One of my favourite types of successes is when a business finds value in its garbage. One of the most famous cases – taught in almost every business school – is Kingsford Charcoal. Kingsford, the largest charcoal manufacturers in the United States, was founded by Henry Ford an E.G. Kingsford to sell off the waste wood scrap from the Ford Motor Company’s plants.
Ford noticed that there were a lot of wood scraps being thrown away as post-manufacturing waste. He and his relative, E.G. Kingsford, founded a company (originally Ford Charcoal, later renamed) to sell the scraps as charcoal briquets. Rather than pay someone to remove the waste, Ford and Kingsford turned the waste into its own valuable source of revenue.
Here are two interesting examples:
- A colleague of mine was CIO for a film production company. Given Hollywood’s intense focus on stars, lights and publicity, IT would normally be even more of a “cost to be borne,” rather than something positive. Yet my friend made IT into a profit centre! Every new project was broken down into two parts: the common and the proprietary. The proprietary is anything that provides unique competitive advantage to the company; everything else that could be useful to other companies, even (or especially) competitors was spun out as an independent offering. I believe my friend ran one of the only IT profit centres in existence.
- A former executive at a client of mine is now working at opower. Opower uses data at power utilities to encourage customers to reduce energy usage. I highly recommend watching the TED talk by founder Alex Laskey. While the reasons a utility (or any business) would actually try to reduce customer purchases are many and varied, assuming this to be in the utility’s interest, opower allows them to take the leftover data they already have, the equivalent of Henry Ford’s wood shavings, chips and blocks, and turn them into a source of profit.
How do you find the gold in your garbage, or revenue in your refuse?
You need the right mindset, one that looks at waste as something that, yes, should be reduced, but more importantly should be turned into revenue. Your typical internal product managers, usually the ones tasked to match your products to markets, are not the best for finding the hidden value. Product managers are very close to their existing market, as they should be, yet most value hidden in garbage comes from new markets. The film production company sells its new services to its competitors, not to its traditional studio customers. Kingsford sells its charcoal to homes via supermarkets, not once-every-few-years car purchasers via dealerships.
Hire people who don’t come from your industry, especially product people. They have seen different customers in different markets, and will think of things industry veterans will not.
Hire people for a short-term who can take a look at your products, processes, markets and waste without day-to-day job pressures.
You are the General Manager or CEO. Take the time to step back and breathe. Instead of leading sales, or marketing, or operations, trust your execs and go learn new industries, stimulate new thought processes.
Don’t entrepreneurs make poor employees? Aren’t they are likely to be cowboys? Yes, many are. But entrepreneurs are, by definition, people who see market opportunity that others do not. If you can find entrepreneurs looking for some time inside a company between ventures, or as a consultant, they can be your biggest source of new ideas. Just be prepared for more ideas than you can manage.