With so many new companies bringing innovative solutions to water and water technology – both startups (thanks Greentown Labs), and mature businesses – here’s a summary of one way to approach making commercial decisions around cleantech, based on my experience with water, indoor air quality, membranes, and water treatment.
There are five key steps:
- Pick a regulator.
- Quantify the customer’s ROI with your product and benchmarks.
- Insert and penetrate (Musso).
- Make the product easy to buy.
- Serve today’s customers to serve the broader goal.
1/ Pick your regulator and your regulations.
The best Cleantech products pay for themselves with a clear benefit for the user and the end customer – they combine functions, add new functions, reduce cost, or provide a clearer benefit than the product they replace. Products can take years to establish this kind of clear positioning – what are we to do in the meantime?
An ugly truth of many industrial B2B businesses is that if the product wasn’t required by a regulator, or if there wasn’t some incentive payment that improved profitability, many customers wouldn’t adopt new products. Industrial technologies take a long time to vet, evaluations are expensive, fickle global supply chains make manufacturers leery of new vendors, and the teams that are qualified to confirm a company’s great new product are often in high demand.
Pick your regulatory early and pick them wisely. If you pick the wrong one, that’s okay – you can add their testing to your product’s performance stack.
Sometimes all you get from this first decision is one standard to use in measuring your product – this is the first step in making your product easier to buy.
The worse thing you can do is to let an abundance of regulatory options freeze the team or delay measurement. Invest time in understanding the regulations, the regulatory bodies and the standards that come from them.
If it is just too overwhelming – call around and see which tests you can get access to fastest and cheapest. Go take the people at a third party testing center out for lunch or drinks and get their input based on what they see customers asking them for.
In the liquid filtration markets where I’ve spent most of my career, often times the high end regulator is the FDA and then other markets free ride off of the standards that they establish. Many customers don’t even fully understand why they need a specific standard – and they actually do need them, but because of high switching costs, they know to insist on them every time.
The regulator provides a standard, and that standard is how you will benchmark the improvement made possible by your product / solution / technology. Your customers’ goal is to quickly evaluate your product to see if it is better, the regulator and the market accepted standard is the fastest, most effective way to help your customer achieve their goal.
Bonus Question: What if there is no regulator? What if you are early?
Answer: Identify an adjacent or sufficient regulator or approach that is measurable, and that has reasonable ground for adoption – then use that.
- Farm vehicle cabins need a standard to protect the driver / operator from aerosols and pesticides, but there isn’t a clear standard – use standards out of HEPA or out of the FAA guidelines for passenger air quality on aircraft.
- A new lightweight portable camping water filter needs to show it is effective against a new pathogen, so use the FDA standards around sterilizing grade filtration to measure performance. Use a proxy particle for the organism if needed.
2/ ROI and Benchmark
With a regulator and a standard in hand, it’s time to vet your capabilities to determine what your customer ROI is from choosing to work with your product, and how that stacks up against your competitors.
Often times technical teams and marketers will scour their competitor’s marketing and technical literature to understand their claims – and then compete directly against those claims. Most likely those claims are a best case scenario. The world starts to look very different when you’re buying competitive products off of eBay, interviewing their current customers for feedback, and sometimes even listening to frustrated buyers talk about your competitor’s weakness. Benchmark and measure the product yourself, because measurement is crucial.
Measurement will then be used to integrate with your production teams quality specifications. Quality specs are often a way to differentiate your pricing by capturing value that the market has left on the table, or providing services and insight that the competition hasn’t yet identified.
Know the ROI.
“What if we can’t get our results to match the standard? Or even close to the standard?”
Well if you can’t do it, then how can a customer do it? Figure it out. Why will a customer buy from you if you make them do all the work? If you force a buyer to figure out your product for you, then you are giving away margin and money. Don’t make your customer
If your competitors product requires a metal filtration vessel, a specific skid, specialized installation, and then specific cartridge refills for a liquid filtration problem – then understand all of those costs and break them out.
Walk through the costs that a customer goes through to buy the competition, and then what they go through to switch to your product. One time, we’d developed a high performance material that was a consumable that was about 4x better than the competition – but that material was only 1 / 1000th of the system cost. There was effectively no change in ROI.
If your business washes out on the ROI calculation, then it is better to know now than to wait! Knowing the numbers can help steer market selection and provide rebound opportunities if the original assumptions which got you excited are shown to be false. There are a lot of zombie companies in the cleantech world that are scared to calculate this number, or too scared to bring solutions to investors when they realize that the ROI is out of whack. Don’t be a zombie.
Bonus Question 2: What if I’m missing something on the ROI calculations?
If you’re sitting with an account, and you walk through your calculations with them and you’re wrong – they will correct you. If you don’t have anything, they don’t have anything to correct. A customer that has been this patient with you will either; (1) cut you off, “you’re crazy, this is way too expensive,” (2) correct you, “this is close, but the numbers are more like this,” or (3) purchase from you.
3/ Insertion & Penetration: Get Trials to Get Wins
Most cleantech products aren’t driving revenue by sitting on Walmart shelves, selling through Amazon, or going direct to consumer. The value comes by improving an industrial product or process, which then experiences its own adoption cycle.
“Material commercialization is all about insertion and penetration.”– Musso
Your goal is to get insertions – that is under your team’s control. You control insertions by:
- Choosing markets with many insertion points. If you go into a big market with a monopoly and they don’t want to buy – the game is over.
- Making it easy for customers to buy the product and use it. This increases your hit rate in the market and makes it easy for adjacent markets, and even adjacent spots in a supply chain, to evaluate the product.
With sufficient insertions, you can get penetration as your customers’ products then go on to win in the market. You will watch brilliant, elegant, and superior products launched by Fortune 50 companies that are enabled by your product fail – and given your spot in the supply chain, the best way to mitigate that risk is to be working with many insertions. Even the best can fail at penetration. To survive, you need insertions – it is a numbers game, because as a small player – which every new product starts off as – it is often too difficult to ramp up and take control of the entire supply chain between you and the end user.
How do you get more insertions?
- Have a clear ROI and know your benchmarks.
- Make the product easy to buy.
- If you’ve picked the wrong regulator, or fully addressed your first application – then go to the next market and repeat. Add markets and materials to your performance stack.
- Do *not* go on to a next market until you have the first market down with a complete understanding of ROI. Too many companies grow their expenses by pursuing too many markets in parallel. Prioritize and pursue markets in sequence – as leaders you get paid to develop an appropriate sequence and see the product through.
4/ Make the Product Easy to Buy.
Your first step in making the product easy to buy was your choice of regulator and choice of a clear third party, independent, standard or test. In nearly 25 years of manufacturing, I see on average 10 startups a year that put forward results in an initial standard that are completely useless. They’ve developed their own standard, they’ve developed their own concept of the pollution or energy savings they will improve – and often times they benchmark it to nothing. Pitch decks or sales literature without this basic information is totally useless, and it isn’t worth the time to evaluate – because I will spend all my time educating them on what they should know in the first place.
If a potential vendor hasn’t shown enough interest in your market to know the standards, what other lunacy can you expect as you evaluate their product? Show that your not yet another fly-by-night cleantech participant by putting forward valuable information. It doesn’t have to be perfect – and it is why this first step above is so important.
“But how can my product be easy to buy if you just said that the product isn’t selling through Amazon or Wal-mart?”The Reader
The sustainability manager, quality buyer, VP global Ops, plant manager, etc that you are courting for your product has a personal life – and in that personal life they know how easy it can be to shop. Don’t be difficult.
Identify your target buyer – follow the Pragmatic Marketing template to make sure you’ve used best-in-class frameworks to get internal alignment, create real buyer personas and think of the problem from your customers’ perspective.
Focus your marketing on high value problems, use content marketing as a proxy to understand interest. If you’re not sure which regulator to pick or which market to sequence next – then put up two blog posts and see which one gets the most clicks.
When customers call – sell to them. Many cleantech companies have a Clean-as-a-Service mindset – which is laudable and will make the world a better place. If the customer has 200 manufacturing sites, wants your product at each one of them, and isn’t yet ready to make that kind of purchase – then structure your contract to mimic the payment structure and help train them on how to migrate to that new world. Take their money, be easy to buy from.
Make the product easy to install.
Make the product easy to deploy globally. Many cleantech companies have competitors elsewhere in the globe – it doesn’t make sense to say “the best X in Brazil” just like it no longer makes sense to say “the best Y in Kansas.” The market is global, even with current supply chain disruptions.
Make the product easy to fulfill online.
Use clear internal and external documentation.
Benchmark yourself to the best-in-class web startups, not to your competitors battling for room on a Fortune 500 website with an IT department bigger than your whole team.
Use case studies to make it easy for others to see the value and the ROI. “What if my numbers are wrong?” Don’t you want to know?
“What if my competitors then know my strategy?” Be good enough to set the pace, don’t let fear of the competition dictate what you do.
Make the product easy to return. If it is easy to return customers will work with you more in those first few installs to coach you to the right solution. Be easy to work with and the customer will make it easy to work with them.
Ship the product the day they buy. “That’s impossible with an industrial good.” Maybe it is, maybe if you set the goal, your team will find ways to hit it.
5/ Serve today’s customer to serve the greater goal.
Many cleantech businesses focus on the great social modern social injustices we see all around us:
- Food insecurity
- Clean water
- Carbon neutrality
- Energy access
Many investors focus on those broader goals – as leaders we earn the right to cure those broader societal issues by being profitable in the interim. Without the profits and cash flow created by building independent, sustainable businesses today – we forfeit the security of knowing our business will be present to thwart those broader challenges tomorrow.
 Talented personnel that can understand, evaluate, and advocate for a new industrial product are often the constraint in the sales process. This is one of the reasons it is so important to make the product easy to buy. The average career stent of this kind of engineer is 4 years, so a sales cycle that takes longer than 2 years is too long.
 Yes, really it is benchmarked to nothing. They have a bar chart that will compare their own product to a worse version of their own product – with no external reference point. Often times the units are of their own making. This is why big companies are loath to entrust any vital process to a new entrant – not only are they ignorant of the customers real needs, they haven’t put forth any effort to resolve that ignorance.