Place - not product - is at the heart of regenerative business
Updated: Oct 1, 2020
"We are a car company - we make cars"
In the 80s when I was a teeny tiny teen I ended up working in the new fangled "espresso" bar at Next in London. Nobody in the UK had ever heard of espresso, the height of coffee sophistication until that point had been a percolated from the Wimpy.
But Next was a "lifestyle" business. So we had an espresso bar, a furniture store, a jewellers, a hair dressers, even a restaurant. As well as clobber. If you had really wanted you could live your whole life as "Next Man" or "Next Woman". This was 1985 - Next was a brand full of confidence. It was cool. We even had Yasmin Le Bon modelling the gear.
And then it wasn't cool at all. It was way too much. Who the heck wanted a Next hairstyle? The whole idea of "lifestyle brand" was about as naff as you can get. The brand extensions all got rowed back and in 1988 the mail order business kicked off and Next went back to being a clothing company.
For as long as I can remember businesses and brands have defined themselves through what they make or what they do. But this won't work for regenerative business.
There are a handful of exceptions such as Nokia and Saab who have shifted what they make in order to continue to exist. But these were product pivots - moving from making product x to product y.
Occasionally the odd bit of brand faddism tried to shift this "what we do" model a bit. At the height of the codswallop around "experience brands" VW went though a funny turn, getting all excited about creating "fascinating experiences" that got to the heart (or the 'essence' - mandatory for any German brand) of what it was to be "VW". What all of this meant in practice was vast and lavishly lit showrooms (then called "experience centres") and a to-this-day odd installation called Autostadt - an auto theme park in search of a purpose.
(Apparently this is the place to explore three wholly unrelated questions:
"What motivates people to excel? What lies beneath the bonnet of your car? And who will determine the future economy?") WTF?
I still remember the internal meeting when this tide was reversed. Something snapped and a big cheese declared that when it came to the brand we just had to remember that....
"We are a car company - we make cars."
This identification with "what we do" is incredibly powerful. WE MAKE CARS. That's what we do. It is the reason for our existence. It became so ingrained, so unquestionable, that it ended up being distilled into a pompous tagline (Das Auto) and meant that the business could not even conceive of a world where MAKING CARS was no longer central.
This mechanised rigidity not only relegates human creative passion to a mere input, it also means that it is impossible to contemplate even a tiny shift into an adjacent business area - renting cars? nope, set up a new brand; ride-sharing? nope, set up a new brand.
It was this rigidity that almost killed Kodak, and which explains why so many of the industrial era businesses die so quickly. When the product becomes obsolete so do they.
Regenerative businesses are not product businesses
As we build up the Good Growth Company this shift away from product centric business emerges as a fundamental, possibly the fundamental, distinction between a regenerative business and an extractive business.
Product businesses are driven by an internal logic that subordinates place to product - how can we make more? how can we make more, more cheaply? where can we get hold of more materials to make more stuff?
This product centricity is at the heart of what makes so many growth obsessed businesses destructive - it drives behaviour that relegates nature (and all its places) to a source of "raw materials" for more product. Place is subordinated to product.
If your measure of business success is "making and selling more stuff" then that business, by definition, cannot be good for the environment, and can never be "regenerative".
The key feature of a regenerative business is that we work within the boundaries of the ecosystem, and specifically within the boundaries of what's good for that ecosystem.
It's the opposite of the product centric, make as much as possible, industrial paradigm that has screwed up the planet so very badly.
In our Chigertei pilot we have a mix of goats, sheep, yaks, horses and camels. Our challenge is to work out the best mix for the restoration of the place and to make products in that mix. We can't just make what we fancy.
So the trick is to flex the product mix out of these core materials to support the ecosystem, to make the things that restore the natural balance in the place.
A regenerative business must subordinate product to place.
There's no other way. What matters is what's good for the place.
Flexing product mix is the key to impact
Financial incentives exert a powerful influence over landscapes. In the EU prior to 2003 pretty much all farm subsidies were hitched to intensive farming. It was almost impossible as a farmer to do anything other than intensive farming. This subsidy regime led to awful outcomes: my childhood soundtrack was often punctuated by discussion of the 'butter mountain', and "bugs on the windscreen" became a thing of the past. Intensive farming is the result of product centric business models that are disconnected from the natural balance of place. More milk. More butter. More flour.
We have learned, especially through the work of Ibis Rice in Cambodia, that the depth to which we can engage a community is the key to delivering impact. If we can get upwards of 50% of the villagers engaged then we can start reversing environmental degradation. Get 70% engaged and we're flying.
But engagement is hard if the farmers are treated harshly by the economics. If they are at the "raw materials" end of a global supply chain farmers get a very raw deal. They carry all the risk, have next to no pricing power, get treated as an input cost.
If the price they get paid for commodity x (say rice, or the fine goat hair for cashmere) fluctuates because of demand volatility, or just (as in this year) a decision not to make so much cashmere, then they have no choice but to do what they can to keep bread on the table. They will produce what pays them.
So the key to engagement is two fold - we have to shift the risk from them to us, and we have to make things that fit with the landscape.
This means taking all the materials without quibble, and making sure we cover everything that the landscape can produce. So in Cambodia this means not just rice, but mung beans, cashew nuts and sesame seeds. If we have that broad mix we can work with all the farmers - if we're just a rice business we can only work with rice farmers.
The key to getting from 50% to 70% is product mix.
Scarcity is value creating
There's only so much core material in a place.
The world of wine gets this in a way no other category does. Appellation and vintages are signals of scarcity. There are only so many grapes, there is only so much wine. When it's gone, it's gone.
Product centric industrialisation is all about super abundance. Regenerative business is all about scarcity. Working within ecological boundaries means working with finite amounts of materials.
So we have to make a virtue - again - out of scarcity. We have to remember the way it was when we had to wait for the crops to grow, to wait for things to be made.
And linking the place of origin to the consumer is key.
Which means these are place brands not product brands
The last piece of this jigsaw, the difference between regenerative brands and extractive brands, is that the truly regenerative brands are place based, not product based. Where they come from, the source of origin, is the thing that matters.
This sounds like a big deal but it's not really. It's reclaiming something we lost but perhaps have started to recover during the pandemic. It's reconnecting us to places and their very special character, reconnecting us to what matters in those places.
Place matters - time to restore it to where it belongs.