Profiting from a Green White Space

The conversation started like many others. It was the kicker that surprised us: "We need $50 million in incremental growth from a new product or service within 18 months. It needs to strengthen our XX brand, and we must own the intellectual property. We don't want to be knocked off as soon as it hits the market. And oh yeah, the idea has to be green."

This conversation with members of the C-suite of a client took place four years ago, and it served as our first real indication that Corporate America was getting serious about the favorite topic of tree huggers everywhere: going green.

In the world of innovation, a common goal is to find the "white space," meaning to discover unmet needs or untapped opportunities in the market. Spend enough time around effective innovators, and you'll find many think their ability to detect white space in the market is their most important skill. There is nothing more crucial than creating expertise around significant unmet needs if you want to build an effective innovation engine.

Fast forward four years. Big business has discovered its customers will now pay for innovation that delivers on its needs and makes the world a better place. Finding the "green space," the opportunity to make more money while staying environmentally or socially responsible, should become one of your goals.

Some of you may be rolling your eyes. We did too, at first. But times have changed, and looking at things through the green lens can no longer remain on your "we have to get around to doing this someday" list. In light of steadily increasing local, state, and federal regulations on the one hand and increasing demand from consumers for more green products (and more socially responsible companies) on the other, you need to do it today. If you wait, you risk losing your lead in the market, the confidence of your customer, or perhaps your job. Follow the steps to finding your green space (before your competitor finds it first).

Step 1. Figure out where you are today with green.

Step 2. Determine how to improve (short term and long term).

Step 3. Find where the green space opportunity is for you individually, based both on what your consumers want and where it fits in with your brand. Then go grab it.

Let's spend a minute showing how these steps can play out in practice. Where are you, and what should you do? The odds are that, when it comes to green, you can classify your company in one of four categories. Let's look at each—and then prescribe what you can do to improve or make the most out of where you are.

1. Is your company just getting started with green (or hasn't done a thing)? Then you fall among the Laggards.

The good news is you have no place to go but up. But your Laggard status also means, of course, that you trail competitors who have already taken steps. And you're doomed to grapple awkwardly with all the new regulations coming out. It is far better to control the agenda than to let it control you. Our advice: Be transparent and get started. Say something like, "We haven't done much up until now, but we will soon do X, Y, and Z." Develop short-term and long-term green vision and corresponding plans for prioritized actions; begin a deliberate transition to green consumer-facing innovations as well as measurable internal practices; and then execute. Obviously this should come from the top of the organization. So forward this article to the CEO.

2. Has your company been actively but quietly working on green for years? Then you are a member of the Bashfuls.

We understand why you didn't want to toot your own horn. You figured, correctly, greening was the right thing to do, so you just did it and didn't expect accolades. Besides, in the past, so much noise has surrounded the green movement that it was often risky to "throw in" with the rabble rousers. Our advice: Get notice and get focused. Your modesty, while admirable, is potentially self-defeating if consumers don't know what you stand for, let alone what green offerings you have. You want the industry to see you as a leader in the category—because you are.

If you're wondering how to reposition yourself, take a look at what Hanes (HBI) has done with its Web site. The clothing company has put its innovative products, packaging, and communications into a larger context. The site is educational, emotional, and relevant to customers. (Full disclosure: Hanes is a client. But we didn't have a darn thing to do with this Web site.) You don't end up thinking Hanes is bragging about itself—just being transparent and consistent with the company's long-term vision and values.

3. Has your company been perceived as green even though you're not actively doing much? Then you are one of the Lucky Dogs.

But you should anticipate that your luck is about to run out. Certain companies (and we won't name them) are perceived as trendy, cutting edge, cool, hip, design-focused, etc. And consumers tend to provide them with a "halo" that extends to do everything they do. Consumers just assume they are leaders in green.

Our Advice: Get serious. First, figure out why consumers are giving you credit for things you haven't done. Then actually do those things, and more. The opportunity for you to get new green innovations into the portfolio mix quickly and get them to market is tangible. Your audience already expects it. Simultaneously and transparently, identify and disclose what you plan to do over the short and long term. If you don't, you could face a huge backlash once consumers find out you have not behaved the way they thought. You may have millions of dollars' worth of consumer goodwill pulled off the table should you find yourself "outed" by the media or a competitor.

4. Has your company been actively and openly setting the standard for green in your industry? If yes, you are clearly in with the Leaders.

Our Advice: Get further ahead, now! Capitalize on your green leadership position by exposing the green disparity between you and everyone else. Enhance your green innovation portfolio of offerings to deliver on today's consumer demands and future market demands.

We should note that change comes from action, not a soap box. For any green puritans reading this who may feel tempted to connect this with something other than tangible, meaningful progress for the desired outcomes of the "movement," we suggest that you reconsider.

Why? First, what will create action soonest and most effectively is aligning consumer purchasing behavior with corporate behavior, not guilt and condemnation. Conscious capitalism works, if action is the desired outcome. Use the carrot more than the stick. The soap box may have worked for raising awareness, but it isn't going to create the outcome you want in regard to action. Second, what we are suggesting will create self-funding sustainability initiatives.

One last point: In the U.S., we have the great displeasure of watching bipartisan bickering slow even the most obviously positive initiatives. The same thing is happening with "green" initiatives. Often, the immediate reaction of many is to point out what is not working. While we agree that everyone, including our biggest corporations, could do more, let's not lose sight of one point. It is actually becoming more profitable for them to see things through a green lens, and consequently good things are happening. So yes, let's all push companies to keep it real, but let's recognize and reward them when they start taking steps in the right direction. It's time to let go for a better grip.

Before it's here, it's on the Bloomberg Terminal.