Disruptive Innovation: G-Diapers

Challenge

After 5 years of up and down growth since launch, gDiapers, a Portland Oregon based green baby diaper company, stopped growing all together. Nothing the company used to address the lack of growth worked. They attempted a partnership with a massive retailer that played out to be a disaster. They launched a new product that turned out to confuse customers about who they were as a brand. The passion the company had created with their customers in the early years was also dissipating as these customer aged out of diapers.

The owners were baffled. They had moved 10,000 miles from Sydney to launch the business in 2004. The plan was to grow a company, make meaning along the way as a sustainable company, and then sell in the model that almost 95% of sustainable companies use. They had enjoyed skyrocketing success in the early years, created a substantial following, and were the darling of the green industry. Now they were stuck.

gDiapers leadership considered a few options as a response.  They looked into hiring a traditional business consultancy. This strategy would have meant letting go of half the team and moving to an online-only, US only business in order to dramatically cut costs, save the company, and prepare for sale.

Instead, they hired Exile.

Discovery

When we began, through a process of intensive facilitation, we discovered a well meaning yet deeply confused company. There was no coherence in the leadership team as to the mission of the company, and each executive had a different perspective around what it meant to grow the company. The strategy for raising new capital was also incoherent, and there was no real agreement on how the company was to manage its recapitalization event due to arrives at year seven.

As we dug deeper, we discovered that every major aspect of the business was stagnating under an old paradigm – a paradigm that was inhibiting growth. We grouped this stagnation into five categories: Marketing, Culture, Leadership, Capital, Sales, and Partnerships.

Marketing was stuck in a conventional green story telling medium; what had been successful and cutting edge in the beginning was now tired and irrelevant.

The Culture was not built to grow the company beyond start-up, and naming this reality was tricky due to the fact that on paper, gDiapers had created a cutting-edge, non-hierarchical, family-friendly culture. In other words, they had a ‘progressive’ workplace story that was masking a crucial inability to hold people accountable while challenging them to be at their very best creatively and professionally.

The Leadership team was confused as to their roles, and the two founders were in a place of physical, emotional and spiritual exhaustion.

The Capital Model for the company was grounded in the principles of the ‘grow-fast and sell in 3-5 years’ model that depends upon rapid and exponential yearly growth. With this growth absent, the company was paralyzed and the relationship between the board and the leadership was divisive and untenable.

Sales were stagnant, and the sales team had no strategy for turning this around.

The Partnership Model was grounded in the Industrial paradigm of acquisition. In this case, gDiapers were seeking partners to solve their growth and recapitalization problem that could acquire them. Nobody was happy about this situation, but they had no other way to think about alternative options.

And lastly, the original Mission – to make meaning and money – was no longer relevant. In fact, it was creating significant confusion among all stakeholders.

It is important to note as well that none of these discoveries were in the awareness of leadership with any depth or clarity when we began. What was truly powerful about this discovery process was that all these revelations were made in tandem with the company; they made their own discoveries and Exile served as their guides. This fact cannot be overlooked. We did not drop a massive assessment upon them – an approach that seldom if every works to create change. Instead, we led them into their own discoveries and in the process trained them in a host of crucial skills.

Impact

In the words of the founder, g-Diapers is now a business with a very different outlook on life. They dug deep, confronted everything they had created. What emerged was a definitive North Star; to eliminate disposable diapers from the planet. Now, every decision in the company drives toward this goal, creating a strong coherency and strategic power. In moving beyond the narrative of making meaning with money – the dominant and conventional green business story – to a mission that has all the elements of a disruptive mission they were able to evolve out of the green business model.

Culture: Leadership skill and capacity needed to be significantly up-leveled in non-traditional ways and it was.  It wasn’t about learning ‘to be more efficient,’ it was instead the acquisition of skills needed to see how their minds worked, what their liabilities were, and then reckoning with what they found.

A theme, in their own words, “of doing what is needed despite the discomfort,” permeates throughout the company today. They understand that their ability to achieve their disruptive goal of eliminating disposable diapers from the planet stands in direct relationship to their ability to live on the edge of their comfort zone and step off. The culture is now grounded in the principles of a true meritocracy using a self-organizing methodology.  It strives to do away with fixed structures and promote an approach that demands everyone show up at their creative and innovative best.

Marketing: The company evolved their marketing foundation to open way for a radical and new brand identity, one that is designed to support the disruptive mission. By definition, for the company to be disruptive it must transform an entire segment of the marketplace. And this cannot be done as a green company selling to green-leaning customers alone.

To make this disruptive strategy work, the story telling and brand identity must be disruptive; it cannot be safe, lily-white and clean while playing to the psyche of just 4% of consumers (the percentage of American consumers that identify with green products and green ideas). The brand is now poised to speak the truth of parenting not the fantasy that every diaper company sells. This means a brand that does not paint a picture of parenting that is filled with blissed-out moments, clean and easy.

By story telling into the commonplace experiences of parenting – exhaustion, isolation and desperation to name but a few – the company has a strategy to reach beyond the 4% green consumer group into the households of the majority of parents. This way, the consumer can build solidarity with the brand because they know the brand is speaking the truth and is not trying to manipulate them.

gDiapers has been trained in the foundations of a Mythical Branding template, and through this template they will be able to speak mythically to the marketplace. They will be able to transform these everyday experiences common to all parents into something sacred and inspirational.

Mythical Branding is the opposite of fantasy branding and story telling. In the fantasy model, everyday experience is ignored and replaced with messaging that is manipulative in nature. And while effective in many cases, especially in the past, fantasy branding cannot support a disruptive mission due to the fact that it relies upon subtle deceptions and lies. Today’s consumer is savvy and educated – more so every day – and in order to effectively reach this consumer truth telling and authenticity is required. gDiapers now has a strategy and a set of skills to do this.

Sales: Sales was a tricky space to navigate, due to the fact that it was difficult to pinpoint the reasons why the sales were stagnant. In the end, a series of breakthroughs emerged. Top leadership in sales came to understand that the way they communicate and carry themselves needed to transform to meet the demands of the new mission. They were no longer able to use the ‘progressive’ style, approach and language they adopted in the early years. Something new, stronger and edgier needed to emerge out of them.

We call this, to use a martial arts term, Owning the Centerline, and as the sales leadership team developed this skill, many problem areas that were previously unseen, became clear. As a consequence, a strategy for improved sales was rebuilt to be coherent with these discoveries.

Capital: In order to support their North Star, gDiapers is in the midst of a process to arrange long-term capital to replace the majority of their current investors. This is money that comes into the company as a true partner such that the rewards to everyone – investors and the team alike – are perfectly aligned.

This capital innovation is perhaps the most crucial piece of the puzzle for a company with a long-term disruptive agenda. It is a powerful Exile innovation that we brought to a company that was suffering under the weight of a conventional capital model. And, at this moment in history, finding investors that are aligned in this way is very difficult. It requires a leadership mandate that is powerful and innovative enough to find and at times, create, a suitable match in the investor world.

Upon completion of our two-year assignment with gDiapers, the company is in negotiation with two investor groups that are aligned from the standpoint of values and long-term, patient growth.

Product: Through an extensive two-year investigation of biomaterials around the world, the company has found a rich grouping of possibilities in Finland and Brazil to transform the materials that go into the product. They have also established a partnership with the Portland Northwest College of Art (PNCA), Portland’s leading design school, to create an Innovation Studio that can provide clues as to how they will evolve their product design into the future – something no diaper company has been able to achieve in the half-century existence of disposable diapers.

Alliances: Leadership achieved a critical learning around alliance building. They learned, that in order to execute disruptive transformation at scale, a mesh of organizations needs to come together to maximize the possibility for success.

To date gDiapers has forged alliances with partners in Brazil and Finland as well as with PNCA. The new investors will fill out this mesh, and because they authentically are aligned with the disruptive mission, there is a foundation set for all parties to truly collaborate with each other.

Leadership: The founders are prepared to lead the company far into the future. They are invigorated, inspired and renewed. The new board will reflect this preparation as it builds off a foundation that is collaborative in nature. The company is also poised, as it builds off the transformations it has achieved in each category – capital, marketing, culture, product and alliances – to position itself in time to challenge the giant disposable diaper incumbents’ Pampers and Huggies.

If gDiapers succeeds in its disruptive strategy, it will succeed in eliminating one of the most harmful products in our world today. Each plastic diaper requires a quarter cup of oil to produce, takes 500 years to decompose in a landfill, and fills landfills at an extraordinary rate. Close to a billion diapers are thrown away each year in the United States alone. By displacing these companies, gDiapers will find itself in a commanding position over an eight billion dollar a year industry.