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    March 8, 2023

    How would you beat ESG

    In this post (and our podcast), we look at ESG, which refers to environmental, social and governance for companies. This has been in the news lately, because BlackRock, the largest asset manager in the world, has adopted ESG principles in its investing. BlackRock has faced some backlash by opponents who argue that they should exclusively focus on shareholders (versus the environment or society or sustainability). 

    Here’s what companies need to figure out: Is investing in ESG principles a good idea, or a bad idea? Can including ESG in your investing criteria generate better returns? Or is ESG just a cost at the expense of shareholders? 

    Let’s see if Jobs-to-be-Done can help us answer these questions. 

    Is investing in ESG a good idea or a bad idea? The pro-ESG argument is often related to the economics of externalities.  A company produces a product. It creates a lot of waste, or pollution, and the company doesn't have to pay for that pollution. Some community somewhere pays for it, because it ends up in their backyard. The company benefits from that and creates equity value, because cleaning up the pollution would cost money. So their shareholders benefit, while the community around them (or wherever they pollute) suffers. Meanwhile, some large companies like Apple, Google, Facebook, Microsoft, and Amazon, are actually bigger than countries. Their market caps are higher than some countries’ GDP and they certainly have more cash. 

    The argument against ESG is that companies should just exclusively focus on creating equity value, and not other stakeholders like the communities impacted. 

    This argument leads people to think about ESG as the ethical thing to do, implying a certain morality or value system. This implies that the operating executives are imposing their value system on the shareholders. 

    But making business decisions around ethics versus the market takes your eye off the ball. You start an argument about values instead of considering the potential for ESG principles to be better investments that produce better returns. 

    The three types of Jobs-to-be-Done and how they fit into ESG
    When you apply Jobs-to-be-Done to this argument, bringing in people's needs is fundamental. We can map this out the jobs your product helps your customers achieve, and further into functional, emotional and consumption jobs. The functional job, which is the key goal your customers want to achieve. The emotional job, which is how they want to feel while executing the functional job. The consumption job is what they have to do to use the product. All three come together to create the customer experience. 

    One of the emotional jobs people have when trying to get most functional jobs done, is feeling like it aligns with their value system and is not harming their friends and family in any way. Picture this: If your friend, or family member has a disability and they can't use a phone because Apple is not looking out for them, it could hurt your customer experience. You could be potentially less likely to buy the product in a competitive environment where there are other solutions that can get the functional job done equally well. So it's a competitive advantage in some ways to satisfy these emotional jobs and create a better customer experience. 

    One might argue that it is hard to measure the ROI on sentiments, but the truth is that it is potentially measurable. You might, for example, measure people's views of the brand in question, and their loyalty to Apple as a result of these features. This is where Jobs-to-be-Done can help bridge this gap in the ESG argument. 

    As for the functional market you're going after, you need to see how pro-ESG decisions can create shareholder value. 

    Commercial opportunities within ESG

    One of the reasons to look at the market and ESG motivations through the Jobs-to-be-Done lens is this: What if an investor is to weigh the likely growth in oil against the growth in alternative renewable energies, regardless of their moral position on either? Even when you factor morality out, and just look at the economics, it's easy to see that growth is obviously going to come from renewables. 

    Previously there was a trade-off if you chose the more energy efficient alternative: If you drove a Prius you did not have a very powerful, fast car. It looked odd. It didn’t handle very well. But it had lower carbon emissions. But today you have the Tesla which is better in every way (and faster than a Lambhorgini, even with a u-haul attached). It's just a better car or all around regardless of whether it runs on gas or electricity. So here, it’s not a trade-off. Here you’re grinding more equity value by considering all the stakeholders, and looking at the job-to-be-done. 

    And when you think about it: is the future going to be about oil? We're not going to transition off it overnight, but clearly, if you're betting on innovation, oil might not be a good investment at all in the long run. Will internal combustion engine cars be popular forever? The answer is no. California is already going to regulate them out of existence. The change is already in motion.

    And coming back to the functional job, people might just choose electric cards irrespective of whether they are deregulated or not, simply because they are faster and quieter. 

    Some companies are already reaping the benefits of this course of action. A company in Cambridge, Massachusetts called Commonwealth Fusion Systems raised a $1.8 billion Series B Funding. It's unlikely that investors are willing to put $1.8 billion up simply because it aligns with their value system. They invest because they see a commercial opportunity. 

    The world’s biggest energy company Saudi Aramco's website highlights “fuels of the future” on its website

    Categories of opportunities linked to ESG principles 

    From everything we’ve looked at above, it's easy to see that there are actually several categories of opportunities that are related to the ESG discussion. 

    1. We've got jobs that are fundamentally ESG environmentally based, like the energy market. Innovation in the energy market clearly comes with great, huge commercial opportunities. Just look at Tesla. 
    2. We've got emotional jobs that appeal to certain social stakeholders, and satisfy emotional jobs. They allow you to improve your customer experience and generate growth. 
    3. We've got compliance jobs that come about because the government is creating new regulations. And that relates to governance because you may then have to report to the government or your stakeholders about how you're doing against that compliance, which creates opportunities for new technology platforms. We're already witnessing large investments in this space right now. Because the compliance job-to-be-done is challenging and important. 
    4. And then we’ve got the question of how you deliver value to your customers by your ESG moves. 

    To succeed in the long term and avoid becoming redundant, you have to envision a future where your current product doesn't exist. In some markets, that's going to be a long time from now. Software is a pretty stable market, but even in software’s case, you have to think ask yourself: will there be a way that the software does this for my users, rather than having my users do it. For example,  once upon a time we used software to download songs and put them on your devices. But now the software creates playlists for you. You just hit play.

    Conclusion: Regardless of the ESG principles, you need to get your customer’s core functional job done better. Some questions to consider are: How do I continue to get the job done better in the long-term and how do I align my customer’s job getting done better with my own revenue growth? And how do I maintain that growth rate? If you're not looking at the customer's job, and all the competition to get that job done, then you're likely going to have an inaccurate assessment of your growth rate, which lowers your probability of success. So that's where Jobs-to-be-Done can really give you a lens into ESG and markets and stakeholders. 

    Want to learn ways to keep your products relevant in a changing environment? Contact us at  


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