The Four Imperatives of the Demand Revolution

Welcome to the third edition of our biweekly newsletter The Demand Revolution.?

The Demand Revolution is more about how consumers are changing and less about how the climate is changing. Companies that embrace this broader perspective will find exciting growth opportunities to serve consumers quickly and at scale, rather than just focusing on ways to reduce the high costs of regulatory compliance.

That is a different way of doing business. For companies that seek to capitalize on consumers’ pent-up demand – and on the behavioral shifts that are generating it – we have identified four imperatives:

1.???? Put the consumer first

It’s time to move away from the narrow confines of the green mirage and its superficial question: “How much more will consumers pay for that thing which I claim is green?”

To successfully launch and scale sustainable solutions, companies need to understand what solutions and experiences consumers want and need and what adoption barriers they face. That applies across the entire spectrum of consumer archetypes, which we introduced in the previous edition of this newsletter. Consumers are now making nuanced and differentiated tradeoffs across price, quality, brand, and sustainability. Companies that have a mindset of “if it’s green, it’s good enough” risk being left behind.

Sustainability will be a transformative megatrend that is demand-driven, which makes it different from previous transformative megatrends that were “push” driven.

Push-driven megatrends emphasize technological, logistical, manufacturing, and process capabilities. A pull-driven megatrend focuses on consumers and can lead to rapid adoption when the pent-up demand is high enough and companies actively reduce barriers to adoption.

2.???? Change the innovation paradigm

The switch from push to pull marks a break from the traditional innovation paradigm and its several phases of adoption. The classic adoption curves for innovations—and the strategic playbooks they inspire—no longer apply.

The traditional innovation paradigm starts with early adopters who pay premium prices and help finance additional growth. If a company "crosses the chasm" it can enter the mainstream and then complete the cycle with laggards who buy the product at a lower price at a later stage in the life cycle.

The traditional innovation paradigm leads to the perception gap shown in the figure below.? Companies following the old paradigm tend to underestimate the true consumer demand. They are literally and figuratively behind the curve that consumers see themselves on.

The new innovation paradigm combines a relentless consumer focus with the necessary capabilities to develop innovative sustainable solutions, take them to market quickly, and scale them rapidly to tap the pent-up demand. Consumers want affordable, useful, less wasteful products at scale, which means companies also need a relentless focus on reducing costs, not only by changing the product, but by changing the business model and the ecosystem. This leads to the next imperative.

3.???? Change the go-to-market strategy

Developing a new go-to-market strategy hinges on how much commercial creativity a company applies and how much creative destruction it is willing to initiate or tolerate.

Commercial creativity covers the ability to innovate business models quickly and effectively to bring sustainable solutions to market successfully. This can cover any aspect of revenue generation, such as pricing, branding, and sales, to name a few. When a company looks beyond the search for a green premium, for example, it can develop penetration pricing strategies – supported by an emphasis on lower costs – to help make sustainable solutions more affordable and accessible. If no company owns the sustainability leadership position in a category or market, a company can claim that position by satisfying consumers’ needs for reliable knowledge and greater trust.

Creative destruction, as defined by Jospeh Schumpeter, is the “process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” Tesla exhibited both commercial creativity and an appetite for creative destruction when it decided to sell its electric vehicles to consumers directly instead of establishing a new dealer network or cooperating with an established one. That approach gave Tesla more flexibility on the upfront purchase price for its vehicle lineup, which requires less service – and therefore less of a commitment to a dealer – than vehicles with internal combustion engines.

4.???? Communicate clearly

Communication about sustainability over the last few decades has been a disabler more often than an enabler. What companies choose to say about their actions and intentions has often left consumers confused, suspicious, or overwhelmed.

Disabling communication takes many forms, from fear mongering about doomsday scenarios to greenwashing in explicit or implicit forms. The ubiquitous use of “green” as a universal modifier, meanwhile, has started to drain the word of any specific meaning. Other examples of disabling communication are the lengthy and jargon-filled scientific discussions that average consumers don’t understand and business leaders can’t translate into profitable initiatives. ?

Enabling communication helps consumers find and evaluate the solutions they need. One common thread in our research is that consumers who want sustainable solutions are willing to invest time and effort to find them. If they have a positive experience with their chosen solution, they are more likely to remain loyal to that brand and also advocate for it on social media.

Whether sustainability will be the greatest commercial opportunity of the 21st century depends on how quickly companies recognize overt and hidden consumer needs and develop affordable, practical, and environmentally viable solutions to meet those needs.

Please click here to pre-order your copy of The Demand Revolution: How Consumers Are Redefining Sustainability and Transforming the Future of Business. The book is scheduled for publication by MIT Press on October 8.