Building a Sustainable Moat | Customers, Etc.
Using social purpose to drive creativity and innovation
Let’s pretend you just finished eating a warm glazed donut and you need to respond to a message on your phone. What do you do?
“I will go to the sink and wash my hands, is this a trick question?”
Yes, but how will you wash them?
“With soap and water, come on.”
What if you’re out of soap?
"I will wash whatever glaze I’m unable to lick off my fingers with just water and pick up some soap on my next trip to the store.”
What if the store doesn’t sell soap, only the ingredients to make soap?
“You’re exhausting.”
Fine, I’ll take over. If you had to make your own soap, you’d have to buy lye, animal or vegetable oil, and a container to store the soap. After returning home, you’d google “how to make soap”, then combine the lye, oil, and some water in appropriate proportions and save the resulting product in the container you bought.
Thankfully, this process is unnecessary. When you go to the store, you see products where the manufacturer has already combined the raw ingredients for you. The Ivory® name printed on the bottle means this is a brand of soap you can trust. Same goes for laundry detergent and a host of other cleaning products. You rely on brands like Tide®, Cascade®, and Dawn® to have figured out the right combination of raw ingredients to solve your problem in a conveniently packaged product.
All of the brands I mentioned in the preceding paragraph belong to Procter & Gamble (P&G). If you wanted to compete with P&G’s cleaning products, how would you go about it? P&G already has an established line of brands that dominate shelf space at physical retailers. It seems highly risky to try to compete head to head. Does sustainability offer a way in?
Sustainability and social purpose
I’m taking a “Business Strategies for Sustainability” class as part of my MBA program at Georgia Tech. The class is broken up into six modules, each taught by a different professor. It’s hard to describe what the class is like. One moment, you’ll be reading about the United Nations’ Sustainable Development Goals, which can feel daunting and almost unapproachable. The next moment, you’re diving into an individual business’s decision to compete on sustainability, which is grounded in real tangible results. We’re covering a lot of ground.
For our most recent class, we read “Competing on Social Purpose”. The paper is excellent and includes practical ways for businesses to think about competing on sustainability and social purpose. One of the authors of the paper, Omar Rodríguez-Vilá, taught the class.
One of my biggest takeaways from the class is how sustainability offers an opportunity to think creatively about serving customers not just because “it’s the right thing to do,” but also because it can make smart business sense. A lot of the examples we covered reminded me of the type of creative thinking you would find at start-ups to solve complex problems of product-market fit. Yes, you already know how to solve the problem the traditional way, but how would you go about it in a way that’s more sustainable?
It pays to think creatively about sustainability. On one hand, it can be more cost effective to choose sustainable solutions. Reducing unnecessary waste is often good for the bottom line. But it also represents an opportunity for growth and innovation. As the market of consumers who prefer sustainable products increases, brands that seek to innovate to better serve that market have an opportunity for growth.
Blueland
Let’s return to the example of consumer cleaning products. In our class, we talked about Blueland, a company “that offers everyday products without single-use plastic packaging.”
The way their products work is that you buy a reusable bottle from them once and then they ship you tablets that dissolve in water to make the finished product. Because they’re not shipping water as part of the product, this makes delivery more efficient, reducing shipping and storage costs. And by reusing a single high-quality container, they eliminate plastic containers being thrown out and polluting the environment.
A sustainable moat
Understanding Blueland from the perspective of sustainability is straightforward enough—they reduce waste in both packaging and delivery—but what made the greatest impression on me is how defensible their position is from a customer acquisition perspective.
A reasonable question might be: if Blueland is so successful, why can’t Procter & Gamble copy them and package their brands into sustainable product packaging that gets shipped directly to consumers?
Despite the strength of each brand in P&G’s portfolio, consumers don’t have a relationship with P&G. They have a relationship with each individual brand. You’ll trust Tide® to clean your clothes, but does that mean you’re automatically going to trust Cascade® because it’s also a P&G brand? How likely are consumers to even know those brands are in the same brand portfolio? They’re not, which means each brand has to earn your business and your trust separately. P&G can’t start a direct-to-consumer business overnight because P&G doesn’t have customers. P&G’s brands have customers.
In contrast, all of Blueland’s products are under the same Blueland brand. If you try out Blueland’s hand soap and like what you get, you might pick up laundry detergent on your next order. You’re not a “hand soap” customer. You’re a Blueland customer. They’ll be able to continue to market new products to you that align with their overall mission and brand.
If Blueland had tried to compete with P&G directly for shelf space at your local supermarket, they would have faced an uphill battle. Sustainability would have felt like a tax. However, by thinking creatively about product delivery, they were able to create alignment with their mission of sustainability in a way that’s very difficult for incumbents to imitate.
If we think of sustainability as a tax, we’ve already given up. But if we look at sustainability as an opportunity to better serve customers and help our businesses grow, we have a real opportunity for creativity and innovation.