Category Archives: Product Development & Commercialization

Guidelines for Hiring Salespersons Who Have Worked for Competitors

Salespersons who have worked for competitors are obviously very attractive candidates when companies are looking to add new skills and experience to their sales group.  Since they already are active in the relevant industry and markets it typically does not take long to bring them up to speed and they also should have a good familiarity with how business done and the products and services that are available from all of the companies approaching the specific customer base.  However, salespersons who have worked for other companies may have obligations to their prior employers not to use trade secrets or confidential information learned or acquired at their prior employment, and may have personally signed contracts so promising.  In addition, such persons may have explicitly agreed not to solicit former customers, even if trade secrets or confidential information of the prior employer are not being used.  Accordingly, when hiring salespersons who have worked for competitors companies must be mindful of potential liability it is found that they or their employees knowingly used confidential information of their competitors or engaged in other activities that might be prohibited under contracts between the new employees and their former employers.

 

State laws regarding trade secrets and enforceability of non-solicitation agreements differ and the applicable law should be closely reviewed; however, the following general guidelines should be given to new salespersons before they begin contacting any customers or sharing information with colleagues at their new company:

 

  • They are allowed to use their general knowledge, skill and experience acquired in their former employment; however, they may not use the confidential information or trade secrets of the former employer in so competing (including information that is not in tangible form and is simply in the memory of the new salesperson).
  • Trade secrets or confidential information of a former employer should not be disclosed anyone at the new company and they certain should not bring any confidential or proprietary information of any kind from their former employer to the new company.  For example, they should not transfer to the computer network of the new company, via e-mail, CD, thumb or flash drive, or other removable storage device, any confidential information or trade secrets from their former employer, including personal contacts.
  • They should not solicit former customers of their former employer; however, if former customers do contact them and ask to do business with you they may send them information about the new company, open an account, and sell to them.  It is important to carefully document how former customers first made contact.
  • If former co-workers of the new salesperson contact them and ask about employment opportunities at the new company they should be given the phone number of the human resources department of the new company and the new salesperson should refrain from any further conversations with former co-workers regarding prospective employment.

It is important to emphasize how important these rules are by making sure that new salespersons understand that the use of confidential information from competitors of the company is grounds for discipline up to and including termination of employment.  All of these points should be covered in the initial entrance interview with new salespersons.  Given the sensitivity of the issues and high likelihood of possible litigation with competitors it is recommended that legal counsel join the initial entrance interview to be sure that the new salesperson understands his or her obligations.  In addition, the guidelines described above should be given to the new salesperson in writing and he or she should be asked to acknowledge receipt of the guidelines and the fact that they have been reviewed and discussed with the company before the salesperson began engaging in sales activities.

Research for Developing a Marketing Plan

Research is obviously an important part of the process of developing, drafting and implementing a marketing plan.  A good deal of research should be completed even before the company turns to settling on its objectives for the marketing campaign since the company will need to collect as much information as possible about its potential target audience(s), their current behaviors, and any obvious impediments to changing those behaviors that might need to be considered in developing secondary objectives for the company’s marketing strategies and activities.  Research should also be used a way to validate some of the assumption that the company might be making about what message needs to be given to the target audience and how they are likely to react.

Companies should rely on a variety of research methods and sources of information including interviews with experts, government reports, demographic data, focus groups, surveys, literature reviews, privately-commissioned market research surveys, and even direct observation of behaviors of prospective customers as they inspect competing products.  The research process should be tightly focused so that it stays on track and those involved in the preparation of the marketing plan should remember that research is necessary in order to make good decisions and set solid marketing strategies rather than just to collect information that is not relevant.  This is why setting the target audience is so important because research can then be limited to that audience.  A reasonable budget for research should be established at the beginning of the marketing plan preparation process and a portion of the budget should be reserved for later use in order to explore issues and questions that may arise once the company has begun implementing the plan.

As noted above, research is particularly important in learning more about the likes, dislikes and beliefs of the members of the company’s target audiences so that the company has a better understanding of what marketing activities are most likely to change their behavior.  Research should be conducted to identify what the target audience wants with respect to the products and services offered by the company, what they know and believe about the company and its products and services, and what type of information and messages they will trust.  Among the key questions regarding target audiences that can and should be answered through research are the following:

 

  • Who are the members of the target audience?
  • What are the demographic characteristics of the target audience?
  • What are they doing (or not doing) now with respect to the products and services being offered by the company?
  • Why are they engaging in their current behaviors regarding the products and services being offered by the company?
  • What fundamental needs are being satisfied by the current behaviors of the target audience regarding the products and services being offered by the company?
  • Do they have all of the information necessary to make informed decision regarding the products and services being offered by the company?
  • Are there significant knowledge gaps or misconceptions among the members of the target audience regarding the products and services being offered by the company?
  • What are their values and attitudes–what do they believe and whom do they trust when receiving and evaluating information?
  • What likely barriers will they have to changing their behaviors in the manner desired by the company?

Lean Manufacturing–What Is It and How Can You Use it in Your Startup?

Lean manufacturing, often referred to simply as “Lean”, has been described as a business model focused on efficiently delivering high-quality products or services to customers in a manner that ensures value by identifying waste within the value stream and eliminating it whenever possible.  While practitioners of lean manufacturing have developed a set of tactics that can be implemented to improve the workplace, lean is also a way of thinking about work that is based on continuously seeking ways to proactively make improvements.  Lean manufacturers do not wait for something to go wrong before changes are made, instead they empower people throughout the organization of to suggest and implement better ways to improve processes and reduce waste.  While lean ideas have been employed for centuries, it is generally recognized that Japan’s Toyota Motor Company was among the first to bring many of the ideas associated with lean manufacturing together into a coherent methodology that became known as the “Toyota Production System”, or “TPS”.  Since the emergence of the TPS in the 1980s, lean manufacturing principles have been implemented in businesses and organizations across many industries and work settings.

This article is adapted from material in Lean Product and Customer Development: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

It has been explained that the key goals of the TPS were to streamline processes, increase efficiency, improve productivity, respect people and please the customer.  TPS was based on the understanding that businesses are engaged in three types of activities: value-added, non-value-added and waste.  In order for an activity to be value-added, it must satisfy several criteria: customers will pay for the activity, the product changes in some way and the work is done correctly without defects. The non-value-added activities must be performed, but aren’t readily recognized by customer as adding value to the actual product (e.g., complying with governmental safety regulations during the manufacturing process).  Finally, the most problematic activity is waste.  Since waste does not add value for the customer, and does not need to be done in order to complete a product or service, efforts should be taken to eliminate it.  In Japanese the word for waste is “muda” and in the TPS there were a number of main types of muda: defects, waiting, extra motion, excess inventory, over-production, extra processing, unnecessary transportation and unutilized talent or skills.  In addition, lean manufacturing attempted to eliminate mura, which referred to unevenness in production, and muri, which meant overburdening people or equipment.

The critical guiding principals for effectively deploying lean manufacturing techniques have been summarized as follows:

  • Elimination of Waste: Businesses need to identify non-value-added work and eliminate it in order to remove the following types of unnecessary wastes from the manufacturing process: overproduction; unnecessary motion; wasted inventory; production defects; unnecessary waiting time; wasted transportation and over-processing.
  • Continuous Improvement: Commonly referred to using the Japanese word “kaizen”, continuous improvement is about promoting constant, necessary changes, both large and small, toward the achievement of a desired state. Continuous improvement begins with establishing and maintaining standardized work and level production and moves forward as a continual mindset throughout the organization based on the premise that there is always room for improvement.
  • Respect for Humanity: Companies should understand that the people that work for them are their most valuable resources and that they must be respected and kept in high regard as lean manufacturing principles are implemented.  Among other things, this means listening to the ideas of workers and providing them with help when necessary for them to fulfill their roles.  Respect for humanity builds loyalty among workers and their sense of personal worth.
  • Levelized and “Just in Time” Production: Levelized production refers to the aspiration to establish and maintain the work load at the same level every day.  This requires striking the right balance between traditional forecasting, which often leads to excess inventories that are not needed for customer orders, and the “pull system”, which waits for customer orders but must be primed sufficiently to avoid delays in deliveries to customers.  The key to achieving levelized production is “just in time” production, which is based on the principle that companies must be focused on avoiding waste by building only what is require, when it is required and in the quantities required.
  • Quality Built In: Lean manufacturing seeks to build quality into the manufacturing process, the product design, the parts in the product and the finished product itself, including the packaging of the finished product and the manner in which it is shipped.  The continuous improvement efforts mentioned above are heavily focused on quality issues and generating and implementing ideas for improving quality.

While lean manufacturing has its roots in larger companies such as Toyota, certain of its techniques and tools have been incorporated into the principles of the “lean startup”, particularly conversion of traditional push methods to pull and reduction of batch sizes.   Startups, with few resources and needing quick iteration of the development of their initial products, have been urged to “go lean” by working in small batches to ensure that they minimize the expenditure of time, money, and effort that ultimately turns out to be wasted and identify problems with their fledgling products more quickly.  Toyota worked on the basis of small batches by foregoing large specialized machines that could produce thousands of parts at a time in favor of smaller general-purpose machines that could produce a wide variety of parts in small batches.  Toyota leveraged the capabilities of these smaller machines by figuring out ways quickly reconfigure each machine—minimizing “changeover time”–to make the right part at the right time and ultimately produce entire automobiles using small batching throughout the process.  Workers did not have to work harder; instead they worked smarter because they were able to rely on better tools and processes.  Everyone in the company benefited from the company’s success using small batches to diversify its product line and compete in a larger number of otherwise fragmented markets.  Lean startups are not yet at the stage where they are in larger scale production of finished products, but small batching provides value to them by facilitating faster testing and learning of product ideas with real customers.

This article is adapted from material in Lean Product and Customer Development: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

Morning Walk: Until We Meet Again

Last week we decided to resign from our membership in a local club.  While there were certain things about the services that had disappointed us, the main reason was that we were not using the facilities and didn’t want to continue paying a fairly healthy monthly dues assessment.  We had an equity membership so we needed to sort out how to return the membership to the club and whether or not we would be eligible for some sort of redemption amount.  I sent an e-mail to the president, membership director and general manager of the club.  A day later I received an e-mail back from the general manager acknowledging our request to resign and informing us that based on the bylaws we would need to continue paying monthly dues for another two months.  He also said that if there was any particular issue that we had with the club that he would like to hear about it in order to improve the experience for other members.  All of this was fine; however, his message was written to “Mr. and Mrs. Gutterman” and this reminded me that one of the things that had bothered us was that he, as the general manager of a fairly small club that thrived on relationships, had never taken the time to introduce himself to us and develop a personal connection even though he had several opportunities to do.  As the general manager, that’s his job.  His predecessor had been just the opposite: he knew everyone and treated everyone as if they were the most important person in the club.

The president of the club eventually wrote to us also and dutifully expressed his regret that we were leaving.  He was a “volunteer” who we did not know and I feel that those folks do enough without being saddled with the responsibility of knowing all of the members.  I wrote back and thanked him but also said that based on my reading of the bylaws the general manager’s statement that we owed additional dues was incorrect.  I had previously asked the general manager to check on this with someone and copied him again on my message to the president.  Well, it eventually turned out that we didn’t have to pay the additional dues, but the point of the story is that I never heard directly from the general manager again.  The “details” were delegated to the controller in the club’s office.  The president did write back one more time to say that he had heard everything had been sorted out and to wish us well.  We never heard from the membership director who, like the general manager, had been around the club for a fairly long period of time and had not reached out to introduce himself to us.

I know all of this is not “life and death” and my issues with a couple of people at a club are not high on anyone else’s list of things to think about.  My point, however, is that when someone acts the way that the general manager did they give people the impression that they really don’t care about developing and maintaining a service relationship.  A sustainable entrepreneur necessarily starts with a very small group of clients or customers and she needs to treat each of them as if they are the most important.  They may not be, at least in terms of current or future revenue potential, but they are the first stop on building a strong brand and reputation.  Don’t leave relationship building to others in your organization: make time to do it on your own and coach others on how to do the same.  And, although it will be difficult in some cases, be present and engaged when a customer or client decides to leave.  The general manager’s handling of the dues question and delegating it without explanation left a bad taste in my mouth and makes it difficult for me to recommend the club to others, at least while he’s supposed to be the face of the club in terms of services.  Also, the general manager, and sustainable entrepreneurs, should not assume that a departing member, client or customer is gone from their lives for good.  Time and experience has shown that former business partners may return to the picture in the future, often in a position of being to provide an opinion on how they were treated in the prior relationship.  So, when a client or customer leaves it isn’t “good bye”, it’s “until we meet again”.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

Marketing Eco-Friendly Products

An important development driving companies to consider and embrace corporate social responsibility (“CSR”) initiatives is the potential for stronger engagement with customers, an increasing number of which are seeking out products and services that address stakeholder needs, such as health focus or environmental responsibility or societal consequences.  CEO surveys indicate that company leaders are acknowledging that cost, convenience and flexibility, the traditional criteria that customers applied when selecting products and services, will soon be joined by believing that the vendor is committed to addressing wider stakeholder needs.  While the connection between customer engagement and CSR is growing in the US, it is even more important in other areas of the world such as Japan, India and the European countries.  Overall, a 2015 survey by Nielson found that 66% of global consumers say they’re willing to pay more for sustainable brands—up 55% from 2014.  The trend will only get stronger in years to come given that Millennials around the world are willing to pay extra for sustainable offerings, or switch brands to one associated with a cause; expect companies to have a real public commitment to good corporate citizenship (i.e., “authentic”, not just “lip service”); and are prepared to take to social media to praise or criticize the CSR efforts of particular companies.  Millennials also enjoy storytelling and opportunities to participation, which means that companies need to do a good job of spreading the work about their sustainability activities and create ways in which customers can actively engage in the causes that the company is supporting.

This article is adapted from material in Stakeholder Engagement: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Specific guidance for companies on engaging with customers can be found in the results of a 2015 global survey by The Nielson Company that identified the following top sustainability drivers among consumers willing to pay more for sustainable products:

  • Products from a brand that the consumer trusts
  • Products known for their health/wellness benefits
  • Products from fresh, natural, organic ingredients
  • Products from a brand known as being environmentally friendly
  • Products from a brand known for its social value
  • Products with environmentally friendly packaging
  • Products from a brand with a commitment to the community
  • Customer saw a TV ad about the social/environmental good of the brand

In early 2017, Unilever released the results of a study that found that a third of consumers were actually choosing to buy from brands they believed were doing social or environmental good, and a growing number of companies are publicly committing to sustainable sourcing guidelines to improve environmental and human rights management within their supply chains.  However, all of this comes with important caveats and additional challenges and responsibilities for companies.  For example, studies by McKinsey & Company found that customers will pay a most premium for sustainability, but that their enthusiasm generally wanes if the premium gets much above 5% of the “normal” price.  In addition, “green” products must meet the same performance standards as a “non-green” alternative.  Research conducted by Gopaldas suggests that companies also need to understand the emotions that drive consumers to engage in make responsible choices when selecting the products they buy, which she classified as “contempt”, “concern” and “joy/celebration”.  Specifically, Gopaldas found that consumers purchase green products out of contempt toward companies and governments that they consider responsible for environmental pollution and for the exploitation of labor; out of concern for the victims of consumerism, such as workers, animals and ecosystems; and out of a sense of joy and celebration for making responsible choices and being part of collective action to make a positive impact for sustainability.  In other words, consumers want to fulfill certain emotional needs when engaging and doing business with companies offering sustainable products and services.

In order to be successful in reaching and converting customers who will pay more for environmentally friendly products, companies need to make some important changes in the marketing and overall customer engagement strategies.  Here are some tips on how to get started, based on recommendations from several experts on marketing eco-friendly products and businesses:

  • Use packaging that highlights social welfare and warm relations as virtues of green consumption.  Green consumers want to feel connected to the brands they purchase from and are emotionally drawn to feelings of contributing to the solution of a particular environmental or social problem.
  • Tell consumers why they should buy green products, which can be done through information cards, window displays and videos that educate consumer about the environmental and social effects of their purchasing decisions.  Companies should also educate customers about how products are created including information on the company’s natural ingredients, earth-friendly manufacturing processes and policies regarding purchasing of inputs from developing countries and overseeing the environmental and social responsibility of suppliers.
  • Manage reputation by complying with environmental and social regulations and not misrepresenting products as being green.  Trust is essential for successfully marketing green products and one mistake, such as a public announcement of problems in the supply chain, can undo all the work done by the company and permanently tarnish the company’s brand.  Surveys show that consumers quickly develop contempt for companies that have been found to engage in activities that harm the environment or demonstrate disrespect for human or animal rights.
  • Persuade consumers that each person can make a difference.  Ad campaigns showing people improving the environment are more likely to convince consumers to buy green products, and surveys indicate that consumers enjoy feeling that their purchases are helping to address an environmental or social issue and that they are collaborating with others of the same mind.
  • Provide regular feedback to consumers to show they are making a difference.  This reinforces behavior from green consumers and motivates others to consider the environment when buying.  Companies should post information on their websites and ask customers to provide e-mail or other contact information so that the company can send them personalized updates; however, when implementing this strategy the company needs to focus on informing customers as opposed to simply bombarding them with sales pitches.
  • Rather than touting products as “eco-friendly”, companies should identify a specific “selling point” that should be a central focus of all of their marketing messages and, of course, be based on practices during the commercialization process.  For example, companies might use phrases such as “low-energy solution”, “non-toxic ingredients”, “low waste (or emissions)” or “recycled materials”.  Educational tools prepared for the products should provide consumers with the information necessary to verify these claims.  A strong and verifiable selling point lets customers know exactly what the company stands for.
  • Companies should make use of a variety of logos and insignias for their marketing and company branding that represent being “green”.  Logos and insignias used with the permission of trusted independent bodies (e.g., Energy Star Rating logo) provide credibility and should be included on the company’s website, advertising, marketing materials, signage, business cards, packaging and vehicle graphics.
  • Make sure that everything about your company, not just the features of the particular product or service, demonstrates a deep commitment to environmental and social responsibility.  For example, print marketing materials, business cards and product instructions on recycled paper; promote local vendors and encourage customers to shop for the company’s products in their own neighborhoods so that purchasing the products also helps the business community in which the customer lives; deliver products using fuel-efficient vehicles and establish campaigns that provide for a portion of the premium charged for green products to be donated to assist a local environmental cause.

Companies should look beyond considering customers as sources of revenue to interactively engaging with them as partners in improving the company’s products and finding new ways to improve the company’s green profile and increase the impact of its efforts.  Companies should seek out customer’s opinions and ideas on new products, set up meetings with customers in their own neighborhoods to try new products and hear what they have to say about the brand and, most importantly, continuously tell customers how much they appreciate their business.  Another approach for attracting interest and support among customers is taking on a special social mission or cause, such as what Ben & Jerry’s Ice Cream did when it launched its initiative relating to Campaign Finance Reform; however, this type of strategy can be quite risky and alienate customers who enjoy the green aspects of the products but don’t necessarily agree with the specific cause or want the businesses they work with to get too partisan.  Moreover, taking on a broader social cause is time-consuming and requires collection and analysis of extensive amounts of data and resources to become and remain an effective advocate of the cause.

Sources for the recommendations above included L. Rakowski, “Attract Customers by Showing They Make a Difference”, Network for Business Sustainability (September 26, 2017) and D. Seltzer, Green Marketing Ideas to Promote Eco-Friendly Businesses (Small Business Marketing Tools).

This article is adapted from material in Stakeholder Engagement: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

 

 

Morning Walk: Whatever You Do, Get the Client’s Name Right

A team I work on received a fairly lengthy letter from a client last week complaining about the size of the bill he had received from us and detailing all of the errors that he saw with our work product.  Everybody receives one of these communications from time to time, hopefully not too often, and it’s easy to get angry when somebody is challenging your integrity and expertise.  For now, some of the members of the team believe that the client was posturing to negotiate a reduction in the bill, probably because he and his colleagues were unable to close the project for which our work was being done.  That may be true, and perhaps our side should have gotten a better idea of the risks that the client was facing in its own business before taking on the project; however, I think we need to view every client or customer, regardless of how painful it might be sometimes, as an opportunity to learn and improve.

In this case, two things stood out to me.  First, the client had pointed out, correctly, the header on two of the pages of a 50+ page document that we had provided referred to a different client.  The client took this as a sign that we had simply tried to palm off our work product from a different project without spending time on this client’s specific needs.  He was wrong about; however, he did have a point.  In my mind that was sloppy.  I missed it in my review of the document and tried to rationalize it by thinking that I was too busy concentrating on the real meat of the document and that the way I set up to view the document on my laptop didn’t always show the header on each page.  That’s all well and good, but at the end of the day we made a fundamental mistake: we got the client’s name wrong!  I was told a long time ago that if you did something like that you would lose the confidence of the customer or client and it wouldn’t matter how good the rest of your work product was.  It was a simple and valuable lesson that had now been refreshed.

Second, we had a loose arrangement with the client for a “fee cap” on this particular project and the client was clearly upset when he received a bill that was well in excess of what had originally been discussed.  From our side we thought the client should have clearly understood that the pieces we had to pull together in order to move the project forward could not reasonably have been done within the cap amount.  The problem is that it’s not the responsibility of the client or customer to be reasonable about the resources and time that we need to fulfill our promise to deliver.  That was our job and we failed to take the time up front to find out as much as we could about the project in order to provide a better quote and, just as importantly, we didn’t communicate with the client as the project proceeded about some of the new information that would eventually lead to the project coming in over budget.  Failure to communicate was compounded at the end by simply delivering a very large bill without someone from our team providing an explanation and establishing a platform to discuss mutual misunderstandings on both sides.

We’ll see what happens in this case.  The client has asked to terminate the engagement and all indications are that the client is trying to tie up loose ends on a project that was not successful on its side, regardless of the work that we did.  We will respond, it’s not wise or appropriate to simply be silent.  When we do respond, both to the client and to ourselves, we need to be honest: admit mistakes when they are clear and demonstrate how we can learn from them.  Double check names and headers?  Of course.  But also set up a better way to continuously communicate with customers and clients about their expectations.  This sounds easy, but today customers and clients often don’t want to be bothered.  They view certain products and services as commodities and they just want the best price and nothing more.  My experience is that it is rarely that easy and you need to proactively engage with customers and clients from the very beginning to build relationships and trust.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

Issues to Consider in Developing a Sustainable Product or Service

New and shifting legal, market and financial dynamics have increased the pressure on firms in manufacturing industries to implement processes for developing and marketing sustainable products.  The environmental and social impacts of products and services depend on how they interact with the surrounding socio-economic and technical systems, sectors and actors along their life cycles.  A number of actors need to be involved in the drive toward greater sustainability in the development, commercialization and use of products and services.  Businesses, particularly larger and more established firms, can play a significant role in making changes in product design and functionality and then using their positions in the marketplace to communicate with customers and supply chain members about the importance of optimizing sustainability throughout the product life cycle.  Consumers can also contribute by changing their preferences and decision making patterns to demand more responsibility with respect to environmental and social impacts in the products and services they purchase; however, changes in consumer attitudes require more investment in education and raising awareness.  If consumers do show legitimate interest in sustainability, retailers need to exert pressure on their suppliers to develop and market sustainable product and service offerings and provide easily assessable information about those offerings to consumers.  Media outlets must also be involved in disseminating information and providing opportunities for sustainable advocates and trendsetters to get their message out to consumers.  Researchers in the corporate and academic communities must be able to provide the requisite technical innovations necessary for enhancing energy efficiency, reducing waste and pollution and eco-design.

Since product developers and designers are the generally the first ones to conceptualize how, and of what materials, a new product will be manufactured, they have a strong influence on the environmental impact of the product during its life cycle.  In fact, the National Research Council has estimated that approximately 70% of the costs associated with a product’s development, manufacture and use (i.e., its life cycle) are determined in the initial design stage.  Among other things, product developers and designers play a leading role with respect to specification of raw materials, energy inputs, purchasing specifications, hazardous materials generated, recycling and worker health and safety.  However, environmental performance is just one of the business goals for product developers and they must balance environmental impact against other priorities such as regulatory compliance, product performance, consumer acceptability, and price.

Companies have used a variety of analytical tools and managerial processes and strategies as part of their business approaches to developing sustainable products and services.  Among the more popular analytical tools have been lifecycle assessment (“LSA”), lifecycle costing, risk assessment, environmental impact assessment, ecological footprint and MIPS for systematic evaluation of environmental impacts along the entire supply chain or product lifecycle.  Managerial processes and approaches have included eco-design, eco-innovation, product service systems (i.e., selling a bundle of products and services based on functionality rather than purely physical products), lifecycle management, product stewardship, supply chain management, corporate social responsibility and product-oriented environmental management systems that are used to collect and analyze lifecycle information.  Lifecycle management and product stewardship are particularly important for integrating lifecycle thinking into the corporate culture and structure and product design and encouraging communication with customers, product marketing, information and support.

Maxwell and van der Vorst wrote about their efforts to develop a method that would provide a framework for implementing sustainable product and/or service development (“SPSD”) throughout the entire lifecycle of a product and/or service.  They noted that the product and/or service lifecycle starts at conception, where there is only a concept and design of a potential product or service, and then continues with raw materials, production processes, distribution, consumption and “end of life” as well as potential “recovery” and “reuse” options (e.g., production processes, consumption and/or “end of life” back to raw materials).  They defined and described SPSD as follows:

“SPSD is defined here as the process of making products and/or services in a more sustainable way throughout their entire lifecycle, from conception to end of life. The products and/or services are developed to be more sustainable in a Triple Bottom Line (TBL) context, i.e. balancing economic, environmental and social aspects. This is interpreted as achieving an optimum balance between environmental protection, social equity and economic prosperity, while still meeting traditional product requirements, e.g. quality, market, technical and cost issues, etc. The goal of SPSD is to produce products and/or to provide services, which are sustainable and achieve their required functionality, meet customer requirements and are cost effective. In other words, SPSD is about producing superior products and/or services that fulfil traditional criteria as well as sustainability requirements.”

Maxwell and van der Vorst pointed out that SPSD represented an evolutionary step in approaches to sustainable product development in that it went beyond the traditional emphasis on reducing the environmental impacts of products to incorporate services as well as products and all of the TBL elements.  Another important aspect of SPSD was the incorporation of the “Product Service Systems”, or “PSS”, concept, which is described in more detail below and involved “shifting the focus of the design away from producing products to providing a function and determining whether the function can be provided by a service, a product or some combination of a PSS”.  PSS provide companies with opportunities to reduce the volume of products that they manufacture, which also has environmental benefits, and increase profits through the introduction of services offerings.  For example, when Xerox transitioned from manufacturing photocopiers to being the “Document Company”, it began offering “functions” through a PSS approach (i.e., offering a product which incorporated service elements such as product leasing, upgrade and maintenance to provide the required functionality more effectively).

Maxwell and van der Vorst explained that “SPSD is about assessing the lifecycle of a function to be provided (from conception to end of life) and determining the optimum sustainable (environmental, social and economic) way of providing that function (through a product, service or PSS) in line with traditional product and/or service criteria”.  The first step of the SPSD process occurs at the “concept stage” when a determination is made about the best way to meet the functional requirements.  At this point, the relevant question is whether functionality can be provided through a product, a service or some combination of a PSS and then optimizing the sustainability impacts of these options with traditional criteria.  Once a decision has been made about whether a product, service or PSS is to be developed, the relevant life cycle stages (e.g., raw materials, production process, distribution, consumption and “end of life”) and the associated supply chain should be identified.  Maxwell and van der Vorst pointed out that a key element of SPSD was its focus on the supply chain for the product and/or service rather than solely at an individual company level, and an assessment must be made of the entire supply chain to determine which companies are the optimum targets for SPSD implementation and how supply chain management (“SPM”) can be effectively utilized.  Particular emphasis should be placed on those supply chain companies that have control over the main life cycle phases with key sustainability issues.  The next step is an assessment of the environmental and then social impacts for each product or PSS life cycle stage to identify opportunities for elimination or minimization of these impacts which can be optimized with the remaining traditional product and service criteria.

Based on their research relating to sustainable product development, Maxwell and van der Vorst identified the following key framework features for ensuring effective SPSD implementation in industry:

  • Use of a strategy level approach, which should be integrated into existing corporate business, sustainability/environmental systems and product development systems.
  • Use of a simple, flexible, non-resource intensive approach designed to mesh with the business reality.
  • Integration and optimization of TBL criteria with traditional product and service specifications over the entire product life cycle.
  • Determination of the requirement for a product based on the functionality and consideration of the options for PSS.
  • Use of Supply Chain Dynamics (“SCD”) to determine the most effective target supply chain company(ies) for SPSD implementation and for effective SCM up and down the supply chain.

Maxwell and van der Vorst developed a checklist to guide consideration of “triple bottom line” issues during the development of a sustainable product and/or service (“SPSD”).  The questions on the checklist were organized by reference to the specific SPSD criteria (i.e., functionality, environmental impact, social impact and economic aspects) and the stage in the product life cycle (i.e., raw materials, conception, production, distribution, consumption and end of life) where an issue was typically most relevant.

SPSD criteria: Optimize functionality

Conception stage

  • What is the functionality?
  • How can this be achieved?
  • Do you need a product?
  • Could this be achieved by a service?
  • Options for PSS?

SPSD criteria: Optimize environmental impact

Raw materials stage

  • Reduce the volume of materials used (dematerialization)
  • Nature of raw materials
  • Eliminate or reduce non-renewables usage
  • Substitution of none/less hazardous raw materials
  • Facilitate recovery, reuse, recycling
  • Extraction and processing of raw materials
  • Transport from supplier

Production stage

  • Optimize production technology
  • Eliminate/reduce emissions to air
  • Eliminate/reduce effluents
  • Eliminate/reduce waste
  • Eliminate/reduce energy usage

Distribution stage

  • Is transport necessary?
  • Volume and nature of transport
  • Type of fuel usage
  • Eliminate/reduce emissions to air
  • Eliminate/reduce waste

Consumption stage

  • Eliminate/reduce waste from product
  • Eliminate/reduce waste from packaging
  • Eliminate/reduce energy consumption

End of life stage

  • Extend product life
  • Design for repair
  • Modular design for maximizing upgradability
  • Facilitate recovery of components for reuse
  • Facilitate recovery of components for recycling and treatment/disposal

SPSD criteria: Optimize social impacts

Raw materials stage

  • Are the raw materials extracted and/or processed in the developing world?
  • Ownership rights
  • Are the trading arrangements equitable?

Production and distribution stages

  • Employee conditions of work at company
  • Employee conditions of work in subcontract companies
  • Impact on local community
  • Investment in local community

Consumption stage

  • Adverse health/safety impacts for the local community
  • Adverse health/safety impacts for the global community

End of life stage

  • Adverse health/safety impacts for the local community
  • Adverse health/safety impacts for the global community

SPSD criteria: Optimize economic aspects

All stages

  • Is the product and/or service cost effective?
  • Does the product and/or service cost the same/less than competing versions?
  • Are environmental externality costs (e.g. end of life recovery, reuse/treatment/disposal) taken into account?

Key sources for this article included D. Maxwell and R. van der Vorst, “Developing Sustainable Products and Services”, Journal of Cleaner Production, 11 (2003), 883; and Designing Products and Services with Sustainable Attributes: An Internal Assessment Tool for Product Developers (Grand Rapids, MI: The Design Work Group West Michigan Sustainable Business Forum, 1999).

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.