What gets missed when designing sustainable products?

Episode Notes 

It's not enough to just make a product more sustainable. At the end of the day, you also need to capitalize on that sustainability improvement because it’s an investment. 

In this episode, we answer how understanding the six stage gates to developing any product is essential to leverage sustainability improvements. We also discuss using single sustainability scores, trade-off and decision-making hierarchies in organizations, and why life cycle thinking is essential to not lose customers in today’s market. 

 

In this Episode 

Neil, as a product manager, how have you seen sustainability embedded into product development? 

• Neil - I have been a product manager for software. So, it's slightly different than when you're looking at physical products. But I think more of my experience has come from my work with product managers and engineers in the manufacturing space and that kind of formalized itself into a bit of a product management structure that I think would be good to explain to answer that question. [00:36] 
• If you look at the toolkit of the product manager there are six stage gates to developing any product. It starts with Discovery, where the goal is to find ideas. You could be looking at new technology on the market, demographics (who is buying what). There is a big green trend that has been going on for the last 20 years and is increasing. [1:01] 

• Product development is a messy process. There is no straight line. But I’m trying to create these buckets [stage gates] that describe this process, starting with Discovery, where you have an epiphany that could help your product or business. [1:30] 
• The second stage is desktop research [Scoping phase], which is done mostly on your computer. You are trying to build hypotheses (will it work, is it going to be better, is there a different market to address, is it a bigger market, is it viable?). There is not a lot of team activity at this stage. [1:48] 
• When you are looking at sustainability at this stage, you might do some crude life cycle assessments (LCA)s. [02:14] 
• Example - Consider a new kind of battery that is low weight, high power for an e-scooter or for a more sporty vehicle. Would you be able to create the battery for a vehicle with 1000 km range? You're trying to create hypotheses and ask are people going to buy it? Is this even technically viable? Have people done it before? [02:25] 
• There's a lot you can see about what is already available in the Scoping phase. It doesn't make sense to create a new battery if your main market segment right now is the Middle East or China. These things are not obvious. You may say it's a battery, it must be better, but that's not always the case. When you look at it from the entire lifecycle, the biggest impact from a battery comes from the use of it when you charge it, and the kind of grid you charge it from impacts the overall performance of that product. Using a lifecycle perspective at this stage allows you to understand and rule out some of these hypotheses that do not make sense. [02:50] 

• The next stage is Business Case. You are looking at it from both a technical perspective (will it work) and from a market perspective (if it were to work, will it make business sense). You might ask: Will it be twice as expensive? If it is a new market segment, will anybody buy it? How big is the market segment? If it’s a new geography, will you be able to address that geography? [03:27] 
• When creating the business case, it is pivotal that you look at the portfolio of products that you're responsible for, and not just an individual product. Because unless there is a big impact to the top or bottom line, you will not get much attention to take this project from the business case to the next stage, where you need to put resources into developing that idea. [03:51] 
• The fourth stage [Develop phase] is where you put resources into developing the idea, and the idea meets reality. When they start to build, many Product Managers realize the materials don't work, the processes that they have or the machines they have don't work, they can't find suppliers for certain materials and so on. [04:22] 
• What's important to consider here is not to stray too far away from those initial hypotheses [in Scope phase], because you have informed those things with lifecycle assessments and with looking at what has been done before. Very often we find product managers will look to solve a problem that they identify, but then forget about the consequences of making that change. [04:44] 
• The next stage is the Testing and Validation phase where you test the hypothetical benefits from taking that product to market and you would test this with market studies. Many companies also look at the stage gates for compliance and sustainability. Do they meet the criteria that would allow them to take the product to market? Both externally from a regulatory perspective but also internally from a company perspective. [05:15] 

• You're doing more robust analyses, slightly more detailed than in the early stages. This is where it becomes more realistic based on the suppliers that you would be using, and what are the real final materials that you would be using and so on. [06:00] 
• The last stage is the Launch phase and it's how you take the work that you've done and position the product in a way that it was envisaged. If this product is using 50% less water or has been created out of 30% more recycled content or is part of a producer responsibility program; these are things you need to quantify, verify, and they become part of the go-to-market. [06:24] 
• This is the frame in which product managers typically look at how they can embed sustainability into products. Sometimes it doesn't have to be a new sustainable product. Sometimes it's just a new innovation or an iteration of an existing product that makes it more sustainable. [07:02] 
• But it's not just about making that product more sustainable. At the end of the day, you need to capitalize on that sustainability improvement. You need to consider how to leverage that because at the end of the day it is an investment. Otherwise, you probably would not have put in that time. So, what is the additional benefit that you get? And I think that's how each of the stages give you the opportunity to be able to leverage that work. [07:23] 

 

Neil, you have mentioned in the past that the product manager may not be responsible for the sustainability aspect in each stage gate. What might be relevant to consider for walking a product through its stage gates and how that sustainability metric or responsibility gets passed to different product managers? [08:00] 

• Neil -The product manager's ultimate goal is to make trade offs, and trade offs happen at different product levels. Products are also typically seen in the context of which portfolio they fit into. Large organizations who are not just building a single product tend to be more complex, and so the products also belong to a bigger portfolio of products. This is where I would say you have different hierarchies of product managers that are making decisions at different levels. [08:37] 
• Should I use material A or material B is one such thing. Should I choose to make this kind of product that is part of my portfolio or cycle it out of that portfolio is a completely different question to answer. And that's above certain people's pay grades. I think the only way to do this is to set the right goals and have the right mechanisms of measuring improvement at any of these levels, and Jim has a lot of experience in this field. [09:10] 
• Large companies right now, especially in the automotive space, are transitioning more of their portfolio to electric and alternative fuels, and they're reducing their Scope 3 environmental emissions for the entire corporation. Not by changing existing products, just by adding new products to the portfolio and cycling out old products. This is one way to improve sustainability of an entire organization without changing an existing product at all. [09:39] 
• You also see companies fixing the products that are currently in the market because that makes the most business sense. These are different levels of decision making that typically are not in control of an individual product manager. [10:11] 

• The other aspect of this is some decisions are very operational. What kind of material you use will decide what kind of manufacturing process you can employ. If you're using machining or if you're using a casting, the amount of material you need compared to the amount of waste you produce for each product step is hugely different. Often product managers stay out of this because you have engineers to solve this problem and they give recommendations on what's the best way. [10:25] 
• The recommendation I have is to use the same metric across all decision-making processes, whether this is carbon, water, or recyclability. There are even aggregated metrics, normalized metrics, called single scores, that allow anyone in the organization to evaluate any decision they make across this single score. There are several companies in the consumer goods space and in the automotive space that are trying to do this. [11:00] 
• Water and carbon are two distinct metrics that are used more often than others. Look at any product decision across the entire lifecycle and ask, ‘what is the carbon impact of this change across the entire lifecycle?’. You can use this same decision metric across any level described until now. And its important to have that same metric so you can compare a decision: should I change a screw, or should I rip out the entire chassis? And I think the difference to the sustainability impact will be determined by this metric at any of these levels. [11:33] 

Jim, with your experience with sustainability and setting the right goals across an organization, did you have anything you wanted to add to that? [12:14] 

• One thing when you look at setting goals is to look at the consequences and the benefits of meeting those goals. [12:24] 

• One client who was part of Product Sustainability Roundtable, was very interested in getting a position in the green building sector. But they didn't believe that the green building sector was going to add sustainability or environmental metrics to their decision-making for selecting suppliers. They just didn't think it was the time, it wasn't relevant to them, and they ignored it. The consequence was they lost that work. [12:51] 
• The product manager and the people who are interacting with the customers need to understand those issues and the decision-making criteria that the client is using to make decisions. In the example where they lost a customer, they could have increased their positioning with the customer by adding sustainability metrics to their innovation process. [13:21] 
• There's a chemical company in Germany we worked with and for quite a few years they had been a leader in the sustainability area with eco efficiency, with sustainable portfolio analysis and looking at sustainability issues associated with the products, materials and chemicals they sell. A lot of times they were ahead of the time; only a few customers asking for it, but they would promote it. But now that clients are beginning to want sustainable, lower carbon footprint chemicals or to use less water, they are well positioned because they've got the tools. They've done the embedding. They've done the training to get the innovation team and the engineers fully aware of what the lifecycle sustainability metrics are, and the value they can bring to the table. This is an example where being prepared, building the tools and building the understanding of how the tools are used, and how the information can be used in decision making are all tied back to their overall target. [14:00] 
• One of the dilemmas trying to move forward and being innovative in the innovative stage gate process is resistance to change (e.g. I've been doing it one way for 20 years). When new technology and new material come out, someone who has been in the field for 15, 20, 30 years, are used to dealing with certain materials. So, you need to see how that impacts that person's resistance to change. How does it impact his or her actual performance and job or bonuses? So, you can bring it to that level of connectivity. [15:20] 
• Another issue is the complexity of implementation, and the whole decision-making process. Who makes the decision? Is it a product manager? Is it this department over here? Is it another department manager over there? It is a very complex situation in big organizations, whereas in small organizations, there's three or four people and you can sit around and talk. But when a vice president has 300 people, another one has 500 people, it's an elaborate conversation about how you make those decisions and who makes those decisions on a product. [16:41] 

• Neil – Because -it’s interrelated. If you choose a different material or a different supplier, it affects the other business units as well, or could affect it. That's what overcomplicates these discussions and debates very often. [17:14] 
• Jim – 100% right. To give an example we had two clients: one was a supplier of cleaning material for buses, the other one was New York City Transit, which provided buses across the five boroughs of New York City. They had to clean the buses and were currently buying 20- or 50-gallon barrels of cleaning material. The alternative from the supplier was to provide a 500-gallon tote where you didn't have to manage the movement of barrels back and forth and you could clean the buses directly. The dilemma was that the first cost to purchase the 500-gallon totes were high, and the procurement people didn't want to buy it because it reduced their budget and increased first costs. On the other hand, the operational cost was a different manager. And it took a long time to go both up both sides and get to the point where the total cost of ownership of having the tote was better for the company than doing it the old way. [17:30] 
• This is a good example of how the complexity in bigger organizations create time and effort. And in innovation, you don't always have that time. You need to make those decisions quickly. That's why having tools out there now that allow people to get information quicker and understand what the outcome is, is a very valuable process. [19:06] 

Jim, suppose there aren't incentives for organizations or a product manager to include sustainability. Can you describe some of the reasons that ignoring sustainability could be detrimental to a product’s success? [19:40] 

• Jim -A lot of it comes back to the business value. If you don't have a sustainable product, you're going to lose customers. If you don't have a sustainable product, you're going to create a negative brand image. [19:54] 

• And right now, there are a number of environmental and social regulations that are surfacing in Europe, North America and Asia-Pacific on products, not just on the operational side. You're going to be out of a market if you don't understand what these are and comply. The US recently put a proposal out that they're going to purchase environmental and sustainable products and services and it's going to be impactful. Neil: the US government – the largest single buyer in the world, is going to mandate sustainable procurement. [20:10] 
• Jim -The sustainable product procurement proposal is as equally as strong as the EU's Green Deal program. So, there's two regions of the world that have committed - and it's not just a business-to-business conversation now it's actually the government, which are huge procurement buyers - to buy greener, more sustainable products. That's probably one of the biggest benefits to embed sustainability into the stage gate process: you're going to be well positioned to compete in all those marketplaces as you go forward. [20:52] 
• Neil -Ten years ago, there weren't so many examples of companies that lost out. There were lots of companies that gained from sustainable products. You had entire brands that were created around sustainability, and they did really well. Five years ago, in Germany the bio-based products and organic product lines across different brands were the fastest growing segment out here in Germany and Europe. [21:35] 
• But in recent years you're seeing customers losing because of it. And if you look at how people think it is, if I can avoid losing money, I will pay attention to you much more than if I told you I could make you twice as much more money. And I think this is what's happening more and more. [22:07] 
• We had a customer where they lost not a couple of million, but hundreds of millions of euros just in a single year to competition who could position their products better and who did a better job of communicating what the sustainability value of their products were. And a lot of product managers are learning this the hard way by losing out to the competition. And that's a very easy way to teach product managers you cannot ignore this anymore. When you lose hundreds of millions, it becomes very easy to make the case that it is no longer about whether you have the right incentives to do it. It is you will lose if you don't. And we see this happening more and more now. [22:29] 

• Incentives was a problem five years ago and I think in certain places it may make sense where the market is not as demanding, like the consumer goods space, or whenever you have public procurement playing a huge role in a company's future. Or in B2B businesses, where you have a big split in terms of the end consumer who is willing to pay more money for sustainable products or who would go out of their way to buy more sustainable products. Maybe there's a bigger split there. But if you're looking at B2B, there is more pressure - sometimes self imposed, sometimes based on the industry itself - on companies, large companies. Think of the big brands - Apple and Microsoft - and these kinds of brands where they have immense pressure to demonstrate sustainability and therefore, they show that in what they buy. [23:19] 
• If you are a customer of these kind of mega brands, you will lose out if you do not have the more sustainable product, or at least can demonstrate that you are working towards sustainability in your products. And this is what has changed in the last three to five years, where this pain has become much more than what was before. It was previously just an opportunity. Now they're starting to become pain. [24:14] 
• Jim - Following up on the example I talked about in the Chemical company. They were prepared to get the internal know-how and experience and understand what sustainable metrics are related to their products. And they got some uptake. But it wasn't until the customers started asking (and the situation was B2B) that they were able to respond immediately because they had the internal tools. [24:42] 
• There's being proactive and not waiting for it to happen, but being proactive and anticipating is another activity. And we've seen this a lot with companies as part of their strategy: we're ‘just going to be a compliant’ strategy and do whatever the government tells me to do. But then all of a sudden, the government requires you to do all this stuff to be able to sell in the country and you're not prepared. Or you say, I'm going to wait for the customer. But you don't look at it proactively. You don't have a system in place to really check with customers about what they're doing. [25:08] 
• Neil - We see this so many times. If you are going to address the situation when a customer asks for it, then you've already lost that customer. Because the answers to these questions don't come from one day to the next. It takes a couple of years to get things in order so you can respond to a customer. I think in B2C this is different - you need to have it in advance of the product going to market because it determines how you position it and how customers buy it. But in B2B, it's a salesperson. It's an account executive that is responsible for positioning that product with a customer. And if that person doesn't have the information they need to win that deal, then you've lost that customer. [25:40] 

• This is one of the reasons why the same customer – and I think I know who you're talking about - they are killing it in the market right now, because they're just ready with it. We speak with customers who are more downstream from the chemical producers, and not all of them but several of them, are not considering manufacturers that cannot give carbon footprints of their products. They will keep their existing contracts because they need to. But think of this – after five years to cycle out old products (that's usually how long it takes) - imagine you're not doing business with this customer anymore. It takes that long to create your new product and to communicate about it and to position yourselves in that way. So, if you are not doing it now. It's almost always already too late. [26:23] 
• Jim - The thing is a company doesn't have one product manager. It may have hundreds, thousands, depending on how big they are. And there are some customers, as Neil talked about, who are going to be very aggressive and proactively looking for sustainable products to purchase.  [27:18] 
• There are other brands or markets which aren't as advanced. Companies who are leadership companies, and particularly in the B2B space, are beginning to look at portfolio sustainability assessment: how to look at the whole range of products, and the various product managers, with some kind of overall corporate process. [27:33] 
• Clint Eastwood’s ‘the good, bad and ugly’ is not exact terminology, but the products that are really good from a sustainability standpoint are the ones where customers want it; and some are in of middle of the road and some may not be a good sustainability performer. If you begin to put your products into those categories, it helps the senior managers, decision makers, and product managers, with what kind of emphasis to add to the innovation process for sustainability of a particular product. So, they're not doing it in a vacuum but in recognition that they are a part of a corporation where we have portfolio analysis. [28:04] 
• Another direction that is happening and that requires some consistency among the various product managers, is looking at the same basic criteria, particularly in the discovery and scoping stages. When you're beginning to look at what are those hotspots. What things are meaningful to my particular product, which may be different than my buddies’ over there, which is an entirely different business unit. They may have different hotspots, but we can share that information as part of this portfolio assessment. [28:45] 

• It's exciting because companies are beginning to say we've got to look at an entire portfolio, we just can't just look at one product and ‘we're a green company’ because we have one green product. It's the whole portfolio. You want to get to the point where you're driving more and more of your products towards sustainability, and the ones that aren't sustainable or don't have a market, customers and companies are saying maybe I should get rid of that or I need to change that. They're managing the products in an entirely different way. [29:22] 

I'd like to bring in the idea of lifecycle thinking. This is something I've heard both of you mention before, and I'm wondering if with the successes you're seeing, this is something that is being embedded in these organizations, that they're thinking more in a lifecycle thinking way? And for our listeners, if they don't know what that is, Jim - I know you've done a lot of work in your career on this – can you describe what that is and its relevance right now? [29:50] 

• Jim -We've been using the terminology: always use lifecycle thinking and apply lifecycle assessment where it makes sense to do so.  [30:14] 
• In the ideation stage, and particularly in discovery and scoping, companies are beginning to look at hotspot analysis, looking at what are the core key criteria to think about this particular product. It's looking at a broad perspective: where you're looking at lifecycle issues associated with raw materials acquisition, things related to energy and from production, manufacturing, things related to distribution, use and end of life management. But you're doing more lifecycle mapping. You're not looking at it strictly from input/output like you would in an LCA. You're beginning to map this out and look at issues along the critical life cycle stages. [30:24] 
• Lifecycle thinking is a powerful tool for promoting sustainability by providing understanding of broader issues without getting into the traditional input/output analysis that you would have with an LCA. It does give you a good perspective. [31:34] 

• We often get asked ‘what does lifecycle thinking mean to me?’ One thing the specifier looks at is to ask the supplier, what have I done to move from a negative to positive impacts (e.g. water or carbon)? A supplier, on the other hand, can look at customers concerns, corporate concerns, and begin positioning -from a lifecycle thinking perspective - for what material might help meet the customer needs. The engineer -from a lifecycle thinking perspective - can look at what tools and information will allow me to embed life cycle information into my process to help inform decisions and choices. So, it becomes a powerful tool to inform decisions based on best available knowledge, understanding the lifecycle systems and the lifecycle stages and the relevant hotspots associated with that product. And it is used over and over again across many roles within a company. [31:55] 
• Neil - I'd like to add to this idea of thinking about where your product is going to be used and what will happen after that. So, think of a screw. If you want to put up a painting on a wall, you can make this screw out of steel. It's a good material, easy to find, cheap, it's a little heavy, but it's one of the best materials you can use to put up a painting on a wall. [33:21] 
• If you want to put a plane together, you should not make it out of steel. That screw should be made of a very light material. You are a person making screws. Depending on what is the use and purpose of that product - it could be the same dimensions and specifications - just choosing a different material will decide whether you should use it for a plane or should use it on a wall. [33:47] 
• I think this is not always obvious. As a person making a screw, you don't think what the screw will be used for. So, it becomes very complicated when you think in this context, but it's super important because the impact could be the complete opposite of what you're thinking, simply because you're thinking of it in the wrong phase. You may make a small battery because it's the lowest impact, the lowest amount of material, the lowest amount of energy you need to assemble it together. But when you put it into a car, you need to drive that car for 300,000 km, which is the lifetime of a car. I need two or three of these batteries. Therefore, I need to repeat that three times, as opposed to a single battery that I would create that is just bigger and lasts the entire lifetime of a car. [34:06] 
• Thinking about it in this way allows you to understand the implications of environmental impacts, because unlike money that you pay for gas, electricity, raw materials or for labour, it's here and now. But a lot of the impacts that are embedded into the making of a product happen far upstream and far downstream of that activity that you have, and you have control over it as a product manager. And this thinking is important when you're looking at it from a sustainability perspective because you may not be paying for the gas that drives the car, the electricity that's used to charge the electric vehicle. But the way you designed your battery will determine that. [35:26] 

• Jim - The things that I'm seeing now in the marketplace as you start hearing about solar panels and batteries - 10, 25 years later, once the product has been on the market – is there's an end-of-life management issue and a landfill problem. They knew 25 years ago that the lifespan was 25 years. But you can address that in the innovation stage by flagging that as a hotspot to be managed and get to the point where you've identified the right parties and stakeholders who could manage the end of life for that particular product early on and establish business relationships. So, when the product's useful life is over, there is infrastructure and ability to recover, reuse, and recycle; whatever the right end of life management solution is for those particular products. [36:06] 
• This post-launch aspect is another element that complicates innovation. What happens when the useful life of that product is over and how and who manages that?  It is another whole conversation. But it’s happening because we're getting examples of products who've been on the market for a while and their useful life is over, or at least for that particular model. So, that's becoming part of many, many conversations right now - how to best handle that. And it needs to be, from my perspective, handled as part of the innovation process. [37:02] 

 

Links to Things We Talk About 

• Scope 3 Emissions, Corporate Value Chain (Scope 3) Standard by the Greenhouse Gas Protocol 

• US Government announces sustainable procurement 
• EU Green Deal Program 

 

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