In brandchannel’s new series with Yale University, teams of MBA students explore the challenges faced by purpose-driven startups. The following summary was written by Professor Kosuke Uetake of the Yale School of Management.
The series of posting is the final project of Marketing and Sustainability courses offered at Yale School of Management (SOM). Our MBA students are working with brandchannel to examine questions that are relevant to marketers interested in sustainability.
As many marketers are aware, consumers are increasingly concerned about product safety and environmental sustainability. This opens a door for innovative ideas and new business models that can impact the entire market landscape. Tesla, for example, developed extremely high-quality electricity vehicle and has changed people’s and the auto industry’s perception about electric cars. Honest Tea, founded by two Yale SOM community members, created a new market for bottled organic tea.
A number of startups are driven by social purposes in the sustainability arena. These purpose-driven startups bring new ideas that traditional marketers and large corporations often have never thought about. Each of the five startups that our MBA students selected is doing business in different industries, but we can get general insights from their innovative ideas and their commitment to sustainability.
Hungry Harvest and Fargreen created new ideas of doing business in the food/agri industry. These companies are trying to address the waste problem—a huge issue in both developing and developed countries—with a new way of value creation. Hungry Harvest sells high-quality but ugly shaped organic produce at lower prices than same quality, good-looking produce. For consumers who don’t really care about the shape of vegetables (including myself), the company can address the food waste problem and break the usual tradeoff that green products face, such as high quality at higher prices. Fargreen is also providing a potential solution to reducing waste while offering financial incentives for the local mushroom farmers. Green products are considered to be expensive to produce but these ideas can be used to make them less expensive while solving the environmental issue at the same time.
Cotopaxi and 2 Degrees Foods extend the idea of buy-one-give-one business model that was developed by predecessors such as TOMS and Warby Parker. The buy-one-give-one model is known to be very powerful to attract and motivate consumers to do something good by buying their products. Some activists, however, argue that this model may potentially harm local producers. Hence, Cotopaxi and 2 Degrees extend the idea of this business model to provide donations to address health, education and poverty issues in developing countries. Compared to TOMS or other companies, their modification of the buy-one-give-one model let them more directly focus on their social purposes.
Lastly, Hugo & Hoby is a furniture company founded by two current Yale SOM students. Hugo & Hoby also offers a new value proposition to consumers who want for environmentally friendly, high-quality furniture but cannot afford expensive brands. They achieve this seemingly difficult task through a flexibly customized and made-to-order production system, which allows them to maintain zero inventory. Customers are more likely to appreciate customized furniture made by local craftsmen.
One common theme can be found throughout all these purpose-driven startups: They have generated innovative ideas by challenging conventional wisdoms that large corporations have implicitly assumed. Sustainability is a big driver of innovation that makes our world and environment better.
I hope the series of postings would be a starting point for us to consider a new relationship between business and environment:
- 2 Degrees Food—Fighting Childhood Hunger
- Fargreen—Going Far By Going Green
- Cotopaxi—Gear for Good
- Hungry Harvest—No Food Waste, No Hunger
- Hugo & Hoby—Quality, Sustainably Sourced Furniture