=VQP0GGjhoOM&NR=1

Wisdom from an Advertising Executive

2009-05-03T21:35:00.000-07:00

David Ogilvy, founder of the advertising agency Ogilvy & Mather, had these words of wisdom for us. "Develop your eccentricities early, and no one will think you're going senile later in life." I love it! Words to live by. I believe my late grandfather would have liked it as well. I have fond memories of him eating his cereal out of an enormous 4-cup Pyrex measuring cup, which most people use to measure liquids for cooking. He insisted it was the best way to eat cereal. Of course, that did occur later in his life. Perhaps I should start now?

Confronted by Too Many Eco-Dilemmas? Me Too!

2009-04-03T00:25:00.000-07:00

A year or so ago I was at my local supermarket when the bright green cover of a magazine caught my eye. It was San Francisco magazine asking me if I was suffering from anxiety from too many options to live green, shop green, and be green. “Eco-anxiety” I think they called it. I thought to myself, YES this is ME! How did they know?

At the time, among other green initiatives in my life, I had become devoted to finding sustainable meat. I consulted websites, researched brands I found at Whole Foods and a local organic food market near my house, and tried to learn more about “sustainable” farming. After several months of this effort, I read the book Omnivore’s Dilemma, which only strengthened my resolve. But yet, I was overwhelmed with options. Despite all my research I had trouble determining which sources of foods were truly “sustainable.” One favorite brand of eggs proudly claimed “free range” on its packaging, but the myth of its chickens roaming free in a field was later debunked by another source. Neiman Ranch was rumored to treat its animals well, but I later learned its founder split with the organization believing that its organizational policies did not match the marketing hype.

Apparently, I am not alone. American consumers are awash with green marketing messages. When I met Damien Huang, VP of Design at Patagonia, he mentioned that his company assumes its customers are not willing to pay a large premium for sustainable products, and consequently Patagonia aims to price competitively. Other students were amazed by this, but honestly it is no wonder to me that many consumers will not pay a premium for all things “green” and “sustainable.” As more and more companies hop on the eco-friendly bandwagon, it is increasingly difficult to distinguish real claims from fake ones. In addition, assessing whether one product is more sustainable than another is incredibly complex, requires a vast amount of insight into the product’s value chain, and could be a full-time job. Busy Americans do not have time for such research, so it does not surprise me that many consumers are skeptical of the “green” products they encounter.

What happened to my sustainable food initiative, you might wonder? Tiring of my effort to identify the most sustainable meats, I gave up on eating meat all together. I buy beans at the grocery store now for my protein. With beans I no longer have to worry about whether my food was allowed to roam free and was treated humanely. Plus, I save money.

To me, this experience highlights the challenge for companies that want to market their sustainable products. It can safely be assumed that companies don’t intend to scare customers like me away from their product categories entirely. Brands that can make true claims that their products are environmentally friendly must cut through the so-called greenwash clutter to be effective. At last year’s Net Impact conference, I attended a panel on just this topic. Panelists there noted that company advertising, not surprisingly, is the least trusted source of environmental information about the environmental sustainability of products and companies. In addition, in a recent article called “The Green Trust Gap,” I read that only 11% of consumers will rely on product packaging and only 5% on company advertising when determining the eco-friendliness of a product. To successfully convey their green message to consumers, the Net Impact panelists suggested that companies should:

Advocate for independent environmental certification in their industries.
Partner with trusted environmental organizations that can lend credibility.
Create transparency by providing consumers insight in to their supply chains and operational practices, including good with the bad. Supplying such information on the website is beneficial.
Develop reports on social and environmental responsibility, including targets for improvement and progress against those targets.
Provide forums for constructive feedback and engagement with consumers.

With that being said, I know that companies will not stop advertising. I wonder how organizations can make their conventional advertising more effective at conveying a message of environmental responsibility. I hope to explore this topic further while at school and with people in my network.

- Lauren

Want to learn more? Click here for: LOHAS "Green Trust Gap"

Entrepreneurship at Home & Abroad

2009-03-14T20:52:00.000-07:00

“In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted - for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things - some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.”

--President Barack Obama, Inauguration Speech (January 20, 2009)

Judy Estrin, CEO of Jlabs and self-professed serial entrepreneur, used this quote from President Obama’s inaugural speech to start a discussion on common qualities of entrepreneurs, emphasized the words “risk-takers” and “doers.” At two recent conferences, the Women in Leadership Conference and the Asia Business Conference, I heard entrepreneurs discuss the traits that they believe contributed to their success. I heard many common qualities, including:

Looking at this list, I wonder about the implications of our challenged U.S. educational system on entrepreneurship in this country. If the above are the qualities that contribute to entrepreneurial success, are we building the foundation for future generations of entrepreneurs and innovators in our country? I’ve read how certain school districts are modifying curriculums to better prepare students for standardized achievement tests, by so called “teaching for the test.” Won’t this type of education suppress creativity? I have also read that grade inflation has become rampant in some school districts, which certainly doesn’t build tenacity or commitment in students. Structured curriculums emphasizing math and science at the expense of art, music, history, or literature stifle innovation and creativity as well. Will future generations of Americans exhibit these qualities that today’s entrepreneurs have found key to their success?

I also wonder about the implications for entrepreneurship in other countries. At the Asia Business Conference, speaker Jimmy Hexter touted the importance of China to the international business community, citing Chinese startups that now compete with multi-national companies. However, I would be curious to know what implications the Chinese political system and culture have on entrepreneurship there. For example, I recently read a New York Times article about Chinese citizens subverting the Chinese Government’s rampant censorship by using double-entendres to convey political messages that escape censorship algorithms. How well can entrepreneurs truly thrive in an environment that lacks transparency and true knowledge sharing? In addition, during the entrepreneurship panel in the Asia Business Conference, panelists noted that failure is not acceptable in many Asian cultures. If qualities that American entrepreneurs site as contributing to their success are difficult to find in China, how will Chinese entrepreneurs innovate the way Mr. Hexter proposes?

I feel fortunate to have had the opportunity to hear the thoughts of so many seasoned entrepreneurs at these two events! I don’t have much stake in China, but I do hope that the U.S. continues to provide children with educational experiences that will inspire and grow future generations of entrepreneurs. I believe that the quality of the entrepreneurial environment will be critical to our future success as a nation.

-- Lauren

Here are some links to interesting articles I read recently in the New York Times:

Chinese subversive responses to censorship
President Obama’s Educational Policy
David Brooks Op-Ed Educational Policy

Here are the entrepreneurs I heard speak at these two events:
Women in Leadership Conference: Judy Estrin- CEO Jlabs; Wendye Robbins- President & CEO Limerick BioPharma; Danae Ringelmann- Chief of Finance & Customer Development, IndiGoGo; Ann McCormick- CEO, Learning Friends
Asia Business Conference: Liam Casey, CEO PCH International; Saeed Amidi- CEO Plug and Play Tech Center; Umair Khan- CEO Secret Builders; Yangbin Wang- CEO Vobile; Yumiko Yamaguchi0- US Office Manager, Medical Create

International Business Strategy: Why China?

2009-03-09T00:53:00.000-07:00

I had the privilege of hearing Jimmy Hexter, Director of McKinsey & Company, Beijing Office, speak at UC Berkeley’s recent Asia Business Conference. From his extensive experience doing business in Asia, he addressed the audience with a talk on why companies that want to stay competitive in a global marketplace need a strategy for business in China. I found his description of the importance of China to be fascinating. I will definitely keep this information in mind as I enter future business roles.

Why is China so important for global business strategy?

1- Size of the market
650 Million Chinese now live in urban areas. By 2025, China is projected to have 1 Billion urban residents. Each year 20 Million Chinese people either move to cities or are swallowed by them. After a house and a car, the first purchase of a typical Chinese family is a 50” big-screen TV. China is a hotbed of demand, and offers huge opportunities to leverage economies of scale.

2- Local competition
Multi-national companies that sell their products in China now find that local businesses are their biggest competition for market share. When multi-nationals first outsourced manufacturing to China, they relied on inexpensive labor and neglected best practices. Local competitors now understand design and manufacturing best practices so relying on inexpensive labor alone is no longer an option. Companies that fail to leverage industry best practices often face competing Chinese products that offer better value.

3- Emerging Talent
China has 1.3 Million college graduates each year. Multi-national companies are now empowering local R&D to design products in China for its own market, other emerging markets, and for global markets.

Mr. Hexter told the story of a U.S. semi-conductor company who attempted to design and manufacture a chip for the Chinese market. Once their product was launched, they found that a Chinese company was producing better chips at lower cost. In response, the U.S. company improved the design of their chip and lowered their costs and prices. After these changes, the chip was such a resounding success that it was exported to other markets. Today, only 20% of these semi-conductors initially intended for the Chinese market are actually sold in China.

How can companies incorporate China into their strategic plan?
According to Mr. Hexter companies should treat China like a second home market. Few multi-nationals understand Chinese perceptions of their products and tailor their value proposition to Chinese consumers. Companies should appoint board members from China and develop personal relationships with their largest Chinese customers.

To illustrate his point, Mr. Hexter told the audience a statistic about pianos. There are 60 Million piano students in China, he said. Chinese need pianos for small spaces, and they prioritize getting a good value for their money. Who will design and manufacture a piano to satisfy this demand, he asked us? Then, why wouldn’t that piano be well-suited for export to other markets around the globe? How will piano manufacturers in these markets recognize and respond to this competitive threat?

Sustainability: Transparent, Desirable, Invisible

2009-03-08T14:08:00.000-07:00

Sustainability can be an elusive concept. At the recent Capitalism Next Sustainable Design panel, Ted Howes, Sustainability Lead at Ideo, challenged us to bring 30 sustainability leaders into a room, ask them to define sustainability, and find less than 30 different definitions. But, one story that Mr. Howes told really resonated with me. One of the legendary success stories at Ideo, which I have heard several times before, is the design of a bestselling child’s tooth brush in 1991. Noticing that children put their whole fist around their toothbrushes, Ideo designed the first big, fat toothbrush so that children could better grip on their toothbrush than with a smaller version of the adult one. Their design was the top selling toothbrush for 18 months and has since been imitated by many other toothbrush manufacturers. For the designer of this toothbrush, however, the concept of sustainability hit home on a vacation in Mexico when during a walk on the beach, a big, round plastic child’s toothbrush washed ashore. While it can be a challenge to define sustainability with words, like the designer of Ideo’s toothbrush, we all have moments where we realize the impact we have on the world around us.

Though a common definition of sustainability may elude us, I heard three words echoed frequently by the panelists as they discussed sustainable design: transparent, desirable, and invisible. Though working for different organizations on a variety of types of products, Damien Huang, VP of Design for Patagonia, Bryant Bainbridge, Director of Nike Considered, and Ted Howes, Sustainability Lead at Ideo, echoed many similar concepts in their discussion of sustainability.

Transparent
First, sustainable design requires transparency. Companies should communicate information about product lifecycles and document the tradeoffs made in its design and production to customers. For example, one way Patagonia creates transparency is through its Footprint Chronicles, an area of the site that tracks the environmental footprint of selected products. Patagonia acknowledges that difficult tradeoffs frequently occur and even highlights areas of its value chain where it lacks sustainability.

The sustainability of a product also involves its entire lifecycle. Mr. Howes gave the example of companies choosing one less harmful component and wanting to brand their entire product with a “green” sticker. Select companies are really just beginning to look at their entire value chains starting with the upstream chemistry of their products. Nike has created tools and metrics to analyze the complex upstream footprint of each product from its multitude of suppliers. Closer partnerships with vendors can help to create this transparency. A large company like Nike and smaller organizations like Patagonia both play critical roles in creating these partnerships. Patagonia is on the front-line bringing up the conversation about new ways to be sustainable with vendors. Nike is large enough to drive big changes with their suppliers. In addition, organizations should not neglect considerations about the end of the product life. Patagonia, for example, has launched the Common Threads, to make its products recyclable, allowing consumers to return used products to their stores for recycling.

Invisible
Secondly, at the same time sustainability must be transparent so that stakeholders can see and understand the value chain, sustainability must also be invisible. Sustainable products must be well designed, performing as well or better than their non-sustainable counterparts. Companies should be able to sell product even if customer did not know it was “sustainable.” At Patagonia, designers assume that the customer will not pay a premium for sustainability, and that its other attributes will sell the product. After the session, I compared the price of an organic cotton dress at Patagonia to a comparable cotton dress at J.Crew without organic cotton and found the dresses to be very similarly priced. (The Patagonia Netty dress is $85, and J.Crew's Cabana dress is $78. J.Crew also sells non-organic cotton dresses for as much as $118.)

Ted Howes gave an example of a sustainable product with poor design, which has received criticism from consumers. Walmart’s new milk carton saves significant energy and resources. However, despite saving money on each gallon, consumers are struggling to be able to pour milk from the new containers. To achieve maximum success, sustainable products should function as well as non-sustainable alternatives. Because good sustainable design must be “invisible,” Ideo even sometimes makes changes to improve sustainability of new products without telling its clients.

Desirable
Finally, when companies communicate the value proposition of sustainability products to consumers they should emphasize desirability rather than fear. Companies should avoid scare tactics, and instead appeal to customers with a value proposition based on the products many attributes, of which sustainability is only one. Companies should even communicate a better value proposition than financial ROI by creating new business or product models to simplify the lives of their customers. After the session, I tried to learn more about how Nike is making their sustainable products desirable to consumers. It seems that they have continued their tradition of athlete sponsorship of with their sustainable products. For example, Steve Nash, All-Star guard of the Phoenix Suns, is wearing Nike’s “Trash Talk” shoe. What sports fan wouldn’t desire a product worn by world-class athletes?

Challenges
Companies and consumers should remember that the pursuit sustainability for consumer goods is a complex and evolving process. Sometimes the choices designers must face in pursuit of sustainability are not black and white. For example, Mr. Bainbridge told a story of a soccer ball factory in Pakistan. When U.S. management learned that minors were employed by this factory, a large fence was installed and employees were more closely screened for age requirements. Because the impoverished families of these children still needed them to work, they found jobs in the only other local employer, a manufacturer of heavy metal parts. Children soon began to lose their hands in metal presses. So it seems in our pursuit of sustainability and social responsibility, the choices are not always so clear.

Towards the end of the session, Mr. Howes said something that really struck me. “The word sustainability has had its day. Let’s use a word like impact- equally powerful, less squishy.” I believe the words transparency, invisibility, and desirability are also powerful. Thank you to our excellent panelists for providing UC Berkeley students with powerful words to us in our pursuit of sustainability.

--Lauren

Sustainable Silicon Valley

2009-03-03T21:29:00.000-08:00

Last week I volunteered at a workshop held by Sustainable Silicon Valley, a non-profit that promotes sustainability initiatives at Silicon Valley companies. This event was an opportunity for green team leaders from different organizations to discuss best practices and common challenges. While some of the green team leaders were hired by their employers to lead sustainability initiatives full-time, I was amazed by the number of leaders who were working in non-sustainability roles but because of their passion for the environment took the initiative to develop corporate sustainability initiatives in addition to their regular work.

I had the pleasure of taking notes at a panel led by Mike Lewman of Applied Materials. The session covered his company’s techniques to track and manage the success of its sustainability initiatives. Mr. Lewman and panel participants provided great insights into components of a successful sustainability program.

Organization

When launching a new program, pick initial programs with impressive financial savings, to demonstrate to management the potential success of sustainable initiative to reduce costs. Executive sponsorship increases motivation of employees throughout the organization.
Create an organizational chart to identify stakeholders, champions, owners, and participants for each sustainability initiative.
When building green teams, include passionate volunteers as well as organization decision makers.

Metrics

Set realistic goals and track progress against those goals. Publish goals to shareholders and employees to promote accountability.
Use visual representations of status to engage all stakeholder groups.
Create Scorecards to track metrics and targets from each site. Standardize core metrics across sites.
Tailor the scorecard to use metrics that are already being tracked, rather than ask participating groups to capture all new data, in order to minimize the extra work required to launch a sustainability initiative.
Hold status meetings between goal setting and target completion date to allow program participants to adjust progress if not on track to meet targets.

From my participation in this event, I learned that Silicon Valley organizations faced common challenges, including engaging and educating large employee groups, standardizing metrics across multiple groups and sites, and measuring impacts where data is not easily available. While some of these insights seem basic, I think they form a great template for companies to successfully launch new sustainability initiatives or improve the success of existing ones. I hope that more organizations like Sustainable Silicon Valley are created around the country to promote sustainability best practices.

Why Green Buildings Take Me Back to Middle School

2009-02-28T17:54:00.000-08:00

One aspect of my school years that I remember quite clearly was the awkwardness of each middle school dance. First, deciding what to wear was critical. You didn’t want to be caught wearing a dress if all your friends were showing up in hyper color t-shirts with jeans cuffed at their ankles. So it was important to poll your friends in advance to ensure sure your appearance would match that of your classmates. After establishing what to wear, you arrive at the dance itself. At the beginning the boys and girls stood in small groups, eying each other from across the room. For a while there is no actual dancing at the dance, just maybe some whispers and giggles from groups of girls and macho talk from the boys. Finally, someone had the courage to start dancing, and then suddenly everyone was dancing. Next a slow song came on, and you suddenly found it critical to partner up with someone of the opposite sex who 20 minutes before you could barely look at. Middle school was a stage in my life that I can now reflect on with some fondness, but that I would never want to repeat.

How in the world is the building industry like this, you are no doubt wondering? The answer is the influence of PEER PRESSURE! This week I attended a panel on green building at the Berkeley Energy Symposium. According to the panelists peer pressure to build greener buildings is a key factor in the surge in popularity of LEED (Leadership in Energy and Environmental Design) certified construction over the past few years. I have written before about the ROI of green building initiatives, but according to the panelists, many developers are making construction decisions where no clear ROI can be measured in an effort to keep up with their competition. 90% of Class A construction, such as office or condo towers, is now pursuing LEED certification, but many developers are going beyond the pursuit of LEED points and making certain decisions for which ROI is difficult to measure. For example, the carbon used to produce the materials in buildings, so called “embedded carbon,” is a significant contributor to environmental warming. Apparently, LEED awards very few points for reducing this embedded carbon. Still, many developers are choosing materials with reduced embedded carbon for fear that their building will be perceived as less green than new construction in the same markets. Fearing risks associated with being left behind, they are hoping on the bandwagon.

Several panelists expressed hope that the influence of peer pressure would also drive greener building in Class B & C construction and even among consumers who are building their own homes or remodeling. While I hope that will someday be the case, I think a key factor is missing for peer pressure to influence smaller building projects. It seems to me that green construction reached its tipping point for Class A buildings only after many elements of green building were demonstrated to have positive ROI. Measuring complex returns from different product investments is complicated and time consuming. Small builders and consumers don’t have dedicated resources to measure the ROI of every building decision. Experiencing $20 a year of ROI on a “greener” purchase may not be enough value for many busy homeowners who balance careers and families to do extensive research and complicated calculations of value. Why would a parent want to spend 5 hours on a Saturday calculating projected energy savings for different washing machines, possibly ineffectively, when his/her children are begging them to play outdoors?

For small players to get on the green building bandwagon, projected benefits need to be easily available and simple to understand. One audience member asked why the energy star ratings on appliances only show one year of expected energy savings instead of savings over the expected life of the appliance. I thought this was a great question. Even now looking online, I can’t even find something translating the ratings into projected dollars saved. One panelist surmised that it is hard to predict energy costs over time, and thus companies would be reluctant to project such benefits. However, companies make assumptions to project ROI internally all the time. Couldn’t a third party organization provide such information to help homeowners and small builders compare the ROI of different green investments without significant effort? Perhaps it could even be interactive and available at stores or over the web so that users could manipulate energy prices and their own usage levels and see the effect of their total savings to compare it to the difference in purchase prices among products?

I am glad that “green chic,” as panelist Phil Williams called it, has become a major factor in reducing the environmental impact of the construction industry. However, I truly believe that for green building to become as common for smaller builders and middle-class American homeowners, ROI of building and materials choices needs to be easily available. Only Van Jones’ “eco-aparthiedists” can justify the expense of greener building materials and appliances based on only a desire to be green chic and feel good about their environmental footprint. For the rest of the world, we need to clearly communicate financial benefits to influence consumers to make greener purchasing decisions. Once we communicate that ROI, I hope that these other markets will reach their green tipping point so that they too can remind me of my middle school days of peer pressure and awkward dances.

In case you are wondering, these were the panelists at the event:

Jim McMahon, Head of the Energy Analysis Department, Lawrence Berkeley Lab
Brandon Tinianov, Chief Technology Officer, Serious Materials
Steve Selkowitz, Director of Building Technologies, Lawrence Berkeley Lab
Phil Williams, Vice President of Sustainability, Webcor Buildings
Sean Ivery, Director, Navigant Consulting

Van Jones & The Green Collar Economy

2009-02-13T14:57:00.000-08:00

It was not long before my Williams-Sonoma co-workers noticed my passion for environmental causes. They observed me heating up my organic lunches in our office kitchen, taking online surveys to calculate my carbon footprint, and touting my re-usable Nalgene water bottle to meetings. So when my co-worker, David Schofield, read an article on the environmental movement written by a neighbor of his in Oakland, Van Jones, he was quick to pass it on to me.

To my horror, I learned that according to Van Jones, I was participating in “eco-aparteid,” a phenomenon where only the upper-classes of American society are financially capable of participating in the green movement. As Van Jones pointed out in the article, low-income families can’t afford organic vegetables when they are struggling to buy food at all. Likewise, Prius hybrids, roof-top solar panels, and most other “green” products are accessible only to our country’s elite. His article noted that Chevron defeated a California ballot initiative on green energy by a small margin by targeting urban, African-American communities with ads implying that gas prices would rise. Van Jones pointed out that it is hard to care about global warming when you struggle to pay rent and utilities.

Low-income communities won’t be compelled act on behalf of the environment until the environmental movement can add something to their lives. And, American society will not be able to significantly reduce our environmental impact without involving more segments of our population. What can the green movement offer these people? Van Jones’ answer is jobs. We can hire them to install solar panels, retrofit existing buildings to make them environmentally friendly, and build wind turbines. One solution can address poverty and environmental destruction, two of our country’s biggest challenges.

This week, I had the privilege of hearing Van Jones speak on campus about his vision for a “green collar” economy. Honestly, the speech was shallow in its content. I did not learn much more about his philosophies than I did from that borrowed article. However, seeing Van Jones speak in person gave me insight into his ability to lead this movement, which even a few years ago may have seemed like a lost cause. Van Jones’ personable nature and sense of humor would make his ideas accessible to all kinds of people. Much like President Obama, he has the power to communicate a message of hope to communities of Americans that have long felt forgotten. And given the current economic woes, more and more Americans seem willing to listen.

Having the opportunity to hear many CEOs and business leaders speak already at Haas, I have come to understand how important it is to have a leader with vision. The best organizations are led by men and women who are able to communicate their vision in a compelling, clear voice to diverse employee groups, potential investors, and the media. Conveying their vision, true leaders motivate others to action. The “green jobs” movement is fortunate to have found a motivating visionary.

While I would never underestimate the value of a strong leader, for the green collar economy to become a reality, it needs more. It looks more and more likely that billions of economic stimulus dollars will soon be aimed at building Van Jones’ “green collar” economy, and to make this investment a success we can learn from the strategies of successful businesses. Here are some of my thoughts:

Mission Statement: Clarify the mission of this investment to facilitate better planning, allocation of funds, and measuring the impact of initiatives.
Communication: Develop a mechanism to promote communication of best practices for organizations across our large country. Van Jones touted the success of Richmond Solar in training unemployed minorities to install solar panels. Rather than allowing other groups to re-invent the wheel, we should facilitate communication between similar organizations across the country.
Key Performance Indicators: It is critical to measure the success of any investment. We should define key performance indicators to help us better understand how to most successfully spend government dollars on green infrastructure projects, green collar educational programs, and clean tech research. By comparing KPIs against our mission statement, we can assess the success of each program.
Process for Planning & Allocation: Companies generally have a budgeting process to allocate funds to capital projects. Ideally, projects are assessed for projected ROI and compatibility with the goals of the organization. Often it seems like government organizations lack this sort of discipline. Rather than throwing money at the sexiest programs, we need to develop a process for balanced allocation of funds to meet our goals.
Transparency: Ultimately we want to develop a sustainable green economy. Transparency can help us do this. Information on how to apply for government contracts or grants should be readily available to private contractors & non-profit organizations as appropriate. We should be rewarding the best and most creative organizations with government contracts, rather than buddies of government officials.

I have long thought it criminal that a nation as rich as ours would allow endemic poverty to persist in our urban communities. At the same time, I could never understand why more Americans were not as passionate about saving the environment as I was. Van Jones brought to my attention the fact that these two national problems are not unrelated. I hope that in the coming years we are able to achieve his vision of saving our planet as we pave a road that will lift Americans out of poverty.

For more information on Van Jones visit his website: http://www.vanjones.net/

Can China Go Big AND Go Green?

2009-02-06T18:19:00.000-08:00

This week Peggy Liu, chairperson of JUCCCE, Joint US-China Cooperation on Clean Energy, spoke at Berkeley. JUCCCE is a non-profit with the mission of accelerating the greening of China through international collaboration.

It seems that the strength of JUCCCE relies in addressing a problem I noted in an earlier post about our green future here in the U.S. Last semester, I commented that the lack of a workforce educated in green technology and development seemed like a barrier to the success of emerging green programs. For example, green buildings are receiving a lot of press here, but a developer who wants to build a LEED certified building may have difficulty finding a team of architects and builders with experience who can do so. The U.S. just doesn’t yet have enough people with knowledge to support large-scale green initiatives, energy related or otherwise.

Peggy Liu described that the lack of resources educated in green technologies is also one of the largest barriers to success in greening China. One of JUCCCE’s main contributions is educating key Chinese decision makers on green development and then empowering them by linking them to resources that can help them execute green projects. For example, JUCCCE has a training program for mayors of the 350 Chinese cities and provinces. JUCCCE provides these mayors a menu of environmental programs, already implemented elsewhere, and connections to vendors and service providers who can help launch the programs in China. A sample project Chinese mayors can explore is the building of a smart energy grid, which leverages digital technology to support more efficient energy usage. JUCCCE brings together thought leaders to evaluate such green strategies for Chinese businesses and the rapidly expanding cities in which they operate. A website is also in progress to promote online collaboration and idea sharing.

In addition to influencing China’s development through its most powerful leaders, I also liked the fact that JUCCCE is creating environmental champions from the bottom up. One of JUCCCE’s carbon reduction programs has given 10 million CFL light bulbs to high school students. These students receive education about the environment so that they can influence friends and family.

JUCCCE is mostly funded by private companies and investors who see this as an opportunity for market creation. Many companies with no plans to expand to China are becoming involved. For example, PG&E and Duke Energy believe that when green technologies are implemented in China, the scale of manufacturing will bring costs for those technologies down around the world. PG&E has been mandated by the State of California to source a certain percentage of its energy from renewable sources, so it is definitely in the company’s benefit to see the costs to implement those technologies decrease.

During the Q&A portion of the session, an audience member asked Peggy, “Does China really want to go green?” Ms. Liu had her own answer, but I thought back to a recent article in the New York Times about emerging hiking clubs in China. Hiking was almost an unknown leisure activity in China just a few years ago. However, as modern Chinese city-dwellers have become more affluent and found themselves with leisure time, some are becoming interested in exploring their natural world by leaving cities to hike or backpack. In the past few years, hiking clubs have emerged throughout China. Some of young hikers interviewed expressed their hope that as more Chinese start to explore their natural environment, they would become more interested in protecting it.

I certainly hope that China does incorporate environmentally friendly technologies into its rapidly developing cities. I do not believe we can make the world greener and cleaner without engaging China in the effort.

http://www.juccce.com/

In the Footsteps of the Incas

2009-01-19T05:44:00.000-08:00

One of the aspects of graduate school I have most looked forward to is the opportunity to travel and experience new countries and cultures. This year during Berkeley’s winter break, I traveled to Peru. The highlight of my trip was a four day trek with 8 friends along the famed Inca Trail to Machu Picchu. I would like to share some of that experience with you here.

Day 1
On the first day of the trek, we were picked up at 4:30 AM for a one and a half hour ride through a darkened Peruvian landscape to the town of Ollantaytambo in the Sacred Valley. Here we stopped for breakfast and to purchase any last supplies needed. After another 30 minute bus ride on a narrow dirt road, we reached our starting point. By 9 AM we had crossed through the government control check that limits trail hikers, including porters and guides, to 500 people each day. As clean, happy tourists, we posed for an enthusiastic photo at the beginning of our trek. Then we crossed the turbulent rapids of the Urambamba River on a rickety wooden bridge to start our journey in the footsteps of the Incas.

While we had been promised a morning of “Peruvian Flat” (i.e. rolling hills) the first hours of our hike seemed mostly uphill to me. My guidebook tells me that these first hours were spent in a sub-tropical ecosystem. The day was warm, and the land was more arid than I had imagined. I was surprised at the number of people living along the trail. Men walked the path with their llamas or donkeys, and children ran along the path watching the tourists. One group of children was even pretending to be tourists themselves. Apparently because it was summer in South America, the children were on their summer break. I’m not sure how much elevation we gained during the morning, but we were definitely going up.

In the morning we saw our first Inca ruins. Below us on the trail was the Inca storehouse of Llacapata. Grains and fruits from the sacred valley were brought here and stored for later distribution to settlements in the mountains.

We stopped for lunch at a campground called Wayllanbaba. Our guide told us that many groups took a short first day on the trail, and stopped here to camp for the night. By lunch, I wished we could stop for the night, but I would soon be grateful that we persevered. Because we went further than most groups did each day, I felt more isolated on the trail. I felt more a part of the beautiful Peruvian wilderness and the spectacular history of the trail than a tourist on a path well-traveled.

After lunch we faced stairs and more stairs as we gained 600 meters of elevation. The steep parts of the trail were lined with stone steps. I imagine that centuries ago these steps were smooth and level. With the passing of time however, the stones have become separated and uneven, making the trek more challenging than it may have been originally. At this higher elevation, the landscape became more tropical, and we entered a dense forest. Because the steep and winding path was surrounded by trees, it was impossible to see far ahead at the endless number of stone stairs to come. I was taken by surprise at a heard of llamas that came running down the path towards me, and quickly backed aside to let them pass.

Exhausted, I reached the first campsite at around 5:30 PM. My reward was a beautiful view of the Sacred Valley during and surrounding mountains during the remaining daylight. Our amazing chef prepared a delicious dinner for us, and food had never tasted so good to me. From the campground, I could hear rushing water from a nearby waterfall, and this was the sound that eventually lulled me to sleep.

Day 2
On the morning of our second day, we faced another 600 meter elevation gain. The upside of all this climbing was spectacular views. Fog covered the valley in the morning. The trees were sparse during this part of the trek and each time I stopped for air, I could admire a spectacular view of mountains and valleys. The morning was hot and sunny, but shrubs provided some shade during water breaks.

Finally after approximately 2 hours of hiking, I reached the top of the trek’s highest pass. At 4,200 meters, it was hard to believe how far we had already come. My sense of victory was short-lived, however, as we spent the next few hours descending. All of that hard working climbing up seemed for nothing! The back-side of the mountain seemed like it received more rain, as there was more foliage and flowers. My favorite flowers were the lupines, clusters of small purple and white petals in a conical shape. Our very knowledgeable guide, Sol, also pointed out baby Falcons flying nearby.

After lunch we began climbing again. Half-way through our ascent we reached the ruins of Runkuraqay, which was a guard tower. From it we could see two ancient Inca trails, the one we were hiking and another, now overgrown. This strategic location also had a view of the pass on which we had recently stood. I could see the shadows of other hikers who had recently summitted.

We continued along the path to climb to the second-highest elevation of our hike at 3950 meters. We passed serene mountain lakes on our way up, and by then it was all I could do to keep from jumping in! The steep descent seemed even harder than the ascent. Descending on the uneven stone steps took great concentration and strength. Our guide, Sol, called this “meditation time” for internal contemplation. I saw even more flowers during this part of the hike, including the beautiful yellow lady slippers and the blue purple potato flowers.

Late in the day we reached, Sayamarka, which means “Inaccessible Place” in Quechua. To get to these ruins we climbed terrifyingly steep steps with no protection from falling off a cliff and into the forest below. This mountain community was a resting spot for travelers to Machu Picchu. Fog swirled around the neighboring mountains, adding to an air of mystery. Our guide showed us how water was channeled from nearby mountain springs to the complex of buildings and then circled around to provide water to all inhabitants.

During our final half hour of hiking we entered the cloud forest. Finally we reached our camp, which had views of snow-capped mountains. We celebrated our victory over the two challenging mountain passes with mad-libs and drinking games. But after we retired to our tents, a storm set in. Thunder and lightning kept waking me up each time I managed to fall asleep.

Day 3
On day 3, I finally found the “Peruvian Flat” I was promised on Day 1. We had only 100 meters of uphill climb, followed my mostly flat land or rolling hills. The cloud forest reminded me of those I had seen in Costa Rica, lush and green. After about an hour it started to rain, and we all put on our ponchos. The uneven rocks, now slippery scared me, and I cautiously trailed the group. In some places, rivers of water ran over the path, making walking difficult. Every 10-15 minutes, I had to jump aside, to let the porters run by me. I was amazed with their ability, laden with heavy packs, to run over the wet stones without falling. On this part of the trek, the path was lined with ferns. Our guide pointed out several kinds of orchids, including the smallest variety in the world.

Before lunch we reached the third campsite at Winay Wayna. The agricultural ruins of Winay Wayna turned out to be my favorite of the trip. Archeologists identified these ruins as an agricultural site. A terraced fountain, still operating, delivered water to the agricultural terraces. Temples at the top of the mountain settlement provided a place of prayer. Houses were found at the very bottom, below the agricultural terraces. We first visited the site in the rain, then again at dusk when the rain had stopped. The ruins were nearly empty. One of the highlights of my trip was standing alone in an ancient home touching the stones of the walls and observing the beautiful mountain scenery around me.

I had been looking forward to a warm shower at the third campsite all day, but alas these were broken during our visit. Instead, my group enjoyed beers and wine to celebrate nearing the end of our trek.

Unfortunately, part of our campsite turned out to be downwind of the bathrooms…definitely not the Ritz! However, the night was still amazing. Two friends, Thomas and Bum Jo, and I spent part of the night admiring the stars. I couldn’t help but think how lucky I was to be able to experience this. The moon was nearly full, illuminating nearby mountains. The moonlight reflected off snow covered peaks and wispy clouds floating nearby them.

Day 4
Day 4 was an early morning. We woke at 3:40, quickly packed and ate, to be in line at the final checkpoint at 4:30. At 5:30 we were allowed to pass through. Our guide estimated the walk to the Sun Gate at 1.5 hours, but we completed it in a speedy 50 minutes. (And as I was one of the slower ones of the group, some were even faster!) In the rush to the Sun Gate it was difficult to appreciate the scenery. However, at the Sun Gate we were rewarded with a beautiful day and our first view of Machu Picchu. After another 20 minute descent past some rather contented llamas, we reached the entrance to the park.

Machu Picchu was discovered by Hiram Bingham in 1911. The city was built around 1460 but abandoned less than 100 years later because of the threat posed by the invading Spanish armies. I found the sophisticated engineering of the site to be extremely interesting.

The location of the city guaranteed rain even in the dry season.
A sophisticated drainage system in the agricultural terraces prevented the terraces from retaining too much water for the crops. Top soil from the sacred valley was placed in the agricultural terraces to increase agricultural yields.
Structures were built with angular walls to prevent them from collapsing as a result of Peru’s frequent earthquakes. As a result of this ingenious design, the city still stands hundreds of years later.
The builders of Machu Picchu incorporated existing stones into the architecture so that their buildings fit with the natural environment surrounding them.
Different types of stone work were used for buildings of different purposes. Temples and holy sites were built using large stones, precisely carved and smoothed, that were placed on top of each other without mortar.
In the areas where the nobility lived, doors locked from the inside for added protection and seclusion.
One of the main temples receives the sun perfectly through its windows on Solstice days.

I also learned many interesting facts about the builders of this city throughout our trek:

First, Incas were the name of the ruling nobles. Quechua was the name of the civilization. Quechua people still live today. Quechua is a language that is still spoken. And Quechua symbols of religious significance are still worshiped by many Peruvians.
The Quechua people worshipped three different levels of the world around them.

Heavens / the sky- symbolized by the condor
Earth or Pacha Mama- symbolized by the puma
Rivers and streams- Represented by the snake.

Quechua people also worshipped mountains. Machu Picchu is situated between holy mountains.
Cusco was the capital of the Inca Empire, and the Supreme Inca lived in Cusco. At its peak the empire included not only Peru, but Ecuador, Bolivia, and Chile.
The names of the Inca ruins I saw are not known. The names we call them today, including Machu Picchu, were given by modern “discoverers” and archeologists of the ruins.
Pachacutec was the most powerful Supreme Inca. He expanded the Inca Empire during his reign, and it is now thought that Pachacutec commissioned the building of Machu Picchu.

It was amazing to walk through this historic city of Machu Picchu and reflect on the people who built it. The modern world could take lessons from their sophisticated means of agriculture, which fed their people sustainably. In addition, the builders of Machu Picchu understood environmental risks to their structures and engineered their cities accordingly. 500 years ago the Quechuas built a city that has withstood hundreds of earthquakes, something that modern countries repeatedly fail to do with devastating effects. What loss of life could be prevented if we took more construction lessons from Inca cities? Finally, I enjoyed the beauty of a city that seemed to emerge naturally out of the surrounding landscape. Maybe Frank Lloyd Wright was an Inca in a past life. It seems to me like this lost culture was in some ways more civilized than we “modern” people are today. The world has much to learn from its civilizations of the past.

Unit of Carbon, Chicago Climate Exchange: $1.65; Unit of Carbon, European Climate Exch: $18; Creating Capitalist Markets to Save the Planet: Priceless

2008-12-07T01:21:00.000-08:00

During the Net Impact conference I attended a panel on Environmental Markets. The panel was of particular interest to me because some of the key ideas presented were in direct opposition to the thoughts of Hunter Lovins, a recent speaker at UC Berkeley’s Capitalism Next series. Hunter Lovins is a proponent of natural capitalism, the idea that as natural resources once considered nearly free become scarcer, for profit businesses should and will calculate the value of those resources as costs associated with their operations. She praised emerging environmental resource markets and a realization of her ideals. I was surprised, however, that she de-emphasized the role of government in inciting businesses to value natural resources. The Net Impact conference panel on environmental markets sought to explore why environmental commodities markets are emerging and what is driving companies to join them. In particular, given Ms. Lovin’s comments about the Chicago Climate Exchange (CCX), I was interested in hearing Megan Morgan from the CCX speak about its emergence.

I should probably start with an overview of the Chicago Climate Exchange. CCX began in 2000 as a grant to Dr. Richard Sandor, an economist at the Kellogg School of Management, to assess the feasibility of a cap and trade market in the U.S. to reduce greenhouse gas emissions. CCX trading began in 2003 with 13 charter members that sign legally binding agreements to reduce greenhouse gas emissions. Organizations that reduce more than the requirement may trade credits for money to those organizations that do not. Today, 11% of Fortune 100 companies participate, and similar carbon trading market has also been launched in Europe.

Given Ms. Lovin’s belief that a change in government policy is not needed to spur creation of natural markets, I was quite surprised to discover that the panelists thought just the opposite. According to the Net Impact panelists, the sole emergence of the CCX is because companies are anticipating government regulation. They believe that joining a voluntary carbon market will give them a competitive edge once regulation is created. For example, 25% of the largest U.S. coal emitters participate in the CCX. Megan Morgan quoted a coal industry CEO as saying his company joined CCX because, “We want to have a seat at the table rather than being eaten for lunch.” Companies are joining the CCX because:

Regulation of carbon is increasingly becoming part of a dialogue for U.S. politicians. If or when regulation is passed, participants feel they will have a competitive edge over peers who have not yet taken steps to reduce their carbon emissions.
Europe has begun to tax polluters, and many U.S. executives prefer a cap and trade system that would financially reward companies that find innovative ways to cut carbon emissions. Voluntarily joining such a system is a way of demonstrating support for such a model and of influencing future legislation.
Being unprepared once carbon regulation is passed will impact return to shareholders.
The initial audit companies participate in after joining CCX causes many companies to identify energy saving opportunities that save them money.

So, it seems that contrary to Ms. Lovin's belief, our government does set the tone for when and how businesses will choose to confront climate change. We can see from the emergence of the CCX that even the threat of a cap and trade system can spur creativity. I look forward to seeing what policy the Obama administration will implement in the coming years, and I truly hope that it will incentivize U.S. companies to find new and creative ways to cut carbon emissions.

On the founding of FedEx...

2008-12-04T09:25:00.000-08:00

I haven't had much time to write lately, but today while reading a case about Federal Express for my marketing class, I came upon a great quote. Fedex was, as of the writing of this HBS case in 1983, the largest venture capital start-up in U.S. history with $90 Million in financing. The founder of FedEx, Frederick W. Smith Jr., said about the early financial difficulties of the company:

"The biggest asset we had going for us was our naivete. God takes care of fools, you know."

So that's my little tidbit of interest for this week.

Sustainable Solutions to Poverty

2008-11-16T07:46:00.000-08:00

In this entry I have two recent experiences to write about. This weekend I attended the Net Impact Conference in Philadelphia, PA. I had the opportunity to attend a variety of panels on topics ranging from microfinance to “greenwashing.” In addition, last week at Haas the Net Impact club hosted the second in our Capitalism Next Speaker series. The topic of the session was how private enterprise can sustainably fight poverty in emerging economies.

During these two events, I started thinking about sustainability in a new way. We hear a lot about how companies can make their products more sustainable by reducing packaging or using recycled materials. We also frequently hear about how homes and business can become more sustainable by using better insulation, adding more natural light, and using environmentally friendly materials. But we don’t often think about how aside from products and buildings, the structure of the organizations we create must be sustainable for them to truly succeed. Obviously with respect to the core operations of for-profit businesses this is intuitive. If a business consistently spends more money than it takes in, has trouble paying its suppliers, and treats its employees miserably, the business is likely on a fast road to failure. However, many organizations whose mission is to address poverty, whether the philanthropy arm of a large company or an independent non-profit, are recently realizing that creating a sustainable organizational model can drive extremely successful results. It’s the mentality of teaching a man to fish rather than giving him the fish to eat, so that he can feed himself after you row your boat off into the sunset. This week I have seen evidence that more and more organizations are developing innovative, creative, and sustainable models to address social problems.

On Saturday at Net Impact, I attended a session about measuring the business value of social impact led by Jason Saul, the founder of Mission Measurement. Mr. Saul consults with large companies that want to drive better results from their corporate philanthropy and social responsibility programs. The old way companies looked at these efforts was to do less bad (i.e. pollute less) and use their foundation to do good deeds that were generally unrelated to their profit making endeavors. The budget for these traditional corporate foundations could find themselves at the chopping block during challenging business environments. Such philanthropic efforts were not sustainable because at the end of the day they did not add business value. The emerging trend in CSR is to solve social problems by generating business value. Mr. Saul gave the example of Kraft Foods, which began issuing microloans to Latin American entrepreneurs to open small stores. These store owners then have the option of stocking Kraft products. The communities in Latin America win because new jobs are created. The entrepreneur and his family win because they achieve a higher standard of living. Finally, Kraft wins because they have created a new distribution channel in a region where they had not previously sold product. Responsibility programs that drive shareholder value will be more sustainable and less likely to face budget cuts. Why would Kraft cut their microloan program when it increases their revenues by opening a new market?

At Capitalism Next, I learned about how for-profit social ventures are creatively addressing poverty for the 72% of the world’s population with a total family income under $3,000 per year, also called the “bottom of the pyramid.” Katie Schmitz of water health international, a profit based organization that provides clean water for communities lacking access, made an interesting comment during the session. She said that the challenge with communities relying on the generosity of donations to meet basic needs is that funding levels are subject to fluctuations caused on philanthropic trends. As Africa has become the “it” region for philanthropists, developing nations in other regions of the world have seen money for their communities dry up. Profit based organizations that address poverty are more sustainable and can continue to meet the needs of the community when the non-profits shift their funds elsewhere. Families at the BOP are willing to buy clean water, and WHI has found a way to provide that water cheaply and profitably. With access to clean water, families then experience less illness. Since physical labor is the primary source of income for these families, good health increases earning capacity. Families win because they experience less illness and earn more money. WHI wins because it earns a small profit off the water it sells.

My last example strays a bit from the two above but was a trend I found very interesting. At Net Impact I attended a panel on the role for for-profit businesses in conflict regions. I learned that multi-national organizations operating in conflict regions are finding ways to make their business operations in those regions more sustainable. Generally companies building operations in conflict regions don’t intend to make the region more unstable. It is common for multi-nationals support programs to reduce poverty in those communities. However, as NI panelist, Melissa Powell from the UN Global Contract mentioned, “the road to hell is paved with good intentions.” To address this, the UN has developed a resources guide to teach multi-nationals how to improve their daily business operations in these countries. For example, the UN encourages the companies to create sustainable relationships with local communities and governments by partnering with them. In the past, some multi-nationals with good intentions built infrastructure for the community. But without government participation these institutions were susceptible to collapse, especially if the multi-national were to leave the region. It is far more sustainable to partner with the government so that the government will build schools, hospitals, and other infrastructure. Obviously most businesses operating in conflict zones are doing so for self-serving, rather than philanthropic reasons. Multinationals would not be operating in these regions if they did not have a powerful reason to do so, such as needing access to valuable natural resources. But bringing business operations to former conflict zones can be an effective way to grow the economies of those areas and promote stability if multinationals operate in a sustainable way.

I think it is wonderful that organizations are finding new, sustainable ways of addressing poverty. The creativity of the social entrepreneurs driving this change by founding their own organizations or by influencing the actions of existing organizations is truly inspirational to me. While I don’t believe that all poverty initiatives should be self-serving or generate a profit, and I definitely believe there is still an enormous role to be played by non-profit organizations helping our world’s poor, I find the growth of innovative approaches to addressing poverty to be an exciting phenomenon.

Who Knew Green Wine Could Taste This Good?

2008-11-13T20:55:00.000-08:00

Last weekend, I toured two eco-friendly wineries in nearby Napa, California. From my blog entries you may have the impression that all I do is tour “green” businesses. Yes, I do attend actual classes here at UC Berkeley. But as my grade on the upcoming finance midterm is bound to demonstrate, I have definitely been taking advantage of the extra-curricular activities.

We visited two wineries:

CADE is a new winery located in the Howell Mountain appellation of Napa. Still under construction, CADE has been open to visitors for just two months. The winery is being constructed with recycled materials including walls of fly ash “concrete,” denim insulation (recycled from old jeans), and recycled plastics that resemble wood. CADE is pursing LEED Gold certification for its buildings and is using sustainable farming methods in the production of its grapes.

Founded in 1982, Peju is a familiar site along Napa’s highway 29. In 2006, Peju’s owners installed a 126 kW solar system on the roof of the winery. Peju prides itself on the organic and sustainable farming methods they use to grow and farm their grapes. Our tour at Peju was unique. After an overview of the winery and a tour of the grounds, the owner of Akeena solar, the company that installed Peju’s system, taught us about solar energy. Afterwards, Sara Fowler, Peju’s head wine maker gave us an overview of the organic farming methods used at Peju.

I want to reflect on two interesting themes I noticed during my winery visits.
First, wineries face tradeoffs between the unique needs of their business and existing certification programs. In this way, the wine business is similar to the hospitality industry. During my visit to The Orchard Garden hotel, I noticed the tradeoffs between one person’s evaluation of what truly makes a product or service “green” versus the one-size-fits all recommendations of a certification board. While CADE and Peju are using organic and sustainable farming methods for their grapes, they are not producing organic wine. Sara Fowler from Peju explained that to have wine certified as organic, it must be produced without the use of sulfites. However, without this ingredient the wine simply isn’t high quality. Wineries aren’t willing to commit product suicide by compromising the quality expected by their customers in favor of eco-friendly production methods. As a result, they go down the path of sustainability, but not far enough for organic certification. Because ‘organic’ is not on the label, customers can’t distinguish between a winery that grows organic grapes and one that uses no organic farming techniques whatsoever. In my mind this raises a question: Should certification programs be developed that reflect the unique needs and constraints of different industries?

On the other hand, creating too many certification programs or bending the rules of a single certification program for different industries can be confusing and misleading for consumers. A great example of this is frozen meals that are certified organic under USDA guidelines. The frozen food industry successfully petitioned the USDA to allow it to include many non-organic chemicals and preservatives in their frozen meals. They claimed that without such chemicals they would not be able to produce organic frozen dinners at all. However, many consumers don’t realize that when they buy a frozen meal labeled “organic” they are purchasing many of the chemicals they probably hope to avoid. Plus it seems unfair to require the exclusion of certain chemicals in some organic products but not others.

A second theme was the carbon footprint implications of creating a new, “green” product versus using an existing, already manufactured product. I’ve read that when a family disposes of their Hummer to purchase a Prius, unless a new car was already needed, it takes 7 years of fuel-efficient Prius driving to equalize the carbon footprint caused by manufacturing the new car. Something similar could be claimed about solar panels. Solar manufacturers estimate that it takes between 4 and 7 years of operation to equalize the carbon footprint created by the manufacturing and distribution of the panels. However, I don’t think we should write off solar for several reasons. First, while it may take up to 7 years for solar panels to become carbon neutral, their expected lifespan is 25-35 years. Next and very important, panels on residences and business reduce demand on the power grid and even contribute more power to the grid. As the U.S. population grows demand for energy increases. Thus the footprint of solar installations can’t just be compared against the status quo but against the presumably very large carbon footprint of building new power plants to meet increased demand. Finally, in business school we learn about the experience curve. As companies produce greater cumulative volume of a product over time, the cost of making each unit decreases due to increased experience manufacturing, marketing, and distributing the product. I wonder if there is a similar carbon experience curve. As more solar panels are made and companies become more efficient at their production, the carbon impact of solar panels could decrease.

What it means to be green...

2008-11-07T10:37:00.001-08:00

This week, I had the privilege of touring San Francisco’s Orchard Garden hotel, California’s first LEED certified hotel. Leading our tour was General Manager, Stefan Muhle, who has been active with the property since conception. Comparing Orchard Garden to Arterra, the LEED certified condo development I toured several weeks ago; there were both similarities and differences. Obviously, being a hotel, the builders and managers of Orchard Garden face some unique challenges. However, there were two striking similarities. First, similar to the low expense of LEED certification at Arterra, building to LEED standards cost only $100,000 extra on a project totaling $21 Million. Secondly, though marketing the property as a green hotel gives it a competitive advantage in terms of increased publicity and high occupancy rates soon after the hotel opened, Orchard Garden is not able to charge a premium for each room.

Designing and operating an eco-friendly hotel involves tradeoffs. As Mr. Muhle walked us through the hotel, it became evident to me that he faced many tradeoffs between the requirements of official certification programs and his own judgment of green products and services. Certification rules and guidelines do not always guarantee a product or service is actually the best environmental choice. While some products or service providers may have met the requirements of certification programs, the OG team often decided the requirements were not enough, and went further to be more ‘green.’ There is a difference between being green on paper and green in spirit. Some examples:

The Orchard Garden team wanted their restaurant to represent the ‘green’ ideals of the hotel. One way to do this would be to serve only foods certified as organic. However, Mr. Muhle and team determined that it was more important to serve local, in-season food, and after those requirements are met, serve organic food when possible. Many local farmers grow food that is pesticide free, however due to the effort and expense required to pursue organic certification, the growers do not do so. Thus, the OG team is using their own discretion to determine what it means for food to be ‘green’ rather than strictly following guidelines set out by organic food certification organizations.

Green Seal encourages hotels to use environmentally friendly detergent for their laundry. However, the nearest such provider was extremely far from the hotel. The OG team determined it was decidedly not green to truck their laundry so far each day. Consequently, they partnered with a nearby vendor that agreed to change detergent for the Orchard Garden. By using the first vendor, the OG may have technically met the requirement for green certification, but it was their personal initiative that really 'greened' the hotel.

Mr. Muhle and the Orchard Garden team had to decide how to ‘green’ the toiletries hotels provide to the guests. Green Seal encourages hotels to use mass dispensers, which do not maintain the image of a high-end hotel. Mr. Muhle also explored compostable containers out of corn, but the team decided that it was not green to use corn in packaging when so many people lack sufficient food. Finally, they identified a local manufacturer of shower products that worked with Orchard Garden to create a 360 recycling program for the bottles.

The owners, architects, and operators of the Orchard Garden also had to make tradeoffs because of the cost, quality, and availability of sustainable materials. For example:

Existing sustainable wallpaper was not washable. Because guests often scuff the wall with their suitcases, it is critical that hotel staff be able to wash the wallpaper to maintain the hotel appearance.

Organic cotton sheets are not durable enough to withstand commercial use. Mr. Muhle has continued to test new brands of sheets, including those containing bamboo, without success.

The team had wanted to place solar panels on the roof; however, the roof was too small to accommodate solar panels in addition to the generator, chiller, and everything else needed there.

Other sustainable elements of the hotel included:

The hotel has European key card systems, where after opening the door, guests must insert the key card into a special slot to activate the lighting. When guests leave, because they must take the key, electricity is automatically turned off.
Partitioned waste paper baskets in room allow guests to recycle their waste. These are not currently available commercially so the Orchard Garden team designed their own small, three section waste baskets, with separate bins for paper, bottles, and non-recyclable trash.
All wood used in building materials and furniture is Forest Stewardship Council certified.
Curtains, cover-lets and other in-room fabrics are machine washable to avoid the chemical-laden dry cleaning process.
Carpets are made from recycled materials.
Citrus based cleaners are used by the housekeeping staff.
Recycled toilet paper.
Each guest room contains vents to supply fresh air to room the room since San Francisco building codes require that windows be sealed.
VOC free paint used throughout the hotel.
CFC and LED lighting

Another challenge the OG team faces is measuring the success of the hotel in reducing its environmental impact. While some metrics exist and are very useful, others are lacking. For example, OG management measures the electricity saved due to the green hotel design and energy saving features. OG Managers also measure the amount of garbage diverted from landfills due to their recycling measures. However, some ‘green’ benefits are more difficult to measure. For example, staff receives PTO rather than dedicated sick days, so it is difficult to tell if employees experience less illness by cleaning with organic products.

Some good news is that environmentally friendly products and building materials have improved in selection, availability, and quality in the two years since the hotel was built. Because the Orchard Garden team is committed to being ‘green’ both in spirit and on paper, they continue to evaluate these new products for use in the hotel. For example, when a better shower head system was introduced, Mr. Muhle upgraded all of the showers in the hotel. I was truly impressed with the dedication of the owners, builders, and management of the Orchard Garden to environmentally friendly practices. The Orchard Garden is a beautiful hotel and the guest rooms are extremely serene. I would be thrilled to stay in a hotel such as this one!

Here are some links if you want to learn more about the hotel, Green Seal, or LEED:

http://www.theorchardgardenhotel.com/

http://www.greenseal.org/programs/lodging_projects.cfm

http://www.usgbc.org/DisplayPage.aspx?CategoryID=19

Post-Financial Crisis Regulation: Stultifying Innovation in the Name of Safety?

2008-11-02T09:11:00.000-08:00

This week, Michael Callen, CEO of Amcap, a financial services company headquartered in NYC, spoke at Haas about the financial crisis. I can't do justice to his entire speech in this blog, but I did want to comment on one point he made toward the end. Mr. Callen spoke about government regulation, a theme touched upon by many recent speakers at Haas. What I found striking was that even in light of the tremendous loss of wealth and jobs over the past few months, Mr. Callen was adamant that government regulation is not needed.

Mr. Callen said, "Regulators will not be capable of doing anything but stultifying innovation in the name of safety." He went on to say that he has never seen regulation be effective, and "markets get it wrong, but they correct. Regulation is very slow to change."

Of course like any speaker, Michael Callen comes with a personal bias. As CEO of a financial services company, Mr. Callen could experience personal financial gain or loss depending on goverment's policies. However, he does have a valid point about government regulation's speed to change. In corporate America, I wasn't elected to my position, and the number of people I had to influence to make change was relatively small. Even in my role as a business analyst, the choices I made and the decisions I helped to facilitate could influence big dollars on the bottom or the top line. My job often required convincing my business partners to change their processes in response to new business realities. Unlike a politician, my arguments for change were not reduced to sound bites. Often I feel like politicians who recognize that an existing policy has good intentions but needs to evolve to be effective have a difficult time doing so because their aims can be distorted. Suddenly the politician with good intentions and great ideas is against children, the economy, the environment, Joe the Plumber, or American manufacturing. And who would re-elect a politician who doesn't stand for our children? It is difficult to change a law from good to better or to update a law that was good in the past but needs to evolve to be effective.

Our government failed to recognize the threat presented by CDOs, highly leveraged banks, and non-traditional bank activities. How could we regulate to prevent a threat we didn't even see? Now that the crisis has occurred, I agree with Mr. Callen that to some extent the market will self-regulate. Each financial institution will seek to minimize its own exposure to such risks in the future. However, I disagree with Mr. Callen that no regulation is needed. In my mind, perhaps the role of government should be to better facilitate this self-regulation by requiring more transparency.

Regardless of what policy is implemented, in 18 months I need another job, and thanks to a pricey business school education, I will have some big loans to pay. My fingers are crossed that the economy turns around by then!

Renewable Energy

2008-10-29T11:27:00.000-07:00

Last week, I attended a panel on renewable energy. I found it interesting that government policy, a topic that was noticeably absent during Hunter Lovins’ address on natural capitalism, was a key theme during the panelists’ overview of the energy industry. For better or worse, government policy is a strong factor shaping the renewable energy industry. For example, the federal government currently offers tax credits for wind power. Each time the tax credit is renewed, investment in wind technology surges. However, when credits near expiration, investment plummets to nearly nothing. Given the focus on energy policy by both Barack Obama and John McCain in the upcoming election, I believe that our government’s influence on the development of alternative energy will only increase.

The following three panelists spoke during the two hour session:

Will Coleman, Partner at Mohr Davidow Ventures and MBA/MS (ERG) from UC Berkeley
Drew Isaacs, Adjunct Professor, and Co-Director of the Center for Energy and Environmental Innovation at Haas
Steve Weissman, Associate Director of the California Center for Environmental Law and Policy, and Lecturer in Residence at the UC Berkeley School of Law

According to the panelists, current government policy is based almost entirely on the potential for job creation. However, for energy policy to be successful, our government needs to define all of our society’s goals for renewable energy, with job creation being just one of those goals. I believe our country’s objectives should include reducing the environmental impact of our growing energy needs and increasing independence from foreign oil. Once key goals are established, the panelists emphasized that government policy should to be aligned to those goals. Finally, success of each government policy must to be quantifiable so that policy can be updated strategically as needed.

Steve Weissman also mentioned something during his overview on the industry that struck me as critical for government policy. Different renewable energy technologies are poised for success in different geographic regions of our country. Here are some notes I jotted down from Professor Weissman’s graph of the country:

Wind: Midwest
Solar: Southwest
Hydro: Northeast and Northwest
Geothermal: Southwest
Biomass: Northeast, Southeast, Midwest, Northwest

Based on this information, I believe that there will need to be a local focus to alternative energy policy. Any federal policy should keep the unique needs of each region in mind. Alternatively, states should be empowered to tailor their energy policy to their own geographic realities.

Finally, while government could be a powerful force in the successful establishment of renewable energy in the U.S. there is potential that government actions could be detrimental to the growth of this industry. I would have loved to hear the panelists talk more about the potential pitfalls of government policy. The farm bill is an example of failed government policy that entered my mind throughout the talk. The initial goals of this bill, no doubt, were good. I imagine that when it was created, the bill's purpose was to help protect farmers from price changes of commoditized farm products as a way to guarantee the nation’s food supply. However, as it was implemented, the bill heavily subsidizes corn. Because corn is subsidized, the market equilibrium price of corn and corn-derived products is lower than would otherwise occur. As a result, it is significantly cheaper to buy 2,000 calories worth of Doritos than the same calories worth of vegetables or other food alternatives. Our country pays an enormous price for this policy. Obesity has become an epidemic on which Americans spend $75 Billion a year, half of which is covered by tax payers. By subsidizing the unhealthiest of foods, couldn’t you say the farm bill has failed us? I would hate to see a similar fate for our national energy policy.

A New Generation of Capitalism

2008-10-28T06:51:00.000-07:00

Last week I wrote an entry on the blog of the Net Impact Club. Net Impact is a club for students interested in promoting social and environmental responsibility in business organizations. I am helping to plan a speaker series called Capitalism Next, which is exploring how capitalism as a system can evolve toward true sustainability. I would like to share that post with you below.

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On Wednesday, I had the opportunity to hear Hunter Lovins speak to a group of students from Haas and other UC Berkeley schools, including the schools of law, natural resources, and public policy. Lovins was the first speaker in a series of speakers, titled Capitalism Next, exploring how for-profit businesses can become truly sustainable. She proposes that because our world’s natural resources are becoming scarce, a new type of environmentally conscience capitalism is emerging, dubbed natural capitalism. During the industrial revolution, Lovins told us, human capital was in limited supply, and successful companies used machines and plentiful natural resources to create more value with less people. Today, in contrast, human capital is plentiful but our world’s natural resources are becoming scare. Consequently, we are experiencing a new capitalist revolution. Recognizing the value of natural resources, companies are now growing their bottom lines by minimizing their environmental impact. This is the capitalism of the future.

Lovins’ examples of companies “doing well by doing good” provides true hope for our planet. For example, Dow Chemical saved $3 Billion dollars over 3 years through their energy saving and waste reduction programs. Tesco, a leading international grocery retailer, has pledged to cut carbon emissions from all existing and new stores by 50%. Tesco has also launched a program to begin labeling foods sold in their stores with their carbon footprints. Companies are even voluntarily trading carbon on the Chicago Carbon Exchange. Participant companies include Dupont, Motorola, and Ford Motor Company. I was impressed that so many leading companies are taking steps toward environmentally responsible business.

I also came to Lovins’ speech with a unique framework. The same morning I had the privilege of touring Arterra, a new condo development which is positioned to become San Francisco’s first LEED certified residential high rise. For those who don’t know, LEED is a green building rating system that provides a set of standards for environmentally sustainable construction. The developers of Arterra are also proving that environmentally friendly business practices can lead to profitability. In this tough real estate market, Arterra has roughly five times the foot traffic of non-sustainable condo developments and is selling well. Arterra’s developers told the tour group that while green development projects do not sell for more money, the extra expense of sustainable building projects has become minimal. On this $90 Million dollar project, the extra cost of sustainability was only $300,000, approximately 1/3 of 1 percent of the total cost!

However, as exciting as I find the idea of natural capitalism to be, Lovins’ speech left me with many un-answered questions, some of which I hope will be addressed during future Capitalism Next sessions. First, I would like to understand more about the role of government in moving industry toward environmentally conscience business. My background is supply chain consulting. While I had the privilege to work with some companies that were cognizant of their environmental impact and actively addressing it, I saw many that were not. In addition, not every change toward corporate sustainability is going to have a positive ROI. Government has played a significant role in shaping and regulating our current capitalist system. For those organizations that are not voluntarily moving toward natural capitalism or taking sufficient steps in that direction, what role will government play?

In addition, I perceive an educational gap in the ability of our nation and the world to rapidly adopt more sustainable business practices. Classmate Ari Frankel pointed this gap out to me on the Arterra tour. While most real estate development companies recognize that green building is the future of development, and while they know green projects are sound business, many companies currently lack architects, developers, and interior designers with the knowledge and skills needed to bring an environmentally friendly project to fruition. What change in education will be needed to support natural capitalism and on what scale? How will existing educational institutions manage this?

I hope to find many opportunities at Haas to continue exploring the role of business in addressing the world’s social and environmental issues. I am definitely looking forward to future sessions of Capitalism Next.

My First Blog

2008-10-24T13:13:00.001-07:00

Two months ago, after five years of full-time work, I returned to school to pursue my MBA. I am thrilled to be learning in an academic environment once again, and school is definitely keeping me on my toes! Unfortunately, despite the best of intentions, I have not been able to stay in touch with all of my friends in family as often as I would like. By writing a blog, I hope to share a bit of my MBA with you.

I think the best way to explain my goal for my MBA experience is to start with a book I read over the summer, "Eat Pray Love," by Elizabeth Gilbert. In one part of the book, the author becomes friendly with an Italian who likes to identify the one verb that describes the energy of a city. He inspires Elizabeth to evaluate her favorite American cities to do the same. After some thought, she describes New York with the word "Achieve" and L.A. with the word "Succeed." After reading this chapter in the book, I challenged myself to identify the verb that to me represented San Francisco, the city where I lived in at the time. The word I choose was "Explore." Over the years, San Francisco has been a city where people have come to explore themselves. You can still find interest in yoga, eastern religions, and counter-cultural movements in San Francisco as its residents look to explore themselves. San Franciscans also enjoy experiencing other cultures, especially through their food. In addition, San Francisco is a city where people explore the world around them. As a group, residents of the bay area tend to enjoy the outdoors, through hiking, camping, biking, surfing, and many other activities. Explore.

Now 8 weeks into my MBA experience, I have decided that exploration should also be the theme underlying these next two years of my life. I want to expose myself to as many new ideas, industries, and potential careers as possible. I have joined a number of clubs, and have attended a wide range of speakers. One day I might attend a speaker on private equity, and the next I could choose a speaker on corporate social responsibility. So while some of my classmates have very clear career goals, I am keeping my mind open to exploring new possibilities. I know I want to have a post-MBA role that is strategic and challenges me, but aside from that, I have much exploration to do.

I am so grateful to have friends and family supporting me on this journey. I hope that the impressions I will share here during my MBA experience will add something to your life as well.