The lean startup movement: Lessons from Coca-Cola and Burt's Bees
Over the past few years, we have witnessed how startups go lean to get a disruptive innovation out into the market and make it through the tough early stages. Adding a sustainable mindset to this process could give startups an enormous competitive advantage -- but has this potential been realized?
Transforming large corporations to more sustainable practices is at the top of the global to-do list with regards to reducing global emissions and toxic chemicals in supply chains. Focusing on the global top emitters is no doubt incredibly important. However, let us not forget that future global multinationals could be among today's many startups. New startups and midsize companies around the world hold the key to truly transforming the way we produce and consume in this world.
Again, my concern: Do they realize the potential?
Startups ride the lean wave
Let’s start by looking at a true epicenter for global entrepreneurship: Silicon Valley. With entrepreneurial bigwigs such as Steve Blank behind it, the lean startup movement advocates for peers to implement a lean process for business and product development.
The idea proposes that startups test products on potential customers and partners at a preliminary stage in product development. This allows crucial feedback from the market to be integrated early in the process. The feedback will create insights to where the market is and what the customers want, which then can make way for vital pivots during development.
The goal is to strengthen the development process, therefore becoming ready for market and investments sooner. These are strong points that can help many startups through the difficult initial stages and make them realize early on where their potential lies.
Big players take lean to new green level
Zooming in on matured companies, lean management started to get traction many years ago and has over the years taken on an interesting green aspect.
A growing pool of large multinational companies have adopted what has been named lean and green management. Coca-Cola, for example, has realized a great potential for resource efficiency as a result of lean management. By focusing on water management in its production, Coca-Cola increased water efficiency by 20 percent compared to 2004 levels.
With lean and green management traveling across the Atlantic, Scandinavian companies also have benefitted from these principles. The Danish company Grundfos, which sells pump systems in more than 50 countries worldwide, was an early adopter. In a pilot project at a China-based factory, Grundfos reduced production by 170 tons carbon dioxide emissions and saved about $40,000 through clever use of resources and supplies.
The lean and green movement excites big companies across the planet. It seems as though lean and green is here to stay, making it important for young companies to seize the trend and adopt these principles at an early stage.
Can startups go lean and green, too?
The reason mainly matured companies have benefitted from giving their workflow a lean and green management review is obvious: Management efficiencies make sense when a company already has reached a certain size. But imagine if those principles could be adopted by startups from the get-go as a natural component of their supply and value chain? That's massive potential.
I see signs that it already is happening. For example, Azuri, a U.K.-based startup, not only produces green solar panels at a low cost to off-grid Africans, the production itself also has shades of lean and green principles. Solar panel parts are produced and maintained locally. This brings costs down, creates jobs and reduces shipping. In addition, users must return solar panels before they can upgrade. This secures an element of recycled resources in the Azuri business model.
The Azuri case has gained widespread international attention for its green innovation and business model, resulting in both international awards and funding. The company received the 2012 Sustainia Award unanimously chosen by an award committee consisting of former California Gov. Arnold Schwarzenegger; Gro Harlem Brundtland, known as the mother of sustainability; European Commissioner Connie Hedegaard; and IPCC Chairman Rajendra Pachauri. Not bad.
In the U.S., another interesting example is Burt’s Bees, although it is very different. This small company placed eco-friendly production and marketing at the core of its products. Customers took the products' attributes to heart, fueling Burt’s Bees' solid growth to a point where big players took an interest. From 2000 to 2007, Burt’s Bees’ annual revenue grew from $23 million to $164 million, and in 2007, Clorox acquired Burt’s Bees for $1 billion in a sign that it clearly recognized consumer demand for organic and eco-friendly products.
Jurlique proved the same case in 2011 when the Australian luxury beauty care brand was acquired for $335 million by Japan’s fourth-largest skincare group. Again, a small startup based on sustainable practices grew into a global super brand with its eco-friendly business approach.
By placing sustainable and lean processes at the core of companies’ value chains from the outset, these companies did what most startups dream of: They made it. Some even made it big.
These companies illustrate the benefits of going lean and green:
• Savings on costly resources
• Energy-efficient production
• Ease in selling product to companies with increased control of suppliers
• Better stakeholder relations
• Reduced reputation risks
• Ability to attract stronger workforces that value companies with strong sustainability profiles
Unfortunately, I doubt most startups have realized this green potential. The way the startup community has adopted lean management, however, makes me hopeful for a future Lean 2.0 movement that focuses on the green aspect, too.