Wednesday, November 2, 2011

Highlight on TerraCycle – The unique business model of a small business innovatively eliminating the world’s waste

The timing couldn’t have been better! This morning’s New York Times blogpost by TerraCycle’s CEO, Tom Szaky, (http://boss.blogs.nytimes.com/2011/11/02/terracycles-quest-to-create-negative-cost-marketing/?ref=smallbusiness ) spotlighted the company’s creative use of “negative-cost” marketing strategy in touting its unique achievements and business model to greater America [and beyond]. The marketing strategy described in the article is just one arm of the small, New Jersey based-company’s unique business model which operates under the purpose of completely eliminating waste. The following post will briefly explore Szaky’s discussion of TerraCycle’s marketing strategy in relation to Week 1 and 2 readings on the concept of strategy and using balanced scorecards as a part of a strategic management system.

TerraCyle began with just one product – organic worm-composted fertilizer produced in a dorm room and shipped to customers in plastic soda bottles. Today it operates a nation-wide program collecting non-recyclable and hard-to-recycle waste (ranging from candy wrappers and left over cafeteria food) and produces materials that are made directly from those wastes (mostly packaging materials), as well as other home goods products including natural degreasers and yard odor remover. The goal, according to the website, is “to eliminate the idea of waste by creating collection and solution systems for anything that today must be sent to a landfill.” TerraCyle offers society a highly unique service that is “good for people good for the environment, and good for profits” (as is written in the Amazon synopsis for Szaky’s book on TerraCycle as a business). This clearly adheres to how Michael E. Porter describes strategy in “What is Strategy) where he states, “strategic positioning means performing different activities from rivals’ or performing similar activities in different ways.”

The “negative-cost” marketing strategy ties in closely with the company’s ideology that naught should be put to waste. Rather than invest in a traditional marketing tactics, TerraCycle focuses publicity efforts solely on projects that are intended to be profit-generating. Among their endeavors is the aforementioned book written by Szaky, as well as a short mini-series (televised on the National Geographic Channel) documenting the company’s quest for recyclables and the process by which TerraCycle’s team determines a use for those recyclables. The marketing strategy is benchmarked by the number of customers reached by the projects, as well as how much profit is generated from each project. It’s unclear from the article though, whether the use of a balanced scorecard is used in evaluating such publicity projects before they are initiated. In his blog post, Szaky mentions a number of failures that occurred in their media department before their marketing strategy became a viable and profitable model. This is an indication that despite having been touted as one of the fastest growing small businesses in America, perhaps an analysis using a more balanced scorecard would elicit information proving that more traditional marketing strategies would be more efficient in helping the marketing department to better meet the vision and goals of the business as a whole.

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