Business Finance – Operations Management Can someone do my Week 2 Assignment in BUS 639 Technology & Innovation!?

ByAtlas Essays

 

Current Intangible Business Costs

[WLOs: 1, 2] [CLO: 4]

Prior to beginning work on this assignment,

Using the DargeanGrix Business Scenario document, evaluate the current costs of the situation to the organization. Provide a breakdown of the costs and the risks to the organization in the situation. Remember that costs are not only hard costs or dollar related; consider the intangible costs of reputation, perception, and lost productivity due to inefficiency, frustration, stress, mental health, workarounds, and any other kind of intangible cost. Remember that these intangible costs may not be readily quantifiable. However, you can include a narrative with examples that support these aspects. Your goal is to develop the ability to think beyond return on investment (ROI) and traditional costs as justifiers for new ideas.

In your paper,

  • Analyze at least three intangible costs associated with the DargeanGrix Business Scenario.
  • Explain the aspects that comprise the intangible elements.
  • Evaluate the impact of each of the intangibles to DargeanGrix and to DargeanGrix’s business processes and assign a cost to each.
    • The cost may be a monetary one or it may be another form of valuation.
  • Justify each of the assigned costs with a narrative explaining your rationale for each element.
    • Although not required, a table may be useful for visualizing the aspects.

The Current Intangible Business Costs paper

What are intangible benefits? 

Intangible benefits are benefits from your Lean Sigma program that are not explicitly measurable; being even more specific, intangible benefits are benefits that cannot be directly or solely attributed to the results of the project or process improvement. Examples of intangible benefits are reduction in employee stress or increased employee engagement; however, these are not the only examples of intangible benefits. Other benefits may include customer perceptions of your organization or competitors viewing your organization as  world-class . 

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Intangible benefits are sometimes referred to as “ soft benefits ,” but I would challenge this definition because benefits such as capacity or time savings can be quantified and reported to stakeholders. Intangible benefits are benefits that cannot be consistently measured or solely attributed to process improvements, such as employee morale. 

Two sides of the same coin 

Documenting or communicating intangible benefits have both a distinct benefit and drawback for your Lean Six Sigma program. As you know, a goal of any process improvement program is to create a culture or environment of ongoing continuous improvement. Using intangible benefits to describe the benefits of the project can both help and harm ongoing continuous improvement efforts. 

Pro: Intangible benefits engage employees

Emotions are the lowest level of cognition and create powerful associations for people. Employees who associate Lean Six Sigma with decreasing stress, process complexity, training time, etc., will be more inclined to participate in ongoing improvements. Associating Lean Six Sigma with “good” things is a great way to get employees excited and talking about the amazing work the LSS teams are doing!

Con: Intangible benefits are unquantifiable

The very nature of intangible benefits means that practitioners are not able to clearly and confidently attribute these benefits to the project outcomes. 

While this may not seem like a bad thing when you are recruiting team members, a central component of Lean Six Sigma is  data-driven decisions  with continuous data as the gold standard. Intangible benefits are at best a form of discrete,  qualitative data , and at worst highly subjective and non-repeatable. This means that by using intangible benefits to describe the project outcomes, we are introducing subjectivity into our Lean Six Sigma (debating subjectivity in project outcomes sounds like an excellent ice-breaker for a LSS happy hour). 

Why are intangible benefits important to understand? 

When we are calculating the total benefits, or  ROI (return on investment) , of our Lean Six Sigma investment, we want to evaluate not just the single project, but also the impact the project has had on the organization. In order to understand this big-picture view of the project outcomes, we need to also understand the impact of intangible benefits.

1. Intangible benefits create goodwill

I know that “goodwill” is a nebulous concept (much like intangible benefits), but I remember from my business school strategy course that assessing an organization’s or brand’s goodwill is a major indicator for customer engagement and ultimately, the organization’s valuation. Intangible benefits create goodwill for your Lean Six Sigma efforts that may help the program’s long-term sustainability. 

2. Intangible benefits show the “softer” side of Lean Six Sigma

One of the (often unfounded) criticisms of Lean Six Sigma is the focus on  efficiency  and data diminishes the employee contributions. While not generally the case (respect for employee contributions is a cornerstone of the philosophy), probing into work behaviors and processes can incite anxiety and resistance in employee participation. Reporting and sharing the success stories that may not be linked to an organization’s strategic goal demonstrates the organization values the employees as well as the performance. 

3. Gauging validity

ROI is a very popular performance metric that measures the efficiency or effectiveness of an investment. Implementing a Lean Six Sigma program (or even a single project) is an investment of employee resources, time, and potentially initial cost to update the processes. 

Given these are investments, organizations often like to compare performance of initiatives. That being said, intangible benefits are often not included in the ROI formula (there are a couple of companies that have a modified approach to quantifying and reporting intangible benefits), which means that the practitioner will need to understand intangible benefits to discuss as additional contributions from the Lean Six Sigma investment.  

Does this bring you joy? 

I was having a Netflix binge session and ended up watching “Tidying Up” with Marie Kondo. For those of you unfamiliar with her work, Marie Kondo is a minimalist, decluttering, tidying expert who helps her clients gain peace of mind by decluttering their home and, thus, bringing joy. 

What struck me while I was watching this is that Kondo’s process is a pop-culture example of applying the  5S  tool. The steps Kondo follows to declutter and tidy her client’s homes parallels the sort, set in order, shine (or scrub), standardize, and sustain steps of 5S. Kondo clearly identifies the intangible benefit of applying this practice to a living space by focusing her work on bringing joy to her clients. 

While Lean Six Sigma practitioners are not generally associated with bringing joy to their projects, the intangible benefits of decreased stress, increased morale, or increased employee engagement can be seen as a form of joy in the workplace.  

4 best practices when thinking about intangible benefits 

I am a strong advocate of including intangible benefits in Lean Six Sigma program development because I believe this adds fullness to understanding the impact of the team’s efforts. 

However, there are a couple of things you need to keep in mind when you are considering adding intangible benefits to your benefits conversations. 

1. Do explain what an intangible benefit is from the start

Hard and soft benefits are intuitive to understand from an efficiency perspective: There is either more money (hard, bottom line benefits) or more time (soft, capacity benefits). Intangible benefits are less easily understood from a business perspective, which means the practitioner needs to clearly explain what an intangible benefit is before discussing whether this project may have intangible benefits. 

2. Do not lead with intangible benefits

It is easy to throw the intangible benefits blanket over a project and claim that is the main benefit. Heck, in my younger and less-experienced days, I wrote a project charter that claimed the main benefit was employee satisfaction with their role. Of course, that project was not considered a success because there are more factors than processes that go into employee role satisfaction. 

It is certainly important to discuss the potential for intangible benefits resulting from this project, but the team should focus on the quantifiable objectives first and follow with the potential additional benefits. 

3. Do provide an explanation for how you determined a benefit exists

Just because a benefit is intangible doesn’t mean you don’t have a way of capturing the information. If you are reporting “lean program awareness” and going to capture this during your gemba walks, document that you are going to record employee feedback gathered during gemba walk. It is important that all measurement systems (including those for subjective data) be captured for the project documentation. 

4. Do agree on reporting benefits

Lastly, or probably first, get buy-in from your sponsors and champions on including intangible benefits. This is an overarching, not just one project, level decision that will require alignment and commitment as intangible benefits tend to decline over time, compared with hard and soft benefits that should compound. 

Frequently Asked Questions (FAQ) about intangible benefits

1. If the benefit is intangible, how do we know it exists?  

This is where intangible benefits get tricky: assessing for intangible benefits can be done in two ways: 

1. Debriefing/post-mortem/post-project follow ups. Because intangible benefits are benefits perceived by employees, the best way to gauge if these benefits resulted from the project is by asking for the employee’s feedback on the process. Practitioners need to be careful they do not ask leading questions when soliciting feedback on employee impressions of the improvement. 

2. Comparative analysis or a pre- and post-assessment. This type of identification is generally done with larger Lean Six Sigma implementations or done in conjunction with employee satisfaction surveys. A large-scale assessment such as an employee satisfaction survey limits the specificity for an individual project’s benefits. 

2. How do I convince champions and sponsors? 

When I have discussed using intangible benefits with leaders, I position the message from the culture of continuous improvement aspect, where to be successful, Lean Six Sigma programs need: voice of customer, employee engagement, and data-driven decisions. Intangible benefits are helpful for bolstering employee engagement. 

The other tactic I have used is completing the first project and including a side note for intangible benefits. After I introduce the idea, I discuss the concept in more detail when we are chartering our next project. 

3. What are some examples of intangible benefits? 

We already discussed employee morale and mental wellbeing, but other examples of intangible benefits are customer goodwill, employee and customer loyalty, Lean Six Sigma program goodwill, and encouraged participation. 

All things in moderation 

I generally advise my mentees and teams to limit themselves to declaring one intangible benefit from the project and to list this benefit last in the project benefits report. Listing this last doesn’t diminish the contribution to the project, but it does keep the focus on the hard and soft (capacity) benefits that can be quantified (fostering the data-driven culture).

,

8/19/2024 Intangible Assets: They’re Not What You Think They Are | CFO

https://www.cfo.com/news/intangible-assets-theyre-not-what-you-think-they-are/661486/ 1/6

William Heitman

Intangible Assets: Theyʼre Not What You Think They Are Published July 19, 2016

By William Heitman

CFO Editorial Staff

For centuries, executives expertly managed the total productivity

of tangible assets, such as plants and equipment. They monitored

both efficiency and effectiveness because tangible assets, or

“things,” historically accounted for more than 80% of business

value.

But in the last 40 years, tangible

assets have declined to 15% of

business value, while intangible

assets now generate 85% of value.

These are the job activities, or

“tasks,” performed by knowledge

workers. Formerly known as white-

collar employees, these people now

comprise a majority of the U.S.

workforce. But accounting rules

require their activities to be recorded as expenses. And executives

currently manage those as costs to be contained and reduced.

Productivity measures of efficiency and effectiveness are rarely

applied.

That’s why the newest, most valuable business assets remain

underproductive, performing far below their potential.

8/19/2024 Intangible Assets: They’re Not What You Think They Are | CFO

https://www.cfo.com/news/intangible-assets-theyre-not-what-you-think-they-are/661486/ 2/6

CFOs are ideally positioned to capitalize on this valuable

opportunity. They can lead the transition from managing the

productivity of “things” to managing the productivity of “tasks.”

White-Collar Assets: Underproductive “Competencies”

The composition of these intangible assets is not what you might

think. Executives perceive them to be mostly patents, trademarks,

and goodwill. But those are only 25% of the total. The other 75%

are the job activities that economists call “competencies,” which

generated more than 60% of S&P market value in 2015.

In business, competencies are concentrated in white-collar

functions, recorded as selling, general, and administrative (SG&A)

expense. Finance, R&D, and product engineering are

competencies, as are the relationships between customers and

suppliers (marketing/sales). Databases and information systems

are also included (IT).

At first glance, it’s tempting to think that managing the

productivity of intangible “competency organizations,” such as

marketing or finance, is fundamentally different and more difficult

than managing a conventional factory. But CFOs can adapt many

of the methods honed over the past century in the course of

successful tangible asset management. That’s because factories, as

well as intangible assets, are managed with budgets.

The major difference between intangible asset budgets and factory

budgets is that the latter are derived and evaluated with

quantitative productivity measures.

Inefficiency: Adopt Productivity-Based Budgets

Knowledge workers squander an average of 40% of their typical

work day performing avoidable tasks, such as error correction,

8/19/2024 Intangible Assets: They’re Not What You Think They Are | CFO

https://www.cfo.com/news/intangible-assets-theyre-not-what-you-think-they-are/661486/ 3/6

rework, and over-service, our research shows. Without

productivity management, these inefficiencies pass unnoticed and

cause over-spending for costly knowledge work. This is how

Fortune 500 knowledge workers squander 15% of hard-won

earnings before they reach the bottom line, based on our

experience and calculations using public data.

For example, the world’s largest lightbulb maker manufactures

products in automated plants that are nearly labor-free. But when

the bulbs are sold through the world’s largest retailer, the invoices

are manually reconciled by knowledge workers, resembling a

modern-day Dickensian counting house. A group of 2,000

employees who process invoices is supported by a team of 600

lower-cost reconcilers. They correct inconsistencies, contact store

managers and vendors, and return goods. Vendors complain of

their high costs, delays, and the inconvenience related to invoice

processing.

Nobody at the retailer notices the wasteful rework, however,

because the invoice-processing organization routinely meets its

operating budget.

When CFOs help develop operating budgets for executives who

manage tangible assets, such as factories, they begin with forecasts

of productivity. Output volumes are estimated and applied to

productivity metrics: cost per unit, labor efficiency factors for

tasks, and cycle times for processes. Starting with productivity

performance goals, they work backward to generate budget line

items and totals. These are productivity-based budgets.

Consequently, many CFO organizations already possess the

capability to manage the productivity of the intangible assets

known as competencies. They can introduce productivity-based

budgets to these knowledge work organizations at the simplest

level. In the example above, the invoice-processing organization

8/19/2024 Intangible Assets: They’re Not What You Think They Are | CFO

https://www.cfo.com/news/intangible-assets-theyre-not-what-you-think-they-are/661486/ 4/6

can be budgeted and managed starting with only two metrics:

invoices processed and invoices that arrive “not-in-good-order”

(NIGO).

Ineffectiveness: Manage the Root Causes of Results

It is impossible to reliably estimate the business value lost to

ineffective knowledge work, but the results often appear as

unintended consequences (direct losses) and opportunity costs

(indirect losses). Most knowledge-work organizations incur both

types of value losses.

The good news is that CFOs can adapt “root cause analysis” from

their manufacturing colleagues to better manage the results of

unintended consequences.

Consider a global credit card issuer that maintains an average

backlog of more than 50,000 consumer claims. The company’s

contact centers are flooded with customer demands for unfulfilled

marketing campaign promises: bonus points, rebates, free gift

offers. Most result from the marketing organization’s failure to

coordinate the details of well-intentioned consumer campaigns

with the company’s fulfillment operations capabilities and the

requirements of its regulatory compliance organizations.

These are unintended consequences that generate substantial,

direct costs of remediation. In fact, the high costs of remediation

render more than 10% of the campaigns “business value negative”

at the design stage, based on our analysis. These should never be

launched. But because such costs fall in organizations other than

marketing, such as customer contact centers, visibility is low and

it’s considered business as usual.

However, the loss of business value is not limited to remediation

costs. It includes greater losses of value, such as the continuous

8/19/2024 Intangible Assets: They’re Not What You Think They Are | CFO

https://www.cfo.com/news/intangible-assets-theyre-not-what-you-think-they-are/661486/ 5/6

drag on marketing effectiveness and the ongoing erosion of the

global brand.

Eliminate the remediation costs, and you also eliminate the brand

erosion.

In the factory, industrial engineers document each step of

production. They analyze the “root causes” and the

interdependencies that result in consequences, both intentional

and unintended. It is a ceaseless effort.

The CFO: Industrial Engineer of Intangible Value

Now that knowledge workers comprise the majority of employees

in advanced economies, their costly, inefficient tasks are

increasingly subject to external scrutiny. Activist investors have

caught on. They want to simply downsize knowledge workers. And

digital upstarts want to disruptively automate them away. But

businesses and CFOs remain best positioned to capitalize on this

growing class of undermanaged, intangible assets.

CFOs might even take a page from Henry Ford, a century ago, as

the moving assembly line was being born. Keenly aware that the

most valuable asset in the newly emerging plant was know-how,

the company immediately built a dedicated office on the factory

floor. It was devoted to documenting, standardizing, and

distributing the rapidly growing body of knowledge — the

competencies — essential for productively managing the massive

investment in the tangible assets of automated plant and

equipment. Those working in that office on the factory floor were

the industrial engineers for tangible asset value.

Knowledge work today represents a similarly massive investment

in intangible assets. CFOs should begin to think of their finance

organizations as the industrial engineers of intangible asset value.

8/19/2024 Intangible Assets: They’re Not What You Think They Are | CFO

https://www.cfo.com/news/intangible-assets-theyre-not-what-you-think-they-are/661486/ 6/6

William Heitman is managing director at The Lab Consulting,

which has been implementing non-technology business

improvements since 1993.

,

8/19/2024 97 Examples of Intangible Things – Simplicable

https://simplicable.com/life/intangible-things 1/12

A-Z Popular Blog Culture Search »

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97 Examples of Intangible Things John Spacey, updated on September 09, 2023

Intangible things are entities that have no physical form. The following are common examples. Reputation Social status Identity Software Digital platforms Talent Literacy Ideas Intuition Knowledge Patents Trademarks Copyrights Trade secrets Style Trust Emotions Mood Intuition Concepts Family Friendship Brand image Brand recognition Well-being Digital media Digital messages Digital advertising Digital marketing Virtual reality Artificial intelligence Broadcasts Podcasts Video games Music Films Videos Social media Stories Fictional characters Humor Freedom Rights Privacy Safety Security Ideology Democracy Capitalism Rule of law Civility Citizenship Nationality Data Customer lists Reviews & ratings Strategies Goals Discipline Leadership

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8/19/2024 97 Examples of Intangible Things – Simplicable

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8/19/2024 97 Examples of Intangible Things – Simplicable

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8/19/2024 97 Examples of Intangible Things – Simplicable

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8/19/2024 97 Examples of Intangible Things – Simplicable

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74 Examples of Life Opportunities An overview of life opportunities with lists of examples.

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8/19/2024 97 Examples of Intangible Things – Simplicable

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8/19/2024 97 Examples of Intangible Things – Simplicable

https://simplicable.com/life/intangible-things 2/12

Personal presence Personality Character Loyalty Licenses Permits Agreements Processes Culture Norms Aesthetics Attitudes Etiquette Politeness Respect Ambition Opinions Values Morals Thoughts Behavior Ethics Principles Beliefs Customs Traditions Lifestyle Quality of life Social class Money Roles Responsibility Accountability Hierarchies Spirituality Symbols Competitive advantage

Ideas

Ideas and thought processes have no physical form. For example, an abstract concept such as freedom.

Emotion

Human emotions such as pride, envy and love.

Talent

The abilities of people.

Knowledge

Information that exists in the mind.

Data

Information that is represented in a digital form.

Intellectual Property

Intellectual property such as trademarks, copyrights and patents.

Trade Secrets

Valuable know-how that is protected by secrecy as opposed to legal rights.

Brand

The recognition, image and reputation of a brand can be worth many billions of dollars but has no physical form. The impressions it has made on the minds of customers and other stakeholders such as employees and investors.

Money

Most of the world's money exists as the records of banks and has no physical form. This can often be exchanged for a

Financial Assets

Financial assets are often represented as securities, derivatives and other contracts that don't necessarily have a physica ownership or rights in something physical.

Experience

An experience such as visiting a theme park.

Events

A unique and limited-time experience such as a concert or business conference.

Services

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8/19/2024 97 Examples of Intangible Things – Simplicable

https://simplicable.com/life/intangible-things 3/12

A product that mostly offers intangible value. For example, a high speed train that transports people. Advanced econom away from physical products. Physical products will always exist but the vast majority of future value creation is likel

Digital Products

Items that were traditionally sold as a physical product that can now be downloaded as a digital item. For example, an

Digital Environments

Digital places that can be experienced despite the fact they do not physically exist. For example, a game or virtual eve

Software Software is digital functionality that is stored as data.

Communication

Communication is increasingly electronic and is often paperless. For example, a voice call or a text message.

Media

Entertainment, information and publications are typically digital with rare exceptions such as a physical newspaper.

Education & Training

Education and training offer intangible value such as knowledge, cultivation of talent, experience and development of

Knowledge Work

Work products that have no physical form such as a strategy, plan, design, decision, advice, diagnosis, communication advanced economies is shifting from physical work to knowledge work such that most work products have no physica

Culture

Culture can be tangible such as a historical building or intangible such as a language.

Society

A society relies on tangible things such as infrastructure and intangible things such as civility.

Norms

The fluid rules of a society or culture. Unlike laws or regulations, norms are informal and occur spontaneously as a soc

Values

The principles of a society, culture, group or individual that allow for peace, productivity and pursuit of happiness.

Shared Experience

An experience that bonds individuals together as a group. For example, a hardship that produces stronger social bonds members or coworkers.

Identity

The ability of a person to feel that they share things in common with others based on shared characteristics or experien people typically identify as human such that they have sympathy and respect for other people.

Art, Film & Music

Creative outputs that have cultural and artistic value often have no physical form. It can also be said that a physical wo of its value from the intangible experience of viewing the art as opposed to being a physical product. For example, a d much like the painting itself whereas a digital image of a tractor has little value compared to the physical machine.

Quality of Life

The extent to which people are satisfied by life measured with concepts such as happiness and self-fulfillment.

Summary

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8/19/2024 97 Examples of Intangible Things – Simplicable

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Overview: Intangible Things Type Things Definition Entities that have no physical form.

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Material Things

A list of material things with an overview of materialism and minimalism. 65 Examples of Material Things » 70 Examples of Clear Things »

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8/19/2024 97 Examples of Intangible Things – Simplicable

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Real World

An overview of the real world with examples. 102 Examples of the Real World »

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INTANGIBLE VALUES: THE BUILDING BLOCKS OF PURPOSE OPINION / Posted January 30th, 2019 | Category: BRM Capability (https://brm.institute/category/brm_capability/), Business

Relationship Management Research (https://brm.institute/category/research/) | Contributed by Tom Kruse

Integrity. Empower Individuals. Deliver on your Promises.

Every organization strives to live by a set of values like the ones mentioned above. These values represent a moral compass for the employees to follow, which sets them on the path towards success.

First of all, values come in many forms and we, as individuals, may agree or disagree with whichever ones we please. However, to truly be justi�ed in our judgments of certain values, it’s imperative to know the distinction between the two main types: tangible & intangible values.

Tangible (Extrinsic) Values

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Something that holds tangible value is derivatively good (https://plato.stanford.edu/entries/value-intrinsic-extrinsic/); meaning it is good for the sake of something else it’s related to. In other words, something with tangible value derives value from its relationship with another thing that is inherently good.

For Example:

When asked why it is good to give employees vacations, one answer might be because it contributes to mental health. However, vacations may not always contribute positively to mental health. Perhaps you have been on a vacation before that was more stressful, than relaxing?

Instead, vacations provide tangible value only when you return feeling well-rested and rejuvenated. Therefore, one could say that vacations provide tangible value when they positively contribute to your mental health (something inherently good).

Intangible (Intrinsic) Values

Comparatively, something that holds intangible value is non-derivatively good (https://plato.stanford.edu/entries/value-intrinsic-extrinsic/); meaning it is good for its own sake.

For Example:

In following the �rst scenario regarding vacations and mental health, we might be prompted to ask, “Why is it good to have a mentally healthy workforce?”

Certainly, you could provide extrinsic rationale by saying that a mentally healthy workforce leads to increased productivity and business value.

But you could also answer with intrinsic rationale, mentioning that it is intangibly valuable to maintain good health, which directly contributes to a quality life. Therefore, positive mental health holds intangible value since it is simply good to be healthy.

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Intangible Values Are More Powerful

According to the Stanford Encyclopedia of Psychology, “Intrinsic value (…) has a certain priority over extrinsic value.” Moreover, philosophers have placed heavy emphasis on intrinsic, and thus intangible, value for centuries. But, why?

To answer that, let’s think like a philosopher for a second…

If I have two similar objects, but one holds intangible value while the other holds tangible value, the former object is innately more valuable. Why?

Because, as per the de�nition of intrinsic value, that object is good for its own sake; its value does not come from some other source outside of the objects themselves.

Consider Your Intangible Values for Increased Motivation

In this area, philosophers and business professionals �nd agreement. The aforementioned values of Integrity, Empowering Individuals, and Delivering on your Promises hold incredible amounts of intangible value. Naturally, employees strive towards these ideals because they recognize the societal value of living by these moral guides.

Is there a reason why organizations are more apt to claim Integrity as a value, rather than stating We Give Vacations? What are your personal intangible values?

Take a moment to consider your values, and how those relate to the values of your company. Consequently, synergy between personal and organizational values helps you �nd purpose and motivation in your work.

Consider a focus on values to increase your personal and professional success.

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8/19/2024 Selling Intangibles: How to Sell What the Customer Can't See – Trellis

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Selling Intangibles: How to Sell What the Customer Can't See

In these uncertain and cash-strapped times, how do you convince customers that buying green is smart and profitable? We asked four companies for their tips on selling the real value of green products and services.

By Sarah Terry-Cobo August 24, 2009 �Updated on July 24, 2024�

Improving environmental performance often takes place behind the scenes – for instance, energy efficiency measures are not always evident on the finished product. But these intangible benefits represent significant environmental upgrades — sometimes more than reduced packaging or other claims touted in labels or in ads.

So how do companies sell such abstract environmental benefits while keeping an eye on what customers want — and an eye on the bottom line?

Help Customers Connect the Dots

In trying to overcome the perception that greener things cost more, Dan Daggett has a tough job. But one tried-and-true method involves selling the customer on

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Four Keys to Selling the True Value

of Your Products

1. Help your customers connect the

dots: Emphasize the total cost of

ownership.

2. Encourage change by showing

success stories: Industry pioneers and

mission-driven companies show how

reduction of GHGs also leads to reduction

in costs.

3. Illustrate that green is a spectrum:

Greener purchases make employees

happier and help achieve environmental

goals.

4. Talk to the right person: the CEOs or

CSOs of a company can see the big

picture and make the connection with

long-term savings and environmental

benefits.

johnson diversey stride cleaner

a “total cost approach,” explained Daggett, the corporate sustainability manager for JohnsonDiversey.

As a company that sells cleaning products to businesses and institutions, Daggett said it can be a challenge for the customer to understand there is more value in a $50 gallon of environmentally friendly, concentrated cleaning solution compared to a conventional solution.

“Part of the overall selling proposition is the quantitative savings: energy efficiency, water conservation, reducing energy use, reduced injury rates, which decreases liability concerns,” he said. If the cleaning solution is less likely to cause respiratory illness to the janitor who uses it, the company does more than save money in the long run. Fewer illnesses mean increased worker productivity and increased operational efficiency, Daggett explained.

“How do we help customers become more efficient? That is a fairly typical discussion we have with our customers,” he said, but noted this type of conversation usually resonates the most among those who are able to “connect the dots” in an organization.

Daggett’s total cost approach may be a more effective way to calculate business transactions — especially in a world where corporate sustainability reports are becoming the norm. By focusing on energy conservation, water waste and health of the workers, JohnsonDiversey gives its customers a tool to improve their reporting and make total costs more tangible.

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stonyfield issue cup

But the idea of total cost is not new one, Daggett observed. It has long been used in the automotive industry to quantify how much a vehicle costs over its lifetime — rather than simply the sticker price — the total cost of owning a car includes the oil, gasoline, and maintenance needed to operate.

Similarly, total cost is factored into IT services: Do the costs above and beyond purchasing hardware make it a smarter investment to switch to cloud computing instead? While the needs vary from company to company and sector to sector, these types of calculations are helping businesses to make informed decisions about business operations. And an informed decision can also mean a more environmentally friendly decision.

JohnsonDiversey shows one way of selling the sometimes intangible values that highlight environmental performance in the long run: By explaining the total costs of purchasing products that normally don’t receive that kind of scrutiny. While there are some challenges to this approach, using examples from businesses that have already taken the plunge can make it an easier sell.

Encourage Change by Showing Success Stories

Stonyfield Farm is not your typical for profit company. It began in 1983 as an organic farming school, but now does far more than sell hormone and antibiotic- free yogurt and dairy products.

As its loyal customers probably already know, the company collects its #5 plastic containers to be recycled into toothbrushes, razors, kitchenware and much more. Stonyfield donates 10 percent of its profits to environmental organizations. And all of the company’s operations are carbon neutral through a combination of methane capture, energy efficiency and investment in offsets.

These examples show how, as a mission- driven company, Stonyfield sets the bar pretty high for reducing carbon emissions. But its work also highlights an opportunity available to any company: A good example is the work the organic yogurt firm did with Ryder System to improve transportation-related emissions.

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ryder rydegreen truck

“When we approached them about their supply chain, they said ‘we want to reduce our emissions’ and there was no mention of costs,” said Mark Swenson, vice president of business development in supply chain solutions with Ryder.

Since 2006, Stonyfield has achieved a double-digit reduction in greenhouse gas (GHG) emissions as well as a reduction in costs, Ryder reports.

“The two are not mutually exclusive, but truly correlated,” Swenson said. “And looking at that model, Stonyfield is a pioneer.” By partnering with the Environmental Protection Agency’s SmartWay program, Ryder was able to track and improve transportation-related emissions for Stonyfield by improving delivery routes, consolidating orders and using web-based reporting to track shipments, among other practices.

Swenson said he uses the yogurt maker as a case study to

persuade businesses that may not be convinced it is possible to reduce costs and GHG emissions at the same time. Onboard computers in Ryder’s trucks can identify drivers whose skills should be emulated.

“It is easy to understand how fuel consumption is impacted positively,” depending on how a driver shifts gears or how hard a driver brakes, Swenson said. These effects can ripple up the supply chain when efficient drivers are acknowledged and allowed to mentor their peers.

While these details may seem small, they are part of an added value that Ryder sells as part of its RydeGreen service. And these tiny details can save thousands per year in fuel costs; the RydeGreen hybrid trucks improve fuel efficiency by 30 to 40 percent in the city.

Making fleets more efficient signals a shift in public awareness, Swenson said. “Ten years ago it was all about decreasing costs. There was always a positive impact to the environment, but the translation wasn’t done because the demand wasn’t there.”

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“Although the initial capital investment is more, the total lifetime ownership costs takes the right data and gives it to the right folks to support these measures,” Swenson said.

Optimizing fleets is just one aspect of selling a value-added product. Sometimes environmental improvements come in the form of tangible goods, such as office supplies, but provide an overall benefit to a company’s sustainability goals.

Illustrate that Green is a Spectrum

“There is a green cost continuum. [Many customers’] base assumption is if its green it will cost more. That is a very flawed assumption,” said Yalmaz Siddiqui, director of environmental strategy at Office Depot. Part of his job is to show how a company can derive intangible benefits from tangible goods.

Some products may cost more up front, of course; examples include compact fluorescent light bulbs or dishes rather than disposable plates for the kitchen, which last longer and save costs in the long run. Other commonly used items, such as remanufactured ink and toner cartridges can provide up to a 10 percent cost reduction and provide the same quality as cartridges made with virgin plastics, Siddiqui said.

While these may seem like insignificant decisions in the face of the world’s larger environmental problems, an accumulation of these small steps do help a company shrink its overall environmental footprint, and are genuine signs of progress.

Siddiqui’s team provides hard data that can nudge a company to make the switch. For example, those remanufactured ink cartridges not only save 10 percent in costs, they also divert 2.5 pounds of waste from a landfill — for each cartridge.

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In addition to the economic and environmental benefits, Siddiqui emphasized there is another important value present with these decisions.

“Certain things will cost more money, but you will derive value from them from the customer engagement. You’re messaging that you are buying greener or that is part of your environmental policy.”

Those at Office Depot and Ryder know that aligning your company with trusted names in energy conservation or efficiency, or embracing a greener procurement policy does more than just reduce overhead costs. They form a body of work that shows your company takes the environment seriously, which has a positive effect on a company’s brand, according to Ryder’s Mark Swenson.

For example, Stonyfield won a manufacturer of the year award for the sustainability of their supply chain. “It doesn’t get any more intangible than that.” Swenson said. “It has a positive impact on the environment, creates more revenue and more customer loyalty.”

Using Energy Star calculators, Siddiqui said Office Depot has shown clients the savings from switching incandescent bulbs to CFLs. Despite upfront initial costs, Siddiqui said companies understand the longer-term benefits. “[T]he payback period is 6 months and return on investment is substantial,” he said. “It is worthwhile paying the extra.”

Talk to the Right Person

Companies face enormous challenges when it comes to selling value-added products and services: budget cuts, departments narrowly focused on one element of the business and an absolute focus the bottom line. But an increased trend of sustainability reporting pushes companies to be aware of people and the planet, in addition to profits. {related_content} It can be difficult to sell “soft” or intangible values such as increased brand loyalty or employee satisfaction, that are an important part of a total cost approach, said JohnsonDiversey’s Dan Daggett.

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“We tend to shy away from giving them numbers [such as a 10 percent increase in brand loyalty] but do include the qualitative statement; it is the right thing to do save energy, to reduce GHG emissions, it is part of your overall brand to develop a better image.”

Fortunately, sustainability managers, and CEOs are often able to connect the dots and are much more receptive to the concept, he added. Reaching out to those employees — who may be in the c-suite or may just be devoted to their company’s environmental footprint — can make all the difference in selling the intangible benefits of your products.

JohnsonDiversey’s total cost approach, which focuses on energy conservation, water waste and worker health, gives companies the information needed to make purchasing decisions that create a path to sustainability, Daggett said.

Similarly, Siddiqui said people make buying decisions first and foremost based on economics. But by engaging sustainability officers in discussions with purchasing departments, it is easier to articulate that buying value added products, like recycled paper, represents the broader values of a company.

And just because you can’t assign a number to a value-add doesn’t mean it isn’t worthwhile.

“It is a very intangible one, but a big benefit to our clients; a lot of consumer products and retail products like Stonyfield want their brand to be associated with environmental friendliness,” said Ryder’s Swenson.

Perhaps the biggest value a comprehensive sustainability platform can have for a company is not just in cutting costs and impacts, but in making the workplace a desirable place.

“We have a positive impact on our environment, with our customers and internally it helps us retain the best employees,” Swenson said.

In terms of the most traditional definition of sustainability — keeping your company going for the long term — that’s money in the bank.

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licensed by Flick user David Sifry

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