We learned an interesting lesson this month about the danger of hiding your light under a bushel. Over the past few years, we had been working hard with bottle suppliers to find ways to decrease the weight of our plastic (Polyethylene terephthalate or PET) bottle. There are obvious environmental benefits for such a package -- such a move could eliminate up to 1 million pounds of PET resin on an annual basis. Another advantage of a lighter bottle is that it takes less fuel to ship (before and after filling). And, of course, we'd save money as well because the price of the bottles is directly tied to the amount of resin in the bottle. It's been impressive to watch what's happened in the bottled water industry over the past few years. In 2000, the average 500 milliliter water bottle weighed 24 grams empty. Today, the average water bottle is 12 grams, and manufacturers continue their race to out-lighten each other. Bottled water marketers have a big advantage over bottled tea suppliers because they are able to fill their bottles cold. To pasteurize tea, we have to fill our bottles at 190 degrees. When hot liquid goes into a plastic bottle, the bottle expands – that's why when you peel off the label of a Gatorade bottle you see expansion panels underneath. We designed our bottle to expand on the bottom when the hot tea is poured in – once it cools, the bottom pops up and the bottle maintains its round shape. You may see some bottled teas in lighter-weight bottles, but they are using preservatives (in lieu of pasteurization) to keep their drink safe. Honest Tea is committed to organics, so those super-thin bottles are not an option for us. We worked over several years with our supplier, Graham Packaging, to design a lighter weight package that looks similar to our previous bottle (click here to see our old and new bottle -- the original was 38 grams and the new one is 30 grams). We managed to design a bottle that is 22 percent lighter, though we had to add a deeper cavity underneath the bottle because the thinner bottle needed more support in order to maintain its structure. As the new bottle starts hitting store shelves, we have been hearing from consumers who think that the new bottle is our way of trying to sell them more air. Who hasn't been disappointed to open up a bag of chips and find out there seems to be more air than chips? Here is a typical e-mail that we received from a customer named John: I just bought a bottle of Orange Mango, and was amazed that the bottle is so deceptively designed. The bottom of the bottle has been designed with a hollow to displace fluid, making it appear that the customer is buying more than is the case. Yes its 16.9 ounces, but I'm sure your marketing dept has determined that purchases are based on visual impressions. I have bought your product regularly, but will stop With a name like Honest Tea, I would expect more than these types of cheap tricks! My partner Barry responded with this note: Dear John, Many thanks for writing, for your honest critique, and your longstanding support. We recently switched to a thinner bottle, one which is 22 percent lighter. This saves us money and saves the world resources. The only problem is that the thinner bottle had the risk of getting dented. In fact, this was a real problem that forced us to redesign the bottle. To help keep its shape, the inside must be under pressure. When the bottle is filled with hot tea, the liquid expands and the plug on the bottom pops out. (If you squeeze real hard, you can make this happen.) Then as the tea cools, the plug pops back in and creates the pressure on the inside that prevents the bottles from being damaged. The thinner plastic means we needed more pressure and hence the bigger plug. There really is 16.9 ounces inside and we aren't trying to pull a fast one. But I can see how you could get confused or could think that we are trying to be deceptive. We need to do a better job explaining why the bottle has this design. In the next label run we plan to say something to explain this to our customers. I hope that makes you feel that you can still trust us and will stick with us. Honestly yours, Barry Once we explained the physics of the bottle, John's response was quite different: Thanks for that explanation. I feel I may have jumped to conclusions, but I'm glad I wrote and didn't just abandon you guys! The physics behind the design solution are actually very interesting. Thank you for taking the time to answer my concerns. I'm glad to hear what it was all about. I will continue to support Honest Tea! Of course, the challenge for us is that most consumers won't take the time to write us, and we will end up losing customers because we took a major step forward for sustainability. So the lesson here is that while environmental efficiencies can help a business, make sure to communicate what you are doing and why it's important. Sometimes a positive step for the environment could be a step backward for business if you don't explain it to consumers. Occasionally I worry that all our talk about organics, healthier products, Fair Trade, and sustainable packaging might come off as bragging, but I am starting to be more comfortable heeding Golda Meir's advice. She once said, "Don't be so humble, you are not that great."

I hope you will save the date and join Anne Holland from WhichTestWon and me for a live webinar Best Ecommerce Tests — Case Studies & Practical Advice to Raise Conversions Before the Holidays happening Thurs Oct 22, 2pm Eastern. You can go ahead and sign up here. In addition to case studies and tips for [...]

Who's greener: a computer manufacturer with revenues of $61 billion planting a tree for every computer sold, or the world's largest retailer with revenues of $380 billion demanding environmental transparency and performance improvements from all of its suppliers? Although it's tough to compare "greenness" across industries, to us, the answer is clear. One company is decreasing its carbon footprint — undoubtedly a worthy effort — while the other is influencing its entire supply chain to do the same, integrating green into multiple aspects of its business, and fostering innovation across the marketplace. This second approach — with its greater impact and lasting effects — should be the model for all green businesses today.

But according to Newsweek and their recent Green Ranking of America's Biggest Companies, the answer is different. Dell is Newsweek's second greenest company while Wal-Mart is fifty-ninth. What's going on here?

Ultimately it comes down to how we define "green." And getting that right is critical. We need to make sure that companies compete around the right metrics — metrics that will lead us to a vibrant, greener economy. Newsweek's Green Ranking — done in collaboration with several environmental research groups — takes a thorough approach to quantify the environmental impact of companies' operations. Few have done this in the past as comprehensively, and the group deserves credit for the endeavor.

The Newsweek list, however, defines "green" largely in terms of a company's efforts to reduce its impact (e.g., buying green power, recycling, building greener facilities, etc.). We believe it's time to move beyond this approach and begin defining "green" by how well a company is aligning sustainability with its core business by solving society's environmental challenges and creating shareholder value while doing so.

The Newsweek evaluation of each company breaks down into three sub-scores: environmental impact (e.g., how much waste, pollution, runoff, and toxins it produces), green policies and performance (e.g., what systems are in place to continuously reduce its impact), and reputation (e.g., how well it communicates its initiatives). This methodology centers on measuring who is doing less bad, when we really need to focus on who is creating more sustainable value in the market.

We see three factors that can help identify the companies that have the greatest potential to create value by improving environmental quality and performance:

1. Innovation: We need to move beyond the 1990s definition of "green = impact reduction" and understand that true sustainability will come from companies developing solutions that move us towards a more prosperous, low-carbon economy — from smart grid and renewable energy to cleaner mobility and water reuse programs. As an example, under its ecomagination initiative, GE invested over $1.4 billion in cleaner technology research and development and generated $17 billion in revenues in 2008 from ecomagination offerings. For Newsweek, which focused on its internal operational impact, GE is far from being a top green company (Newsweek ranked them 82nd), but their analysis does not tell the full story about GE and many other companies that use the lens of sustainability to innovate and therefore change the business world as a whole.
2. Integration: We've worked with many of the companies ranked by Newsweek and can say that in our experience, the most long-lived and effective green strategies are those that are integrated with the core objectives of an organization. Tree-planting programs tend to be suspended when the media buzz dies down and budgets get pressured. But product development efforts, new revenue opportunities, and business efficiency programs are tactics that stick because they create real business value. Organizationally speaking, sustainability resources should not be deployed in cost-center silos, but rather be fully integrated into R&D, operations, supply chain, marketing, sales, and HR departments.
3. Influence: It's one thing to green your own operations, but it's ultimately more powerful to collaborate with your suppliers and customers to advance green across your business. By developing home energy measurement dashboards and piloting programs where people can compare their energy use with their neighborhood average, Google (Newsweek's #79) is trying to influence fundamental consumer behaviors. To test the project, the tech giant has partnered with eight utilities, reaching over 10 million people and sending a clear signal across the industry.

Newsweek and their Green Rankings partners deserve credit for taking a hard look at the environmental impact of companies, advancing the dialogue in this space, and inviting companies to compete around green. But we believe it's even more important that companies compete around the factors that will create long term, sustainable value (in all senses of the word "sustainable"). Rankings like this will only be effective at driving true sustainability when they measure a company's ability to innovate, integrate, and influence — not just their ability to reduce, reuse and recycle.

Nicholas Eisenberger is the Managing Principal at GreenOrder, an LRN Company. GreenOrder is a strategy and management consulting firm that has helped leading companies turn sustainability into business value since 2000. Mateo Bueno is coordinating the development and launch of the EcoStrategy Alliance, a GreenOrder and LRN solution. The EcoStrategy Alliance is an enterprise-wide platform providing access to leading sustainability tools, experts, and peer-to-peer collaboration.

The late Oscar Levant — American pianist, composer, actor, hypochondriac, and world-class neurotic — once remarked, "There is a thin line between genius and insanity. I have erased that line." As Levant saw it, this blur gave him creative impetus. Just as Levant achieved renown by navigating the lighter and darker sides of his imagination, couldn't the same be said of great entrepreneurs?

To be truly great, entrepreneurs need to be a little...out there. After all, fearless creativity, maverick thinking and risk taking seldom show up in the middle of the bell curve. As venture capitalists, we see our fair share of aspiring and veteran entrepreneurs, and have often wondered if the man or woman standing before us was brilliant, deluded, or a combination of the two. In one of my previous posts, I explored the relationship between our strengths and weaknesses and how they are often one in the same: your strength is often your weakness and your weakness is often your strength. The goal is to find the optimal balance between the two.

Perhaps one of the most important and delicate balances that great entrepreneurs must finesse is the one between risk-taking and vulnerability. Now, the term "vulnerability" typically carries with it a host of negative connotations. If a risk-taker is generally perceived as bold, driven and admirably extroverted, a "vulnerable" person is apt to be seen as gentle, weak, introverted and easily assailable. Yet here's the paradox: vulnerability is among the defining characteristics of the greatest entrepreneurs I know. Inside these people lies an inner, highly nuanced vulnerability that actually buttresses their externally directed strength.

The nuance lies in the type of vulnerability that they have and their recognition and comfort with it. Let's be clear: there is a vital difference between what I call passive and active vulnerability. Passive vulnerability refers to the condition of being vulnerable without choosing to be. Active vulnerability comes from engaging in a contemplated risk that considers and hopes for the payoff, financial or otherwise will be worth the effort. Active vulnerability is in essence proactive and informed risk-taking. Passive vulnerability is reactive and submissive exposure.

But with that said, you might wonder, would anyone in his or her right mind "choose" to be vulnerable? Asking that question may be the reason why you are probably not an entrepreneur! The willingness to be vulnerable isn't driven by the desire for exposure, but by the possibility of what that exposure might lead to — be it a meaningful role, the possibility to affect change, and, of course, greater financial gain.

The test of a great entrepreneur is one who can continue in the face of failure and does not fall prey to passive vulnerability. Lavant's "thin line" for many entrepreneurs is the one between resilience and vulnerability. There are many would be entrepreneurs who have tried an idea and failed and never been able to get going quite in the same way. What was once once active vulnerability turns passive. Others surf the line between resilience and vulnerability successfully, understanding that repeated failure is usually necessary to achieve success. Some even thrive as much on the failure (and the learning and strength that can come with it) as on success. As VCs we try to understand how entrepreneurs deal with active vulnerability and failure. If they fail, will they feel defeated or more determined than ever to try again? If they succeed, will they feel satiated, or still hungry and willing to take on new challenges, putting at risk their newly minted reputation?

The story of how inventor James Dyson went through 5127 prototypes and 5126 "failures" to get his massively successful vacuum cleaner "right" is the stuff of entrepreneurial legend. Dyson was fond of saying that the inventor and entrepreneur's life is one of failure. Embracing vulnerability and its rewards — whether those are lessons from failed efforts or life-changing (even world-changing) success — that's the stuff of great entrepreneurs.

In a chat last week, Boston Red Sox General Manager Theo Epstein explained why he wasn't bothered by J.D. Drew's relatively low number of runs batted in (quotes from Joe Posnanski's blog):

"When you're putting together a winning team, that honestly doesn't matter. When you have a player who takes a ton of walks, who doesn't put the ball in play at an above average rate, and is a certain type of hitter, he's not going to drive in a lot of runs. Runs scored, you couldn't be more wrong. If you look at a rate basis, J.D. scores a ton of runs.

And the reason he scores a ton of runs is because he does the single most important thing you can do in baseball as an offensive player. And that's NOT MAKE OUTS ... Look at his runs scored on a rate basis with the Red Sox or throughout his career. It's outstanding.

You guys can talk about RBIs if you want ... we ignore them in the front office ... and I think we've built some pretty good offensive clubs."

Business managers can learn a lot from how baseball general managers build and manage their talent portfolio by drawing on the findings of baseball's Sabermetrics revolution. And the same is true for business managers trying to balance their innovation portfolios: how can they focus on the metrics that really matter?

According to the old-fashioned metrics, the run-batted in is a vital statistic. But smart general managers like Epstein recognize that the RBI is not a valuable measure of performance (it actually correlates with the on-base percentage of the hitters earlier in the lineup).

Innovation managers, too, need to look beyond "obvious" but potentially misleading statistics like first-year revenue, first-mover advantage, and leveraging core competency to hidden drivers of success, such as targeting non-consumption and minimizing first year losses.

A key enabler of the statistical revolution in baseball was not just better statistics, but the widespread availability of those statistics. Even before the internet made possible utterly fantastic websites such as Baseball-Reference, Fangraphs, and Baseball Prospectus (which is also an annual book), the bible for statistics was Macmillan's Baseball Encyclopedia, introduced to widespread acclaim in 1969. (Alan Schwarz, in The Numbers Game: Baseball's Lifelong Fascination with Statistics, quotes from Christopher Lehmann-Haupt's review in the New York Times: "I got lost in it for nearly two days.... It's still the book I'd take with me to prison.")

Companies should create an internal encyclopedia in which they highlight the year they started work on each innovation, what type it was, how projections about its market potential changed through time, its key characteristics, and its ultimate performance. The encyclopedia would facilitate statistical analysis to help the company increase its success rate.

Even better would be a cross-industry research effort to develop a deeper and broader reference work. A researcher who painstakingly created a like-for-like database of efforts across multiple companies (made anonymous, of course) would do the innovation movement a great service.

Key to the effort would need to be a robust categorization scheme for classifying the type of innovation (incremental line extension, disruptive, and so forth), the target customer (high-end, mainstream, low-end, nonconsumer) and the market circumstances (nascent, rapidly growing, mature, declining).

Better metrics give Theo Epstein a competitive advantage over his rivals. And better metrics can give you an advantage over yours — and create better innovations that benefit all of us. What else do you think would be in an ideal innovation encyclopedia? Is there an open source way to create a "good enough" starting point?

For a more in-depth argument about what you can learn from baseball about building and managing your talent portfolio, see my article in this month's Harvard Business Review.

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