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In visiting with a green manufacturer recently, he hopefully asked, "How much more will people pay for green products?"
My answer, "Not much. They pay for additional VALUE, not GREEN."
This is the same challenge conscientious, conservation business people are facing: how do we translate the green benefits into VALUE propositions that people can get instant gratification from?
Some are taking the tact of "glamor". Others, prestige and innovator status with bragging rights among the in-crowd. Others are selling the concept of savings from energy use.
Others are waiting.
Waiting for what? For compliance to kick in. For carbon trading to kick in. For carbon tariffs. For carbon taxes. For prices of oil to rise.
Watching and planning and waiting is what constitutes a "chasm".
This marketing term was coined by Geoffrey Moore who wrote the book "Crossing the Chasm" in 1999 to illustrate how high technology's early bell-curve product life cycle was broken with hesitancy at a predictable point.
2007-2008 is that "Chasm" for many green business-to-business applications.
The Chasm |
The early adopters have been corporations who have bought "test" units and they are testing them. They are communities who have instant savings from long term energy glut applications such as street lights or potential litigation from health impacts such as schoolbuses.
They bought. They're testing and sharing the results with the rest of us. We're waiting for the rules of the game to become clear before we buy more.
But some things are different between the green revolution and the technology revolution in the desktop computer era. We ARE living in challenging times.
Early Market |
Consumers Are Ahead of Business
Recent research showed that consumers are ahead of business in adapting green solutions. They are recycling. Changing light bulbs. Buying organic. Walking and biking. Buying hybrid vehicles. Buying Energy Star applicances.Businesses aren't putting systems into place for purchasing greener products. They aren't collecting used paper. They aren't replacing paper plates with permanent servicewater. They aren't buying hybrid cars. They aren't retrofitting HVAC systems.
Businesses are waiting for legislation that will affect their tax credits and their compliance behaviors.
Businesses are going to seminars and searching for case studies and testing demo equipment. And waiting.
That's the chasm.
The questions that must be answered is "Then what happens...?"
After the Chasm
Employees are learning about green solutions at home. They are replacing faucets, recyling their trash, measuring their electrical usage, locating biofuel fueling stations.These innovators will be the leaders in the workplace when it breaks loose...and then, Katie bar the door!
They will be ready. Will you be ready?
The Bowling Alley
The Bowling Alley |
The specific solutions in the green market include hybrid vehicles, PV solar energy and organic food, among others. Very specific solutions that are well defined with immediate results that can be demonstrated.
Other green and sustainable solutions, such as water conservation, zero waste, and green retrofits for buildings are harder, provide longer term or less obvious results -- and they will thrive in later stages of the technology life cycle.
Knowing which of your products can be attached to SPECIFIC market applications can help you tailor your marketing and your message to these "bowling alley" buyers.
The Tornado
The Tornado |
Green building and development (NEW buildings) is a good example of one segment of the green space that has reached The Tornado stage.
Supported by the USGBC and other green certification and training programs, new green building technology has
- An infrastructure with deployable methods
- Is supported by architects and builders who provide third party endorsement and services
- Is supported by governments who mandate and will buy into the marketplace
New green building has crossed the chasm, has been applied to specific applications such as schools and colleges and state office buildings... and is now an accepted part of the architectural field with training, employment opportunities and materials suppliers all lined up for the ride back up to the bell curve apex.
Cities are strengthening the mandates across the entire development sector that all new buildings must meet tighter building codes that meet green building and sustainable community goals.
Translating "Computer Tech" into "Green Tech"
Times have changed. The challenge is different. Compliance issues are different. And the economic mix has changed. But the chasm concept is partly an observation about how people and how groups work when faced with new technology and CHANGE. And that doesn't change a lot over a few short years.We will be bringing you more information about how green marketing fits this product lifecycle timeline in future articles and learning platforms.
Resources
The Chasm Companion by Paul Wiefels with a Foreward by Geoffrey A. Moore provides implementation guidance to "Crossing the Chasm" and "Inside the Tornado".
Entrepreneurs constantly seek capital for new and
existing ventures although they face considerable
constraints in obtaining financing. Venture
capital from outside investors has been considered
an important driver in the startup and growth of
entrepreneurial firms. Understanding the specific
investment criteria for venture capital funding is
of foremost importance, since this may substantially
improve these firms’ chances of acquiring
funding.
Venture capitalists (VCs) may be willing to fund
a
marginal team with better venture potential
than a good venture team with
limited venture potential.
In other words, entrepreneurs need not only to assemble an effective team, but also to clearly demonstrate the venture potential of their proposed business. This finding contrasts with most prior studies, which identify the venture team as the key funding criterion.
The Small Business Research Summary Findings include:
- The findings suggest that while a venture team’s
composition and ability are a minimum requirement
in the consideration of a venture capital investment
and a major factor in explaining why a business plan
gets rejected, these features are not significant in
explaining why a business plan gets funded.
- The study implies that venture potential is a better
indicator of business plan funding than venture
team quality and that VCs have similar knowledge
structures and preferences when it comes to funding
and not funding actual business plans.
- The researchers analyzed the relationship between rates of return and factors such as venture team quality and venture potential. The analysis finds that a good venture team has decreasing returns even for funded ventures, but favorable competitive conditions and market potential of a business plan have increasing returns
Venture Capital Investment Decision Making
Download a full copy of this report is available at: US SBAThe research summary can be found at: US SBA
ROI - Return on Investment
ROI is a powerful motivator -- "Return on Investment" is an accepted demonstration of value, but we don't think about how we invest for a return on emotions, or a setting, or a vacation. We do invest for "well being". And buying solutions to meet these basic human needs is a key driver for consumer purchasing.
In reading a recent article about merchandising for the outdoor living trend by P. Allen Smith ("Mecrchandising the Outdoor Living Trend", Lawn & Garden Retailer), the basics of "In Lieu Of" marketing struck me as a very powerful way to help customers realize value.
ILO - In Lieu Of Investing
For HALF the money a consumer (and family) would spend on gas, plane tickets, food and accommodations, they can create a "vacation feeling" in their own backyard by creating a setting that is "in lieu of" a traveling vacation.
Do you want THIS or THAT? Which will bring you more value...for a longer period of time, with more intensity, with greater pleasure?
RoS - Return on Setting
With the new majority of the world now being urban dwellers, "setting" has become more important than "gardening" (task oriented). Outdoor living is one example of a new marketing opportunity: creation of settings. Whether we are creating an outdoor spa with a hot tub and water falls, or an executive office that maximizes productivity and prestige -- "setting" is the demonstration of a specific value.
Hence, Return On Setting. Ambiance. Symbols. The creativity and craft of creating a symbol that creates a mood that results in specific outcomes that provide emotional returns.
RoD - Return on Demonstration
I believe that everyone is "creative". We can all imagine solutions to problems. We all have flights of fancy. What we don't all have is the ability to convert those ideas into demonstrable projects. The merging of creativity with craft. That's the power of "Return on Demonstration".
If your retail store can create an "outdoor room" that demonstrates a recipe that results in the desired feelings and situations of pleasure -- i.e., visiting with family and friends -- you have a powerful marketing tool. Demonstration is the bridge between creativity and craft -- and the opportunity for retailers to help their customers succeed at achieving their hearts' desires in a tangible way. That's merchandising! That's demonstration.
RoE - Return on Emotions
The best way to motivate people is to show them inspiring examples in which they can imagine themselves relaxing, enjoying, connecting, revitalizing themselves, succeeding, enjoying respect, enjoying health and vigor. All those outcomes are heavy on "emotional returns" or pleasure, the most motivating of human emotions.
Add to those positive emotions the reduction of: stress, cost, fear, exhaustion, health concerns, etc...and you cover the other half of the human psyche -- fear.
Together, when you offer both POSITIVE and NEGATIVE tools, you demonstrate how you deliver a solution with extra benefits. Most solutions only demonstrate one side of the emotional equation. But a good marketing proposition provides both sides -- what is wanted, and what is avoided.
RoG -- Return on Green
Green is a confusing concept to most people -- even people involved in green companies. And that's because we are in a high-innovation phase. New technologies are being developed daily. Green affects EVERYTHING -- and who can grasp everything?! There's water conservation. And air quality. And green building. And organic food. And recycling trash. And buying recycled paper. And...
Return on Green is about demonstrating a "setting" in which the "emotions" are rewarded with a better, simpler claim to wellness. Good friends. Family time. Good health. Pleasant visual surroundings. And how YOUR green strategies can deliver those things. Give them a template, a plan, a list of materials...a recipe for greening their current goal.
RoS - Return on Solution
The marketer's challenge is to craft a creative solution for each customer (or customer group). How to partner with supporting companies to create a complete setting, a DEMONSTRATION that appeals to the customer. An alternative, an In Lieu Of proposition that costs half as much, delivers twice as much -- or is measurable in some appealing way. What you deliver isn't just cost related -- it is also EMOTION related.
... you get the picture. Create pictures. Demonstrate "returns." Focus on the RETURNS that people work for. The returns they shop for. Hunt for. Work for. When you infuse green solutions into these demonstrable, real life settings, you are fulfilling very human desires with green marketing and green results!
ROI is a powerful motivator -- "Return on Investment" is an accepted demonstration of value, but we don't think about how we invest for a return on emotions, or a setting, or a vacation. We do invest for "well being". And buying solutions to meet these basic human needs is a key driver for consumer purchasing.
In reading a recent article about merchandising for the outdoor living trend by P. Allen Smith ("Mecrchandising the Outdoor Living Trend", Lawn & Garden Retailer), the basics of "In Lieu Of" marketing struck me as a very powerful way to help customers realize value.
"While it might seem that the most sensible thing to do is just hold steady and not change anything, experience has taught me that when customers feel they need to do some belt tightening, they often scale back on items such as travel and vacations but still look for economical ways to bring enjoyment and beauty into their lives....
"For half the money that they could spend on gas, lane tickets, food and accommodations -- all of which are temporary enjoyments -- homeowners can create outdoor settings with all the style and comfort of indoor living and gt that 'vacation feeling' for months, not just two weeks. But to help them see the advantage of what you have to offer, they need some encouragement."
ILO - In Lieu Of Investing
For HALF the money a consumer (and family) would spend on gas, plane tickets, food and accommodations, they can create a "vacation feeling" in their own backyard by creating a setting that is "in lieu of" a traveling vacation.
Do you want THIS or THAT? Which will bring you more value...for a longer period of time, with more intensity, with greater pleasure?
RoS - Return on Setting
With the new majority of the world now being urban dwellers, "setting" has become more important than "gardening" (task oriented). Outdoor living is one example of a new marketing opportunity: creation of settings. Whether we are creating an outdoor spa with a hot tub and water falls, or an executive office that maximizes productivity and prestige -- "setting" is the demonstration of a specific value.
Hence, Return On Setting. Ambiance. Symbols. The creativity and craft of creating a symbol that creates a mood that results in specific outcomes that provide emotional returns.
RoD - Return on Demonstration
I believe that everyone is "creative". We can all imagine solutions to problems. We all have flights of fancy. What we don't all have is the ability to convert those ideas into demonstrable projects. The merging of creativity with craft. That's the power of "Return on Demonstration".
If your retail store can create an "outdoor room" that demonstrates a recipe that results in the desired feelings and situations of pleasure -- i.e., visiting with family and friends -- you have a powerful marketing tool. Demonstration is the bridge between creativity and craft -- and the opportunity for retailers to help their customers succeed at achieving their hearts' desires in a tangible way. That's merchandising! That's demonstration.
RoE - Return on Emotions
The best way to motivate people is to show them inspiring examples in which they can imagine themselves relaxing, enjoying, connecting, revitalizing themselves, succeeding, enjoying respect, enjoying health and vigor. All those outcomes are heavy on "emotional returns" or pleasure, the most motivating of human emotions.
Add to those positive emotions the reduction of: stress, cost, fear, exhaustion, health concerns, etc...and you cover the other half of the human psyche -- fear.
Together, when you offer both POSITIVE and NEGATIVE tools, you demonstrate how you deliver a solution with extra benefits. Most solutions only demonstrate one side of the emotional equation. But a good marketing proposition provides both sides -- what is wanted, and what is avoided.
RoG -- Return on Green
Green is a confusing concept to most people -- even people involved in green companies. And that's because we are in a high-innovation phase. New technologies are being developed daily. Green affects EVERYTHING -- and who can grasp everything?! There's water conservation. And air quality. And green building. And organic food. And recycling trash. And buying recycled paper. And...
Return on Green is about demonstrating a "setting" in which the "emotions" are rewarded with a better, simpler claim to wellness. Good friends. Family time. Good health. Pleasant visual surroundings. And how YOUR green strategies can deliver those things. Give them a template, a plan, a list of materials...a recipe for greening their current goal.
RoS - Return on Solution
The marketer's challenge is to craft a creative solution for each customer (or customer group). How to partner with supporting companies to create a complete setting, a DEMONSTRATION that appeals to the customer. An alternative, an In Lieu Of proposition that costs half as much, delivers twice as much -- or is measurable in some appealing way. What you deliver isn't just cost related -- it is also EMOTION related.
- Simple pleasures. "Enjoy a nap that gives you hours of additional energy"
- Higher energy. "Increase your stamina measurably"
- Better complexion. "Clear the zits in 2 days and go to that party embarrassment-free"
- Lower energy costs. "Decrease your lighting costs by 75%"
- Open spaces. "Remove half the clutter"
- Less travel. "Enjoy more weekend time with your family"
- More rewarding work...that makes a difference. "Deliver practical results that your customers can want"
- Happier children. "Take the stress out of homework and improve concentration by 50%"
... you get the picture. Create pictures. Demonstrate "returns." Focus on the RETURNS that people work for. The returns they shop for. Hunt for. Work for. When you infuse green solutions into these demonstrable, real life settings, you are fulfilling very human desires with green marketing and green results!
A
group of businesses and organizations have gathered together to encourage the federal
government to enact legislation for significant reduction in greenhouse
gases. that have come together to call on the federal government to quickly
enact strong national legislation to require significant reductions of
greenhouse gas emissions.
USCAP has issued a landmark set of principles and recommendations to underscore the urgent need for a policy framework on climate change.
is the result of a year-long collaboration. It lays out a blueprint for a mandatory economy-wide, market-driven approach to climate protection.
We Know Enough to Act on Climate Change
The Environmental Goal
U.S. legislation should be designed to achieve the goal of limiting global atmospheric GHG concentrations to a level that minimizes large-scale adverse climate change impacts to human populations and the natural environment, which will require global GHG concentrations to be stabilized over the long-term at a carbon dioxide equivalent level between 450–550 parts per million.
They propose that the environmental goal and economic objectives can best be accomplished through an economy-wide, market-driven approach that includes a cap and trade program that places specified limits on GHG emissions. This approach is proposed to ensure emission reduction targets will be met while simultaneously generating a price signal resulting in market incentives that stimulate investment and innovation in the technologies that will be necessary to achieve the stated environmental goal. The U.S. climate protection program should create a domestic market that will establish a uniform price for GHG emissions for all sectors and should promote the creation of a global market.
US Climate Action Partnership (USCAP)
For more information about USCAP, please contact The Meridian Institute
1920 L Street, NW, Suite 500
Washington, DC 20036
Phone: 202.354.6440
Lighthouse Consulting Group, LLC
1150 Connecticut Ave., NW, Suite 717
Washington, DC 20036
Phone: 202-822-2000
www.us-cap.org/
"In our view, the climate
change challenge will
create more economic opportunities than risks for the U.S. economy."
create more economic opportunities than risks for the U.S. economy."
USCAP has issued a landmark set of principles and recommendations to underscore the urgent need for a policy framework on climate change.
USCAP's Six Principles
- Account for the global dimensions of climate change;
- Create incentives for technology innovation;
- Be environmentally effective;
- Create economic opportunity and advantage;
- Be fair to sectors disproportionately impacted; and
- Reward early action.
is the result of a year-long collaboration. It lays out a blueprint for a mandatory economy-wide, market-driven approach to climate protection.
We Know Enough to Act on Climate Change
The USCAP ... believes a U.S. policy framework must include the following:In June 2005, the U.S. National Academy of Sciences joined with the scientific academies of ten other countries in stating that “the scientific understanding of climate change is now sufficiently
clear to justify nations taking prompt actions.”
Each year we delay action to control emissions increases the risk of unavoidable consequences that could necessitate even steeper reductions in the future, at potentially greater economic cost and social disruption. Action sooner rather than later preserves valuable response options, narrows the uncertainties associated with changes to the climate, and should lower the costs of mitigation and adaptation.
For these reasons, we, the members of the U.S. Climate Action Partnership (USCAP) have joined together to recommend the prompt enactment of national legislation in the United States to slow, stop and reverse the growth of greenhouse gas (GHG) emissions over the shortest period of time reasonably
achievable.
- Mandatory approaches to reduce greenhouse gas emissions from the major emitting sectors including emissions from large stationary sources, transportation, and energy use in commercial and residential buildings that could be phased in over time, with attention to near-, mid-and long-term time horizons;
- Flexible approaches to establish a price signal for carbon that may vary by economic sector and could include, depending on the sector: market-based incentives; performance standards; cap-and-trade; tax reform; incentives for technology research, development, and deployment; or other appropriate policy tools; and
- Approaches that create incentives and encourage actions by other countries, including large emitting economies in the developing world, to implement GHG emission reduction strategies.
The Environmental Goal
U.S. legislation should be designed to achieve the goal of limiting global atmospheric GHG concentrations to a level that minimizes large-scale adverse climate change impacts to human populations and the natural environment, which will require global GHG concentrations to be stabilized over the long-term at a carbon dioxide equivalent level between 450–550 parts per million.
They propose that the environmental goal and economic objectives can best be accomplished through an economy-wide, market-driven approach that includes a cap and trade program that places specified limits on GHG emissions. This approach is proposed to ensure emission reduction targets will be met while simultaneously generating a price signal resulting in market incentives that stimulate investment and innovation in the technologies that will be necessary to achieve the stated environmental goal. The U.S. climate protection program should create a domestic market that will establish a uniform price for GHG emissions for all sectors and should promote the creation of a global market.
US Climate Action Partnership (USCAP)
For more information about USCAP, please contact The Meridian Institute
1920 L Street, NW, Suite 500
Washington, DC 20036
Phone: 202.354.6440
Lighthouse Consulting Group, LLC
1150 Connecticut Ave., NW, Suite 717
Washington, DC 20036
Phone: 202-822-2000
www.us-cap.org/
The chief executive of General Electric has emerged as one of the most outspoken advocates of government caps on carbon emissions. But it’s not that visions of saving the planet are filling his “Ecomagination,” nor has he given up on Hayek. In transforming one of the world’s biggest companies into a clean-tech juggernaut, he just smells the chance to make a lot of money—if the U.S. doesn’t miss the train altogether.
“It’s no great thrill for me to do this stuff. I’m not an environmentalist. But if business has no voice, that’s the worst of all worlds,” Jeff Immelt said tonight keynoting The Wall Street Journal’s “ECO:nomics” conference in California.
“We live today in a certain kind of hell, where nothing happens,” he said. Lack of planning for new nuclear plants has paralyzed the industry; lack of progress on renewable-energy tax credits has clean-energy developers treading water. Worries over how carbon will be priced has the traditional coal-powered utility industry trembling. All are GE strongholds.Clean technology is a huge business for GE already, and only stands to grow, if not in the U.S. then overseas. Renewable energy isn’t just a subsidy baby, subject to the whims of Congress. It’s a multi-billion dollar business for GE around the world. “If the U.S. doesn’t buy my wind turbines, I’ll go to Turkey,” he said.
SOURCE: WSJ.COM
Communicating issues that apply to the Board of Directors of either a public or private company can be daunting for environmentalists. Scientists, communications pros and even marketers focus most of their efforts on end applications and end users. Yes, we know there's compliance and stock prices, but what do the members of the company's governance board need to know about going green and corporate social responsibility.
I spoke with a turn around board member about governance and green. Here are the questions he said matter to board members:
Why is green a governance issue?
Those questions make good sense. Board members focus on the performance evaluation of the president and chairman of the board. How their operations are working. They take note of issues the CEO is missing and bring these new concerns to his attention as team players. They look for risks and weigh them.
As large corporations such as General Electric, Wal-Mart and Interface go green and are methodically re-engineering their product lines and processes to conserve natural resources, we have to look at what moved these governing boards to approve of a green strategy.
Jeffrey Immelt, CEO and Chairman of GE stated in a 2007 news conference that he's not an environmentalist, he looked at the practical side of conservation of resources and the business opportunities they presented to his company and decided that green is the way of the business future.
GE has since then divested itself of its chemical and plastic divisions. They have enhanced their renewable energy and water processing divisions. They are moving in the direction of renewable products and services rather than consumptive products that depend on oil. That's risk avoidance. And looking at ways to serve the world population's need for the basics of life: water, energy, food and sanitation.
Governance Issues In Social Responsibility
Social responsibility affects meeting compliance and reporting requirements at the local, state, national and international levels.
Risk management affects insurance rates, losses due to changing weather patterns, increased cost of raw materials that are tightening as the easy pickings are plundered and essential materials are harder to harvest.
Performance of the President and CEO and their C-suite team depends on attracting quality talent -- and thinking, educated leaders are getting more concerned about the impact their employers are making on their families' well being.
The cost of doing business rises with the cost of raw materials and keeping pace with new technology.
Toxic materials affect the lifetime accounting costs that are being increasingly monitored by regional governments who must clean up brownfields and landfills long after the corporate players have left the playing field. And dumping toxic waste on unsuspecting countries around the world is coming under closer scrutiny. Waste management costs are rising -- and can be a source of business revenue if handled in a socially responsible, green, and reclamation way.
Marketing as Social Responsibility
Marketing is not just about getting new customers. Marketing is also about keeping customers because the cost of marketing decreases rapidly with repeat sales. Good marketing with social responsibility is good business. Building mutually respectful relationships along the supply chain, across stakeholders, and in the communities of residence and commerce are socially responsible ways to support a board's fiduciary responsibility.
Caring is better than abuse. It's that simple because someone has to pay the price for abusive policies and governments are increasingly able to track responsibility, regulate it, and put the costs back on the source of the costly problems.
Transparency is partly a governance task, and partly a marketing task. Marketing communications affects customers, investors, potential investors, potential employees, leadership teams, and regulators who live in the communities affected by a company's "dirty laundry"... or respectful citizenship.
I spoke with a turn around board member about governance and green. Here are the questions he said matter to board members:
Why is green a governance issue?
What are the benefits to my company by going green?
Is there a return on investment?
What makes social responsibility a governance issue?
How do I start?
What is the leading edge of green technology and practice?
What are other organizations doing?
Why is green a governance issue?
Those questions make good sense. Board members focus on the performance evaluation of the president and chairman of the board. How their operations are working. They take note of issues the CEO is missing and bring these new concerns to his attention as team players. They look for risks and weigh them.
As large corporations such as General Electric, Wal-Mart and Interface go green and are methodically re-engineering their product lines and processes to conserve natural resources, we have to look at what moved these governing boards to approve of a green strategy.
Jeffrey Immelt, CEO and Chairman of GE stated in a 2007 news conference that he's not an environmentalist, he looked at the practical side of conservation of resources and the business opportunities they presented to his company and decided that green is the way of the business future.
GE has since then divested itself of its chemical and plastic divisions. They have enhanced their renewable energy and water processing divisions. They are moving in the direction of renewable products and services rather than consumptive products that depend on oil. That's risk avoidance. And looking at ways to serve the world population's need for the basics of life: water, energy, food and sanitation.
Governance Issues In Social Responsibility
Social responsibility affects meeting compliance and reporting requirements at the local, state, national and international levels.
Risk management affects insurance rates, losses due to changing weather patterns, increased cost of raw materials that are tightening as the easy pickings are plundered and essential materials are harder to harvest.
Performance of the President and CEO and their C-suite team depends on attracting quality talent -- and thinking, educated leaders are getting more concerned about the impact their employers are making on their families' well being.
The cost of doing business rises with the cost of raw materials and keeping pace with new technology.
Toxic materials affect the lifetime accounting costs that are being increasingly monitored by regional governments who must clean up brownfields and landfills long after the corporate players have left the playing field. And dumping toxic waste on unsuspecting countries around the world is coming under closer scrutiny. Waste management costs are rising -- and can be a source of business revenue if handled in a socially responsible, green, and reclamation way.
Marketing as Social Responsibility
Marketing is not just about getting new customers. Marketing is also about keeping customers because the cost of marketing decreases rapidly with repeat sales. Good marketing with social responsibility is good business. Building mutually respectful relationships along the supply chain, across stakeholders, and in the communities of residence and commerce are socially responsible ways to support a board's fiduciary responsibility.
Caring is better than abuse. It's that simple because someone has to pay the price for abusive policies and governments are increasingly able to track responsibility, regulate it, and put the costs back on the source of the costly problems.
Transparency is partly a governance task, and partly a marketing task. Marketing communications affects customers, investors, potential investors, potential employees, leadership teams, and regulators who live in the communities affected by a company's "dirty laundry"... or respectful citizenship.
Does international pressure really affect the survival of domestic manufacturers?
Does it have the same effect regardless of size?
A new study released by the Office of Advocacy, The Impact of International Competition on Small-Firm Exit in U.S. Manufacturing, provides answers. The study finds that changes in exchange rates affect the smallest of
manufacturers, those with fewer than 20 employees, but have limited a impact on larger manufacturers. Manufacturing firms in high-tech industries felt less impact from international pressures than low-tech industries did.
Increased international pressures in the form of currency exchange rates lead to increased exit rates among very small manufacturers (those with fewer than 20 employees).
Slightly bigger manufacturers (20-499 employees) are less sensitive to changing conditions in the international marketplace.
Hightech industries are more insulated from international pressures than low-tech industries are.
Highlights
At the national level, exit rates among overall small manufacturers showed little fluctuation between 1990 and 2004. They had large variations across firm sizes and industries, however.
Exit rates of firms with fewer than 10 employees hovered around 14 percent from 1990 to 2004, around 7
percent for firms with 10-19 employees, and around 5 percent for firms with 20-99 employees and 100-499 employees.
Apparel firms with fewer than 10 employees had the highest exit rate, at 22.3 percent;
The exit rate was lowest for firms in the beverage/ tobacco industry with 100-499 employees, at 2.9 percent.
The determinants of exit generally differed by firm size category between 1990 and 2004, but there were some consistent factors. Mirroring conventional wisdom, growth in the overall economy reduced exit, while increases in labor costs increased firm exits.
Consumer goods industries had higher rates of exit among small manufacturers.
In low-tech industries where import penetration is significant, a strong dollar leads to an increased likelihood of exit for small manufacturing firms with fewer than 20 employees.
For the smallest size class of manufacturers studied (firms with 1-9 employees), the impact of exchange rate effects were greater in the 1990s than in the 2000s.
Changes in an industry’s import share were not statistically significant for firms with 20-499 employees; it was negative but not consistently statistically significant for firms with 1-19 employees across the two time periods of analysis, the 1990s and 2000s.
With the results showing some differences between the decades of the 1990s and 2000s, effects of international competition seem to be changing over time.
A full copy of this report is available at: http://www.sba.gov/advo/research/rs320tot.pdf,
The research summary can be found at: http://www.sba.gov/advo/research/rs320.pdf.
The full text of this report and summaries of other
studies performed under contract with the U.S. Small
Business Administration’s Office of Advocacy are
available on the Internet at www.sba.gov/advo/research.
Copies are available for purchase from:
National Technical Information Service
5285 Port Royal Road
Springfield, VA 22161
(800) 553-6847 or (703) 605-6000
TDD: (703) 487-4639
www.ntis.gov
Order number: PB2008-106600.
Paper A03 ($26.50)
Microfiche A01 ($14.00)
CD-ROM A00 ($20.00)
Download A00 ($15.95)
Does it have the same effect regardless of size?
A new study released by the Office of Advocacy, The Impact of International Competition on Small-Firm Exit in U.S. Manufacturing, provides answers. The study finds that changes in exchange rates affect the smallest of
manufacturers, those with fewer than 20 employees, but have limited a impact on larger manufacturers. Manufacturing firms in high-tech industries felt less impact from international pressures than low-tech industries did.
Increased international pressures in the form of currency exchange rates lead to increased exit rates among very small manufacturers (those with fewer than 20 employees).
Slightly bigger manufacturers (20-499 employees) are less sensitive to changing conditions in the international marketplace.
Hightech industries are more insulated from international pressures than low-tech industries are.
Highlights
At the national level, exit rates among overall small manufacturers showed little fluctuation between 1990 and 2004. They had large variations across firm sizes and industries, however.
Exit rates of firms with fewer than 10 employees hovered around 14 percent from 1990 to 2004, around 7
percent for firms with 10-19 employees, and around 5 percent for firms with 20-99 employees and 100-499 employees.
Apparel firms with fewer than 10 employees had the highest exit rate, at 22.3 percent;
The exit rate was lowest for firms in the beverage/ tobacco industry with 100-499 employees, at 2.9 percent.
The determinants of exit generally differed by firm size category between 1990 and 2004, but there were some consistent factors. Mirroring conventional wisdom, growth in the overall economy reduced exit, while increases in labor costs increased firm exits.
Consumer goods industries had higher rates of exit among small manufacturers.
In low-tech industries where import penetration is significant, a strong dollar leads to an increased likelihood of exit for small manufacturing firms with fewer than 20 employees.
For the smallest size class of manufacturers studied (firms with 1-9 employees), the impact of exchange rate effects were greater in the 1990s than in the 2000s.
Changes in an industry’s import share were not statistically significant for firms with 20-499 employees; it was negative but not consistently statistically significant for firms with 1-19 employees across the two time periods of analysis, the 1990s and 2000s.
With the results showing some differences between the decades of the 1990s and 2000s, effects of international competition seem to be changing over time.
A full copy of this report is available at: http://www.sba.gov/advo/research/rs320tot.pdf,
The research summary can be found at: http://www.sba.gov/advo/research/rs320.pdf.
The full text of this report and summaries of other
studies performed under contract with the U.S. Small
Business Administration’s Office of Advocacy are
available on the Internet at www.sba.gov/advo/research.
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News reporters have long been counseled to "Follow the Money" if they want to find the story.
For example:
It's easy to get jaded in today's economic world of fudging numbers, hiding sources and strategically communicating a slanted view of reality for business benefits. The players pursue the money -- and those who seek understanding should follow that money trail.
The same advice could be given to green marketers -- "follow the money". Who finances the research? Who will benefit from widespread implementation of a technology? What are the community ramifications? What are they protecting?
Transparency is the new mantra of social responsibility. Following the money is about transparency beyond the stats of how much greenhouse gas has been cut or virtual cars taken off the road. Following the money is about the long term and widespread impact of a company's core business practices and strategy.
Where are R&D funds being spent? In prevention or cure? If it's cure, is there a balance with prevention to phase out the problem in the foreseeable future, or is the strategy one of lingering maintenance.
Before you partner with a company -- follow THEIR money flow. Who is investing in their company? What is their revenue model? What is the metric for their success?
Numbers matter only when they are truthfully verified and vetted by independent sources. All other numbers are red flags to be investigated! And... who knows the difference?!
Vetting The Numbers
Resources that reporters rely on (but independently verify) when researching a story include:
Resources they use as indicators that need verification include:
For example:
Liggett Group Paid For Lung Cancer Study
The New York Times
A 2006 study that jolted the cancer world by claiming that 80% of lung cancer deaths could be prevented through widespread use of CT scans was underwritten almost entirely by $3.6 million in grants from the Vector Group, parent company of the Liggett Group, maker of Liggett Select, Eve, Grand Prix and Quest cigarettes.
"If you're using blood money, you need to tell people you're using blood money," says Dr. Otis Brawley, chief medical officer of the American Cancer Society. Dr. Jeffrey M. Drazen, editor in chief of the medical journal, says he was surprised by the revelations. An increasing number of universities do not accept grants from cigarette makers, and nearly all medical journals and associations demand that researchers accurately disclose financing sources. - Read the whole story...
It's easy to get jaded in today's economic world of fudging numbers, hiding sources and strategically communicating a slanted view of reality for business benefits. The players pursue the money -- and those who seek understanding should follow that money trail.
The same advice could be given to green marketers -- "follow the money". Who finances the research? Who will benefit from widespread implementation of a technology? What are the community ramifications? What are they protecting?
Transparency is the new mantra of social responsibility. Following the money is about transparency beyond the stats of how much greenhouse gas has been cut or virtual cars taken off the road. Following the money is about the long term and widespread impact of a company's core business practices and strategy.
Where are R&D funds being spent? In prevention or cure? If it's cure, is there a balance with prevention to phase out the problem in the foreseeable future, or is the strategy one of lingering maintenance.
Before you partner with a company -- follow THEIR money flow. Who is investing in their company? What is their revenue model? What is the metric for their success?
Numbers matter only when they are truthfully verified and vetted by independent sources. All other numbers are red flags to be investigated! And... who knows the difference?!
Vetting The Numbers
Resources that reporters rely on (but independently verify) when researching a story include:
- Trade association figures
- Insurance claims
- Federal and state government reporting and compliance reports
- Nonprofit advocacy groups and watchdogs
- Corporate quarterly and annual reports
Resources they use as indicators that need verification include:
- Company news releases, brochures and websites
- Corporate annual reports
- Chamber of Commerce reports and presentations
- Consultants' reports that represent their clients
- News reports
- ...and their own writings of a couple years ago!
Southern California is one of the world's most intensely entrepreneurial
regions. Though Southern California has only 23 Fortune 500 companies
headquartered here, the heavily populated region is home to an
estimated 400,000 small and mid-sized businesses and one of the world's
most vibrant economies.
Starting your own company is difficult but the journey is worth it, say most Southern California entrepreneurs in a first-ever survey by the Lloyd Greif Center for Entrepreneurial Studies at the USC Marshall School of Business.
Starting your own company is difficult but the journey is worth it, say most Southern California entrepreneurs in a first-ever survey by the Lloyd Greif Center for Entrepreneurial Studies at the USC Marshall School of Business.
Among the survey highlights:
- Almost two-thirds of respondents (62 percent) said starting a business "has been difficult." But almost all the respondents (94 percent) agreed that their "entrepreneurial journey has been enjoyable."
- Though the average respondent had seven years of experience in an industry before starting their business in that field, nearly a third (32 percent) had no experience whatsoever.
- The two factors most likely to correlate with success and strong company growth were previous work experience in the same industry and successful previous startups.
- Almost half (49 percent) neither conducted a formal feasibility study nor wrote a business plan before starting their company.
- Friends and family were overwhelmingly the top source of both financial (80 percent) and non-financial support (73 percent) in the first two years of these companies.
- Few received financial support from the U.S. Small Business Administration (7 percent) or other government agencies (6 percent), despite numerous programs to encourage company creation. Angels and venture capitalists played an equally modest role in funding most startups in the first two years.
- Though almost two-thirds of the companies (64 percent) have fewer than 20 employees, most (71 percent) have created jobs over the past two years.
- Of the companies willing to divulge revenue figures (about half of those surveyed), five in six (86 percent) reported revenue growth over the past two years. More than a third (36 percent) saw their sales double.
The surveys also yielded several consistent lessons learned by the entrepreneurs during their journey. Perseverance and passion are vital to success, but so is the ability to work hard, plan, learn, take risks, and carefully manage cash flow. The importance of doing what you love, the survey suggests, can make all the difference.
For access to the survey results, please go to: www.marshall.usc/entrepreneur/survey
