Posted on February 29, 2016 @ 07:46:00 AM by Paul Meagher
Andrew Sherman, in his very useful book Raising Capital (3rd Edition, 2012) classifies equity investors into three types: Emotional, Strategic, and Financial. The classification is based on his extensive experience in fund raising. Other classifications are possible but today we will discuss Andrew's three-fold classification.
The emotional investor captures the idea that some early investors in a company may do so because of they have personal relationship with the company owner. Friends and family are often promoted as a source of early financing. Some investors may only invest in companies in which they have a personal relationship with the owners.
The strategic investor is one who sees strategic value in putting money into a particular company. They may, for example, have experience in the industry and partnering with a startup in a similar industry might be a good way to grow their business. They may also want access to the research and development the company has done or the talent they have assembled. Their financials may be important, but they are more interested in the non-financial aspects of the deal - what synergies a deal might bring.
The financial investor is interested in the bottom line and ensuring that the numbers add up and it is a financially worthwhile project to invest in. They invest in the rewards that a well executed business plan will produce.
I have three questions about how we might interpret this distinction:
Should we view investors as only fitting into one category for all their investment decision making?
How likely is it that an investor will flip from being a financial investor in one deal to being a strategic investor in another deal?
Can these investor types instead be viewed as orientations with investors giving more or less weight to the different factors (emotional, strategic, financial) depending on the deal?
Irrespective of whether investors are always, sometimes, or more or less emotional, strategic, or financially oriented, it is important that the entrepreneur raising funds recognize what type of investor they are appealing to or dealing with. In general, we might expect online investors to be less emotionally oriented when screening investment pitches and more likely to be strategic or financial in their orientation. Investment pitches are often geared towards the financial investor because it is generally a good assumption that the business plan and numbers should be good in order to attract investors. A strategic investment pitch while promoting a good return on investment, might also spend some time on what might make the company look good to a potential strategic partner who is more interested in the non-financial aspects of the company (e.g., clients, intellectual property, talent).
So if you are looking for an equity investor it might be useful to distinguish between whether you are seeking a strategic or financial investor and to make sure you highlight details that might be relevant to that type of investor in your pitch. Also, when you are dealing with them, again recognize the type of investor you are dealing with.
Equity financing is one type of financing along with debt-based financing. According to Andrew, the optimal capital formation strategy of a company generally consists of some balance of equity and debt-based financing.
Posted on February 25, 2016 @ 09:30:00 AM by Paul Meagher
The digital transformation of industries is ongoing and accelerating. The internet, big data, advanced computing and sensors are combining
to transform that way that things have traditionally been done.
An interesting recent example of this is General Electric which is betting that its' future growth will come from the Industrial Internet:
the convergence of industrial machines, data, and the Internet. General Electric is well known for the industrial machinery it designs
and manufacturers, but now it want's to be known as a digital company that also makes industrial machinery. Hence the new GE slogan
"The digital company. That’s also an industrial company".
A major component of their digital strategy is a software platform they call Predix and that can be connected to different types of industrial machines to gather data that can be stored in the cloud and made sense of using their platform. A major market they are looking at is the digital transformation of the Oil & Gas industry and in the video below you can see their vision for Intelligent Pipeline Systems.
Predicting the future is a tricky business and GE may bomb out on this strategy if the funds are not available to make pipelines intelligent.
On the other hand, when you are as big and influential as GE the future may be more a matter of creation than prediction. And so it is
with many companies contemplating their own digital transformation. You have to try to predict the future but you must also be involved
in creating the digitally transformed version of it you envision.
Posted on February 24, 2016 @ 11:44:00 AM by Paul Meagher
This morning I became aware of a new project by market gardening guru Jean-Martin Fortier and his wife Maude-Hélène. They are crowdfunding a video documentary that will allow us to see exactly how they run their successful microfarm. Sometimes words are not enough.
I have purchased and read Jean-Martin Fortier's book The Market Gardener so purchasing the Market Gardening Toolkit video was something I would have done anyway. I hope to incorporate some of their market gardening techniques (e.g., stale seedbed, flame weeding, biointensive planting) into my own growing practices. They are quickly closing in on their funding goal and I hope this posting helps them achieve it.
If you are not familiar with the Fortier's market gardening system, you can get started with a recently posted 5 part video series of Jean-Martin talking at an event in Vermont. In addition to being great market gardeners, the Fortier's are also smart business operators so you come away from Fortier's videos not just with farming knowledge but some practical business insights as well. Here is the first video in the series:
It is also noteworthy that the Fortier's have teamed up with Possible Media to create this video documentary. Possible Media is doing alot of excellent work these days that appeals to my Permaculture addiction. They have found an interesting niche for their videographic skills. I am looking forward to the video documentary.
Posted on February 22, 2016 @ 10:15:00 AM by Paul Meagher
What does it mean to be "Off The Grid"?
That is the question that Phillip Vannini and Johnathan Taggart explore in their book Off the Grid: Re-assembling Domestic Life (2015).
The book arose from a research grant to study the lives of 200 off-gridders located in all the different provinces of Canada. Because so many different off-gridders were interviewed at different times of year, in different climates, and with different motivations, it paints a rich and diverse portrait of what life is like off grid.
This is not a book you would pick up to learn how to physically survive off grid. It is a book you would want to pick up if you wanted to understand the motivations and lifeworld of those who live off grid. Why would we want to learn about off-gridders?
Anthopologists study other cultures both for the sake of understanding those cultures and, using comparative methods, to help us to understand own culture better. Most of us take for granted all the grids we are connected to - the power grid, a natural gas grid, a sewage grid, a water grid, a communications grid, and a transportation grid are the most common grids we are connected to. Going off grid technically means removing yourself from the power grid or a natural gas grid, but many off-gridders also take care of their own sewage and water. They may also be removed from main roads and cut off from one or more types of communications (TV being a common media form they abandon). Many also grow some of their own food and disconnect to some extent from the food grid as well.
Being off grid means you have to take care of more of the basic functions of living than most of us do. It means having fewer of the conveniences and comforts we often take for granted. Why would someone want to do this?
A common reason is simply that was too costly to hook up power to the remote location where they want to live. Some want to reduce the cost of living, some do it for environmental reasons, some want to be more connected with the rhythms and resources of nature. Some net-zero off-gridders disconnect from the power grid in urban settings and speak to the advantages of being able to access necessities on a bicycle or by walking, rather than hopping in a car to access on-grid services.
The book attempts to get into the minds and environment of off-gridders using a wide array of literary sources. Many of the case-studies of off-gridders are briefer than I would have liked, but given the volume of interviewees they want to to discuss this is understandable. The case-studies are used to high-light particular aspects of off-grid life that the authors want to focus a longer critical discussion of. They assembled a vast array of interesting theories and ideas in an effort to understand the lifeworld of off-gridders. Sometimes the critical theory seems to be used as a substitute for any real insight; other times it helps to shine a revealing light on what might be unique about such lifestyles and how they differ from what we find normal.
I'm recommending that you watch the film, listen to an interview, or read the book as a way to understand our own culture by comparison to a culture that chooses not to take many of our modern conveniences and comforts for granted. Maybe you have some romantic notions of living off grid. These resources will give your more realistic notions of what off grid living is like in its many and varied forms.
I'll conclude by suggesting that the Living Off Grid project could also be used as a case study for modern independent film making. Take a subject that most people have an interest in, get some funding to explore the topic in the field and through research, create some buzz along the way by discussing your project as fieldwork and research is progressing, create a dynamic website where people can order your film and track how the project is evolving, and offer up multimedia experiences to your audience (e.g., book, film, audio). The book also offers some insights into the trials and tribulations they experienced as they did their fieldwork which might be useful and amusing for independent film makers as well.
In this book they identify 4 global trends as the ones to watch out for:
Economic growth is occurring most rapidly in emerging cities in China, India, Asia and Africa. As people continue to move from rural areas to cities and urban clusters, they create demand for infrastructure, goods and services. Multi-nationals like Coca Cola, Frito Lay and Unilever report that most of their revenue growth is a result of growth happening in these markets. When looking for global growth opportunities do research at the city/urban region level rather than the region/country level because it is the cities where growth is most evident.
The effect of technology on business is accelerating. This is no surprise but it does have implications for what needs to be done to keep up to date on technologies and skills in our businesses. It can represent a threat or an opportunity depending on how technology acceleration is managed.
The aging of the population around the world is creating significant problems and opportunities. The world will need to adapt to this new normal with new products and services aimed at the elderly, increasing the retirement age, becoming more resource efficient in the delivery of health care services, re-employing retired workers to retain skills and workforce, etc...
We are becoming more globally interconnected in terms of trade, capital, people and information flow across national boarders. The positive aspect is that it is easier for businesses to expand their markets across borders. A negative aspect is that our business can be disrupted by new entrants outside our borders. Either way it is difficult to ignore this trend and businesses will need to develop strategies to cope with and exploit this increasing global interconnectedness.
Where I would use the book is as a tool for researching trends. If you are doing work on a business plan you will often have to look into the crystal ball and identify trends that affect the viability of your product or service. None of the trends identified in this book constitute radically new insights but what might be new are some of the numbers, graphs, and references assembled to characterize these trends. The book can be paired with the McKinsey Global Institute website as a credible resource for trend information you can use for big picture business planning. Some numbers you may need to obtain from local data sources but the characterization and analysis of big picture trends can be found on management consulting websites like McKinsey Global Institute. It should be noted that a precursor to the book was published on their website that focused specifically on the technology disruption trend.
The book does not spell out the methodology they use to make trend projections and often they seem to be simple linear extrapolations from present trends. An example would be this trend graph showing the ratio of retirees to children.
Alot might happen between now and 2050 to that could change these graphs so we should have some measure of skepticism regarding them. At the same time, those reading business plans often want to see numbers and graphs and simple linear extrapolations from present trends may be as justifiable as other methods of predicting the future.
Posted on February 15, 2016 @ 09:52:00 AM by Paul Meagher
I previously blogged about David Lang's book Becoming A Maker (2013) when I was a quarter of the way through it. I finished it off this morning and wanted to post a few more observations about it.
In the later parts of the book David discusses some of the technology and tools that you might find in a communal makerspace setup. One professional-level makerspace is Techshop where you can pay a fee and have access to wide range of high-end maker tools as well as classes to learn how to operate them. It is possible to start a business here by building your prototype and if you are successful in getting orders you can also use the facilities to manufacture units. You can learn from others who are similarly occupied and in some cases you might be occasionally employed by someone with a hot-selling product.
What distinguishes a maker tool from other tools is that maker tools are often used to make other tools. The TechShop at Austin-Round Rock allows you to reserve 3D printers, CNC machines, Welders, Heat Presses, Industrial Sewing Machines, Injection Molding Machines, Laser Cutters, Milling Machines, Powder Coating Equipment, Waterjets and more. In addition to all this hardware, there will generally be a need to use a variety of computer aided design software programs. It is alot of learn but if there is a community of makers around you this can make it easier to cope and eventually become a maker yourself.
Makers wanting to commercialize their offerings will often attempt to get funding on Kickstarter. One useful observation David makes about Kickstarter is that raising funding on Kickstarter is often more about activating a fan base that you have built up for your ideas than recruiting new people to fund your ideas. Some makers may be reluctant to share their ideas with others and in some cases that is understandable, however, it may put you at a disadvantage when it comes to raising money in a Kickstarter campaign because you haven't built up a fanbase prior to launching your campaign. One might consider Kickstarter another in the list of tools that makers should become familiar with.
David's book is still worth reading 3 years after its publication as an introduction to the maker culture and the tools that they commonly use. David would be the first to admit that this is an area where things are moving quickly and there is a danger of any publication becoming rapidly out of date. An example would be that David does not include much discussion of biotech makers who might have makerspaces that look more like university chemistry/biology labs (places to grow anything) than industrial workspaces (places to build anything). In the coming years we might expect these biotech toolsets to become more popular. It will give people with less financial resources access to tools that are normally only available to universities and corporations.
One of the main reasons the maker movement has become popular is because people are increasingly able to access maker tools that were once prohibitively expensive. Either the price has come down so people can purchase the tools for their personal use, or co-op and professional makerspaces have been setup that make access possible. Many of these co-op and professional makerspaces are appearing in larger cities first and there is still room for such spaces to grow in smaller cities and communities. Schools and public libraries are a common entry point for makerspaces in local communities.
I recommend David Lang's book as a way to get oriented to the maker culture. Chris Anderson, former editor of Wired Magazine, also wrote a book called Makers: The New Industrial Revolution (2012) that David makes frequent reference to. Here is a recent video of Chris talking about the Maker Movement:
There is huge amount happening in the maker movement today and you only need to google "maker movement" to take you where your particular interests might lead you.
Posted on February 12, 2016 @ 07:05:00 AM by Paul Meagher
Sometimes it is a fine line between being green and being cheap. Is the person upcycling old pallets into furniture doing it because they want to be green or because they don't want to spend money?
If the person simply doesn't want to spend money then it is a nice side-effect that they can also advertise themselves as being green. The fact that it is often difficult to tell the difference between being green and being cheap means that there are at least 2 routes to being green - the eco-minded route or the cheap route.
What is the best way to achieve the goal of being green? My own attempt to be green is more of an intellectual than a lifestyle commitment. For example, I generally drive my small truck in cases where I could be biking to get where I need to go. If I was cheaper about not spending money on fuel I'd be living a greener lifestyle. I, like many people, wonder why so many green people fly to conferences to discuss sustainability issues. I suppose they have to meet sometime but if they were cheap would they find greener ways to coordinate on these issues?
North Americans consume more than our fair share of the world resourses. By any measure our lifestyle is less green than someone in a developing country. The big difference is the amount of money we have available for consumption. If we curb that consumption through voluntary cheapness then we might achieve higher levels of sustainability. Some might call the lifestyle voluntary simplicity but voluntary cheapness might be a core element of that lifestyle. David Holmgren (co-founder of Permaculture) prefers the term voluntary frugality and maybe you would as well.
The idea of "homesteading" is arguably becoming a more popular ideal these days. The idea of making your own food, building your own stuff, making your own medicines and so on is attractive to many people. Some methods of homesteading are more energy and resource intensive than others. Ben Hewitt in his book, The Nourishing Homestead (2015), offers up a good example of how to do cheap homesteading.
Even though they use alot less energy to run their house and farm than most people, Ben's family is always looking for ways to eliminate the need to use purchased energy to run things. In part this reflects concerns over whether energy will be as easy to obtain in the future, and it may also reflect a committment to being green, but I can't help feeling that Ben likes to operate his homestead as cheaply as possible so that he doesn't have to run as fast on the economic treadmill to maintain a lifestyle he enjoys. Any green halo he might enjoy is secondary to his goal of living cheaply.
One example of Ben's ecocheap lifestyle is how he refrigerates his food. Because he lives in Vermont and experiences cold conditions for a good chunk of the year, he decided to purchase an insulated cabinet, or icebox, and vent the icebox to the outside world. Viola, refrigeration for free. Living off grid for most of your life, and being cheap, makes you think up innovative ways like this to reduce energy consumption.
Cheap often has a negative connotation which is probably deserved in some cases. I think, however, that our consumptive society also gives being cheap a bad name. If we were all cheap our economy would grind to a halt.
If Ben's lifestyle is anything to go by, yes he is cheap in some things, but he is also willing to spend money where he feels the investment will yield the greatest return. In his case, it involves investing in the soil around his farm. Purchasing a wide range of amendments to get the balance in his soil that he is looking for. He will also spend money on greenhouses to grow food. He won't spend money on energy to heat them preferring to rely on free passive solar energy instead.
I would agree that if we were cheap in all things that would be a problem for the economy. If we are selectively cheap then I think the argument does not hold. It is all a matter of how we want to invest our money. Which industries we are willing to support and which ones we won't support.
I think we need to take seriously the connection between being cheap and being green because being cheap is often a more sure-footed way to being green than through eco-mindedness. How to be green is often not clear whereas how not to spend money generally is. Ben Hewitt's book provides some useful guidance on what an ecocheap lifestye consists of if you want to learn more.
Organic Valley (OV) is an independent cooperative of organic farmers based in La Farge, Wisconsin, United States near La Crosse, Wisconsin. Founded in 1988, it is the largest organic farmer-owned cooperative in the world with over 1,800 farmer-owners across the United States, Canada, and Australia. Organic Valley markets its products in all 50 states and exports to 25 countries. In 2014, growing annual sales neared $1 billion.
Mark frequently refers to Organic Valley as a "production aggregator" meaning it aggregates production across farmers so that farmers can access larger and more diverse markets. The need for a production aggregator, according to Mark, can arise because there is a failing market for your commodity or service when you are acting alone in the marketplace. If you are at a farmers market with local grower competition and you can't sell your cucumbers or you can't get your price, then the solution may be for cucumber growers to aggregate production and sell the combined product into the same or bigger market that can absorb it at a price that is acceptable. The market feedback you get when you operate alone may be negative but when you cooperate with other producers the market feedback can be strongly positive and encourage you to grow more cucumbers.
If you combine all your cucumbers together and sell them to a grocery chain then you might be paying a fee to a broker who distributes on
your behalf. What if you replace that broker with members of your coop
so that any fees you pay are going back into your production cooperative? The fees might allow you to make more income or receive additional benefits (i.e., pension, dividends, internal jobs) and would help finance the evolution of the production cooperative. Note that this is a different model than Uber, AirBnB and other popular "sharing economy" business models that offers a production aggregator service and collects a brokerage fee but without many additional benefits provided. The alternative to the "sharing economy" business model may be something along the lines of Organic Valley or the very successful John Lewis Partnership in the UK. These companies may not be as "explosive" in their growth as Uber but they are showing high levels of growth and considerable growth potential.
There may be significant costs to setting up a production aggregator (e.g., legal, accounting, software, storage facilities, equipment, transportation, dedicated staff, etc...) and the production aggregator might seek investment to cover these costs. The production aggregator might offer to return investors money (plus interest) over a period of time but could also sweeten the deal with a coop membership that allows the investor to enjoy some of the benefits of the venture. Ideally, the investor's skillset would be useful to the company and an investor might end up paying themselves some of the money invested to carry out the required setup and ongoing work.
Setting up a production aggregator would entail some legal work on the company structure. Often they are setup using a legal trust as the formal business structure but some type of partnership structure might also work and be less legally complex to start out with. I do not pretend to be a lawyer or accountant so don't quote me on any of this.
I'm not necessarily endorsing the view that cooperatives are the end-all and be-all. I'm mostly interested in examining what the motivation for production aggregation might be, how the startup phase of a production aggregation service might be financed, and what types of benefits private investors might receive from their startup investment (i.e., payback with interest, membership benefits, payment for worktime invested).
Also worth considering is what types of objects can a production aggregation business model be applied to that it isn't being applied to today? Examples might be timber production, water production, carbon sequestration and other products or services that might be less tangible.
Posted on February 8, 2016 @ 08:29:00 AM by Paul Meagher
In a recent blog called Constraint Satisfaction: Part 1 I illustrated a couple of ways to represent constraints (i.e., line graphs, linear equations) and how to go about satisfying them (i.e., line intersection, gaussian elimination). In today's blog I want to provide a couple of other approaches to representing constraints to add more flexibility and precision to our thinking about constraints.
An example that illustrates a couple of different ways of representing constraints is from p.113 of Robert Schalkoff's book Artificial Intelligence (1990). In this example, Robert represents the goal of getting professorial tenure as involving the satisfaction of a number of constraints that can be represented in tree form as follows:
An equivalent way to represent these constraints is in the form of a PROLOG program which looks like this:
The main part of a PROLOG program consists of a set of facts and rules. These facts and rules constitute a small database which which can be queried. One question we might ask is "who will get tenure" which is formulated in this way in PROLOG:
The answer PROLOG returns is "rjs" who is the book's author Robert J. Schalkoff.
So we can represent the constraints we face when trying to achieve some goal using tree graphs or we can use a logic programming language like PROLOG. The advantage of the latter is that we can draw inferences from our database of facts and rules, but this is probably not worth the effort in simple cases like this. We can run the logic program in our head.
I decided to exhibit a PROLOG program not because I expect people to start using it to solve logic problems, but because it provides a nice high-level language with which to express constraints. Also important is the idea that if you don't express these constraints (i.e., facts & rules) in the proper relationships, then you won't not be able to reach the conclusions/goals you want. You can't just write facts and rules down in an unstructured format. In this case, the graph provides the discipline we need to express our facts and rules with the proper relationships so that we can logically satisfy the get_tenure() goal.
The purpose of this blog is to illustrate that a couple more ways to represent constraints are with tree graphs and with structured logic programs consisting of facts and rules. It should be noted that the goal you are trying to achieve may have subgoals which have to be satisfied, hence the reason why tree graphs are useful. There may also be a strict or loose order to when these subgoals need to be achieved. In the graph above the subgoals on the top might have a higher priority (i.e., publishes()) than the subgoal at the bottom (i.e., teaches-well()). The order in which subgoals are achieved is often important in real world problem solving.
So if you are in the coffee shop thinking about your business and how you are going to achieve your goals, one way to achieve some precision in your thinking is to represent the constraints to achieving your goals with a tree graph or a simple logic program like the gets_tenure() example. There are other methods you can use like line graphs and sets of linear equations. The more precisely you can represent goals and constraints the better able you will be to reason about them.
On p. 114 of his textbook professor Schalkoff illustrated the sequence that PROLOG uses to figure out ?-gets_tenure(Who). This may not represent the order in which a professor satisfies tenure subgoals but it does illustrate useful further details: 1) there are often a significant number of subgoals that have to be achieved in order to achieve a significant high level goal, 2) your abstract tree structure needs to eventually "bottom out" with an actual binding to some real object or result. Constraint satisfaction involves satisfying our low level goals in concrete form so they propagate back towards achieving our high level goals.
Posted on February 4, 2016 @ 11:30:00 AM by Paul Meagher
Recently I posted two blogs on the topic of Constraint Satisfaction (Part 1,
Part 2). I'm still interested in this topic and did some more searching last night to see what additional useful material I could dig up on the topic of constraints.
One recent resource that looks interesting is a book by Adam Morgan and Mark Barden called A Beautiful Constraint (2015). According
to their website, "A Beautiful Constraint calls for constraint–driven problem–solving to become a much more widespread capability and offers an original framework to achieve that". Reviews
for the book so far are quite good.
Another resource is an MIT Thesis by Mark Donald Gross called Design As Exploring Constraints (1985).
This freely available manuscript is useful because it directly addresses the role of constraints in design, indeed, it views design as an exploration of constraints. While the technology discussed is dated, the discussion around design as exploring constraints is not.
A popular approach to thinking about constraints is via the Theory of Constraints popularized by Eliyahu M. Goldratt in his book The Goal (1986). In this theory business growth is viewed as a process of identifying and overcoming a constraint that is currently holding a company back from growing. Once that constraint is addressed a new constraint will be revealed as the limiting factor which in turn will have to be addressed and so. The theory of constraints is popular in the lean production literature. This view of growth is similiar to the Law of the Minimum which I discussed in a previous blog.
A final noteworthy resource was discussed by Mark Gross in his thesis, namely a book by Nobel Laureate Herb Simon called Sciences of the Artificial (1996). This is a seminal book on "Design Science" in which Herb Simon argues for a view of design as "optimizing an objective function over a region bounded by constraints" (Gross, p. 140). The optimization that is going on here, however, is quite subtle because Herb Simon views such optimization as a matter of "satisficing" or finding a "good enough solution" rather than a solution that would require unrealistic amounts of computing power. There is a threshold to the amount of work we'll do to arrive at our view on what the optimal design is. So while we may in fact arrive at an optimal solution to a set of constraints when we can formulate the problem in quantitative terms, in most cases we are using a different approach to optimizing our objective function, one in which we will be satisfied with a good enough solution if it means being able to operate within time and resource constraints at hand.
The purpose of this blog is to identify some more literature worth exploring to clarify the role and nature of constraints in design and business.
Posted on February 1, 2016 @ 08:26:00 AM by Paul Meagher
Over the weekend I was in a large grocery store looking for coffee with this ecolabel on it.
Unfortunately, they had no bird-friendly coffee for sale. I became interested in bird friendly coffee as a result of reading the first couple of chapters of Coffee Agroecology (2015).
The book enlightened me about the different agricultural approaches to growing coffee. The terms "sun coffee" and "shade coffee" refers to the two ends of a spectrum of coffee production methods with sun coffee being the main method of production these days because they can produce more coffee per unit of land by growing coffee trees without much shade cover. Coffee, however, is traditionally an understory tree and grows well in the shade. Shade coffee can be produced without cutting down rain forests and without chemicals because the biodiverse forest habitat includes pest predators and natural sources of fertility (e.g., leaf and branch litter, animal droppings, dead animals). It is arguably the closest you can get to organic coffee and is in many ways superior to organic because shade coffee systems support a large amount of biodiversity that organic labeling does not specifically address.
Most coffee is grown in tropical regions of the world and you might wonder why you should care how they grow it down there. One reason is because many birds of North America migrate to the tropics during the winter months and the type of habitat they encounter there affects their populations in North America during warmer months. Hence the ecolabel for bird-friendly coffee. It should be noted that bird friendly coffee, or shade coffee, supports much higher levels of biodiversity generally than sun coffee and if you are looking for high quality organic coffee that is fairly traded, the label might signify that as well. Unfortunately, bird-friendly coffee does not appear to be something I can buy locally. Not even one of the major brands appears to support it. Why is that?
This raises the issue of ecolabelling communication and how effective it is. Even if some company did put the Smithsonian bird friendly certified label on their coffee, would this add sufficient value to that product to make people want to buy it or perhaps pay more for it? Most people would not know what it meant and would therefore probably not care. For ecolabelling to be effective there has to be some outreach and education about why we should care that a product is sustainable in the ways the ecolabel certifies. I think this label would be more effective if it included a url where people could go and learn more and feel like their efforts are making a difference.
The Ecolabel Index website is currently tracking 463 ecolabels. Some of the ecolabels such as EnergyStar are well known whereas others are not. There are gaps where I think ecolabelling could be better such as indicating the longevity of an appliance and not just its energy consumption. It is an interesting exercise to walk through a store and imagine the type of ecolabelling that could appear on various items. Is there a label in this index that could be used or would a new ecolabel have to be created? Exercises such as this might help you imagine a new product or a new approach to marketing your product.
In North America the most successful ecolabel is arguably the "organic" ecolabel. While many people argue that the label has become increasingly meaningless with the entry of large corporate organic farms, the fact is that it is still a label that "adds value" to the food that it is attached to. For many companies getting certain types of ecolabels is now a cost of doing business. Most large forestry companies, for example, are expected to be Forest Stewardship Council (FSC) certified. Here again we might wonder whether there should be better ecolabelling as some of the forestry practices of such companies could be better. Would we buy or pay more for wood that was harvested to ensure forest qualities like supporting biodiversity, selective logging, uneven aged stands and so on?
Will ecolabelling need to become more prevalent and more meaningful if we are to address some of our sustainability challenges? Will social media and the internet provide a better way to make ecolabelling more meaningful, effective and participative? How general does an ecolabel have to be in order to be worth promoting? There are lots of issues to think about when it comes to ecolabelling and the purpose of todays blog is to begin exploring some of them. There is also a significant amount of marketing research on ecolabelling and what makes it effective that this blog does not discuss which might be the subject of a future blog.