How do a startup company's potential resources and costs connect to their future impacts? Better by Measure, a class from the Products of Design masters program at the School of Visual Arts (http://productsofdesign.sva.edu), explores how startups can build value by critically embracing civic, environmental, and human health challenges. The course is taught by Jen van der Meer (@jenvandermeer) and Rebecca Silver (@rgsilver).
6. KEY RESOURCES: FINANCIAL!
EQUITY!
• Friends Family!
• Angel!
• VC – growth!
• Social impact investing !
• Equity Crowdfunding!
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CONVERTIBLE DEBT!
• Debt that converts to equity!
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DEBT!
• Small business loans!
• Trade finance !
• Working capital debt!
• Line of credit !
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NON DILUTIVE GRANTS !
• SBIR, STPR grants!
• Open Innovation prizes (XPRIZE, Kaggle) !
• Social impact foundations (RWJF)!
• Project Crowdfunding!
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7. NEW SOURCES OF FUNDING – AMERICA COMPETES ACT !
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8. NEW SOURCES OF FUNDING – SEC CHANGES !
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9. OPEN INNOVATION– PRIZES AND PULL MECHANISMS!
PUBLIC !!
OPEN INNOVATION: Federal agencies encouraged to call innovators to
a challenge, look for the brightest minds and the best ideas, seek a diversity of
solutions, and incentivize those solutions with the highest performing outcomes. !
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PRIVATE SECTOR OPEN INNOVATION: Companies are recognizing the
complexity of business and that the best ideas lie outside their organization.
Prizes and open innovation exercises are proliferating in all sectors. Often these
are non-dlllutive, but beware those programs that are for marketing/branding
reasons, or where there is IP or first right of refusal claims in the terms.!
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NGO OPEN INNOVATION: Foundations and philanthropic organizations are
growing faster than for profits, and to incentivize the freshest ideas and solutions,
“pull mechanisms” are used to bring forward the best ideas, and reward those that
demonstrate the strongest outcome.!
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12. HUMANS: COMPANY!
Co-founders!
Employees!
Contractors!
Development firms, contract manufacturing !
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13. HUMANS: MENTORS & ADVISORS!
Mentors: make you smarter about your career!
Teachers: provide specific subject matter expertise !
Coaches: help you achieve a goal!
Advisors: help you make your company succeed !
Board members: help the investors succeed !
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Surround yourself with people that give critical feedback, and help you
through a major founder failure point – when you believe your vision is
fact.!
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14. TALENT!
Developer/engineer!
Designer!
Marketer!
Scientist!
Community manager!
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When do you need a CEO?!
A CFO? !
An HR person? !
A VP of Sales?!
A Chief Revenue officer?!
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16. COSTS!
• Income statement!
• Balance sheet !
• Cash flow!
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Are these the financials you need to understand? !
Yes, because it’s the language investors speak, and it’s good to
understand the flows of financial reporting – but this is a system used to
compare financial performance for investors. !
These do not supply execution metrics to help you make decisions and
formulate/test hypotheses. !
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17. COSTS - EXECUTION METRICS!
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18. COSTS - EXECUTION METRICS!
• Viral coefficient!
• CAC!
• LTV!
• Conversion rate!
• Retention rate!
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What are vanity metrics? !
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Registered users, downloads, and raw pageviews. A mobile apps could have
millions of downloads but only a few hundred thousand active users, or a freemium
website might see exploding traffic growth but barely any conversions to paying users.
They are metrics that make you feel good, bad for guiding execution. !
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What metrics will drive you through MVP?!
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22. TOOLS TO QUANTIFY & REPORT ON IMPACTS!
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LEAN METHOD!
(FOR MIDTERM)!
4. Foci!
Hypothesize & test!
Top of T foci with !
Consumer; Validate !
Base of T!
2. Impacts!
Identify impacts !
using canvases!
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3. Materiality!
Perform preliminary !
materiality
assessment! Refine!
1. Value Prop!
Hypothesize & test!
Base of T foci
(sustainability value
proposition) with !
consumer!
It’s time to determine what’s material to your company, then to
measure the opportunity space for addressing impact.!
23. WHICH IMPACTS ARE THE MOST RELEVANT TO YOUR
BUSINESS?!
DETERMINE WHAT’S SALIENT BY PERFORMING A “MATERIALITY ASSESSMENT”!
This is a dominant framework used by corporations who have done a comprehensive
assessment of their environmental and social impacts and risks.!
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Goal One: Help you determine where you should focus so you don’t waste valuable time
and resources addressing negative or creating positive impacts which are of little concern
or relevance to stakeholders & shareholders (i.e. non material factors).!
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Goal Two: Lays the groundwork for a plan you (your company) can take to address
negative or create positive impacts.!
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Goal Three: To communicate the most material impacts to stakeholders and shareholders
so that they can better assess your financial value, corporate values and risks now and
into the future.!
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24. MATERIALITY: WHOSE PERSPECTIVE IS MOST IMPORTANT?!
Goal Three: To communicate the most material impacts to stakeholders and
shareholders so that they can better assess your financial value, corporate values
and risks now and into the future.!
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Who’s perspective is most important when determining materiality?!
• Regulators?!
• Investors?!
• Stakeholders?!
• The environment (the trees and bees)?!
• Customers?!
• Society?!
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25. MATERIALITY: REPORTING FRAMEWORKS!
Who’s perspective is most important when determining materiality? This question
underlies the assumptions made by each dominant sustainability materiality
reporting framework, creating bias.!
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Top sustainability materiality reporting frameworks: !
• Integrated Reporting (IIRC) - http://www.theiirc.org!
• Sustainability Accounting Standards Board (SASB) - http://www.sasb.org!
• Global Reporting Initiative (GRI) - https://www.globalreporting.org!
• CDP - https://www.cdp.net!
• Corporate Water Disclosure (Via UN Global Compact) -
http://www.ceowatermandate.org/disclosure/!
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26. MATERIALITY: REPORTING FRAMEWORKS!
Who’s perspective is most important when determining materiality? This question
underlies the assumptions made by each dominant sustainability materiality
reporting framework, creating bias.!
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• IIRC, which is betting that investors will broaden their analytical horizons, proposes a
framework that seeks to integrate financial and nonfinancial reporting by taking a broader
and longer-term view on how value is created.!
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• SASB, meanwhile, is betting that regulators will broaden their interpretations of
materiality and is creating standards on how publicly listed U.S. companies should
disclose material sustainability issues for investors in mandatory filings to the Securities
and Exchange Commission (SEC), such as the Form 10-K and 20-F.!
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• GRI—the traditional authority for sustainability reporters—is betting that stakeholders
should have an equal say in sustainability reporting, since reports are used by multiple
audiences.!
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SOURCE: http://www.bsr.org/en/our-insights/bsr-insight-article/navigating-the-materiality-muddle!
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27. MATERIALITY: SELECTING THE RIGHT INDICATORS!
For mature corporations: In the long term a company should align their
materiality assessment with one or multiple frameworks, but should also be
inclusive of stakeholder views not represented in the frameworks. !
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For entrepreneurs: The leading standards can serve as a cheat sheet for
identifying material impacts (though exclude impacts which are not of concern to
the specific audience of the standard – i.e. regulators & investors).!
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28. MATERIALITY: SELECTING THE RIGHT INDICATORS!
SOURCE: http://www.sasb.org/materiality/sasb-materiality-map/!
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29. MATERIALITY: SELECTING THE RIGHT INDICATORS!
Via standards:!
• Sector & impact list guidance from SASB & GRI!
• Sector specific indicators (differ depending on sector – ask for guidance)!
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Via comparables (competitors):!
• Corporate reports via Amee, individual company’s CSR reports, Financial filings, press
releases, CSR Hub, Dow Jones Sustainability Index, Corporate Responsibility Officer!
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• Product comparables via Good Guide!
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Via outliers: Look for opinions of NGO’s, news stories, trends etc.; this can also be
obtained through interviews with experts!
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Via pending legislation: Or legislation from leading states, i.e.
California Supply Chain Transparency Act !
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Via academic research: Database of scientific reports can be accessed via
http://www.researchgate.net/!
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30. TOOLS TO QUANTIFY & REPORT ON IMPACTS!
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LEAN METHOD!
(FOR MIDTERM)!
4. Foci!
Hypothesize & test!
Top of T foci with !
consumer!
2. Impacts!
Identify impacts !
using canvases!
!
3. Materiality!
Perform preliminary !
materiality
assessment! Refine!
1. Value Prop!
Hypothesize & test!
Base of T foci
(sustainability value
proposition) with !
consumer!
Measure the opportunity space for addressing impact. After performing a
materiality assessment, the next steps are to prove out your sustainable value
proposition (base of your T), and to identify other potential impacts which may shift
your burden (top of T).!
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By prove out we mean:!
• Define the scale of the opportunity (magnitude of impact)!
• Define the scope of the opportunity (boundaries)!
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31. WHAT DO YOU WANT TO MEASURE?!
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WHAT YOU’RE MEASURING!
• Product!
• Service or activity!
• Company performance !
• Facility & building!
• Suppliers & supply chain!
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FOCUS OF MEASUREMENT!
• To the Environment!
• Society!
• Human Health!
32. SUSTAINABILITY EXECUTION METRICS!
Unlike business metrics, the metrics that matter for sustainability are
predominantly sector/industry specific, and/or specific to the category of
impact when measuring positive and negative Social, Environmental, or Health
impacts, and often not universally accepted. The exception to this rule is for
Greenhouse Gas measurement & reporting.!
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In this class we’ll narrow down the universe of metrics & measurement systems to
a few select system which will allow you to calculate your impacts. We’ll learn by
doing and teach each other as we go, due to the idiosyncrasy of each
method.!
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33. SELECT IMPACT MEASUREMENT METHODS!
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• Life Cycle Assessment: Methodology for determining the varied system-wide
environmental impacts associated with the creation, use, and disposal of a product or
service. PAY ATTENTION TEAM NEST!!
• Footprinting: The amount of resource produced or consumed by performing specific
human activities (by a product, corporation, service etc.). Examples include: carbon
footprint, water footprint, and energy footprint. PAY ATTENTION TEAMS UBER &
AIRBNB!!
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• KPI’s & metrics: Sector and industry specific indicators, which allow companies and
other stakeholders to track the performance of products, services, activities, etc. over
time along key attributes. Examples include Energy Return on Investment eROI. A
comprehensive list of KPI’s can be found via IRIS: IRIS.thegiin.org/metrics. PAY
ATTENTION ALL TEAMS!!
34. SELECT IMPACT MEASUREMENT METHODS!
• Risk - benefit analysis: Qualitative and quantitative assessment of potential risks
(financial, social, and/or environmental) in relationship to potential benefits of taking an
action, manufacturing a product, enacting a program etc. PAY ATTENTION TEAM BLUE
APRON!!
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• Sector specific methods of evaluation: In each industry and impact category there are
often industry-led coalitions which define the key attributes and impacts a firm should be
concerned with in that sector. Examples include supplier scorecards and sector specific
rating systems like the HIGG Index for apparel. PAY ATTENTION TEAMS NEST &
UBER!!
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• Standards and regulations: In each industry and impact category there are often
globally leading standards and regulations which provide guidelines for how to design
products or services (usually stemming from the EU or the US). Examples include
certifications like Energy Star or Organic, regulations like REACH it OSHA etc. PAY
ATTENTION ALL TEAMS (ESPECIALLY TEAM FITBIT)!!
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35. SELECT IMPACT MEASUREMENT METHODS!
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Environment! Society! Health!
Product! • Life Cycle Assessment!
• Ecological Footprint (carbon,
water etc.)!
• eROI!
• Certifications!
• KPI’s & metrics!
• Social hotspot identification!
• KPI’s & metrics!
• Industry specific standards!
• California Supply Chain
Transparency Act!
• Certifications!
• KPI’s & metrics (for efficacy)!
• Clinical trials!
• Regulatory standards/approval!
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Service/Specific activity! • Life Cycle Assessment!
• Ecological Footprint (carbon,
water etc.)!
• Environmental Assessment!
• Risk/benefit analysis!
• KPI’s & metrics!
• Industry specific standards!
• Risk/benefit analysis!
• KPI’s & metrics (for efficacy)!
• Clinical trials!
• Risk/benefit analysis!
Company performance! • Ecological Footprint (carbon,
water etc.)!
• Reporting: SASB, IIRC, GRI!
• Industry specific standards!
• UN Global Compact standards!
• Reporting: SASB, IIRC, GRI!
• Reporting: SASB, IIRC, GRI!
• OSHA standards!
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Physical facilities! • Ecological Footprint (carbon,
water etc.)!
• Emissions standards!
• OSHA standards, !
• Emissions standards!
• Industry specific standards!
• KPI’s & metrics!
• Supplier scorecards!
• OSHA standards!
• Supplier scorecards!
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Suppliers & supply chain! • Ecological Footprint (carbon,
water etc.)!
• Industry specific standards!
• Industry specific standards!
• KPI’s & metrics!
• Supplier scorecards!
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• KPI’s & metrics!
• Supplier scorecards!
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36. SELECTING WHAT AND HOW TO MEASURE!
1. DEFINE THE GOAL AND SCOPE OF YOUR STUDY!
• Time & resources you have available to complete the study!
• Goal of the study (why are you measuring what you’re measuring)!
• Determine your research hypothesis!
• Audience (This is where your materiality assessment is really useful) !
• Scope (boundaries) & limitations (what doesn’t the impact method tell you)!
• Unit of measure and/or functional unit (what EXACTLY are you measuring)!
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2. DETERMINE TEST FOR YOUR STUDY!
• Research potential ways to complete the study: what aligns best with your above goals
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and resource limitations!
• Identify if there are leading standards/methods for the method of impact measurement:
Are there ANSI or ISO standards, or other dominant standards (like the World Resources
Institute for Greenhouse Gas measurements)!
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3. REVIEW!
• Get feedback (from instructors & mentors) for how to conduct your study!
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37. HOMEWORK – QUANTIFYING IMPACTS!
1. VALIDATE BUSINESS MODEL CANVAS!
• Decide on value propositions (sustainable & business) & customer segments!
2. PREPARE TO QUANTITATIVELY TEST YOUR VALUE PROPOSITIONS!
• For your sustainable value proposition, determine your goals, research hypothesis and
scope for determining the scale (magnitude of impact) of the impact, which you hope
to address through delivering your value proposition. How might you define the
maximum opportunity for addressing this impact?!
• For your business model, narrowly define customer segments and quantify these
numbers. Consider how to calculate financial return.!
• Come to Monday office hours to discuss your specific idea(s) for how to measure
your impact!
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