Introduction
Building with dirt is nothing new. Indeed, the use of earth in construction has been a staple of man’s time of the earth. While the creation of simple shelters may be the most prominent example of earth construction in many people’s minds, many of the worlds “great feats of construction involved the use of mud or dirt. The Great Wall of China (246-209 BC) was built of earth along most of its route. Hannibal's watchtowers, built with compressed earth in Europe in 300 BC, stood for more than 600 years.”[1] As man has evolved, so have the methods used to make structures with dirt. Many of today’s earth made structures are made with compressed earth block machines. These machines create higher quality bricks – as compared to manual compression – and produce bricks at a significantly faster rate. Armed with a new compressed earth block (CEB) machine, an international nonprofit organization looked into launching a for-profit entity to promote its new CEB machine. Was this a good idea?
Case Study: The Mountain Institute
Founded in 1972, The Mountain Institute (TMI) seeks to empower “communities in the world’s great mountain systems through education, conservation and sustainable development.”[2] In 2002, TMI received a U.S. patent for its new CEB machine. The machine was designed by TMI board member Jim Underwood.[3] TMI believed that because the new CEB machine was “price-competitive, allowed for low-cost construction and was environmentally friendly,”[4] it not only was ideal for people’s living in mountain regions around the world, it also fit TMI’s mission to ‘empowers communities…through education, conservation and sustainable development.’
A recent MBA graduate, TMI hired John Buffington to assist in continuing the prototype study it was conducing with its new CEB machine in Tibet as well as develop a business plan for further promotion and the possibility of marketing TMI’s new invention around the world. After spending ten months examining the long-term viability of the CEB machine for a global market, Mr. Buffington realized that “this project was not going to be as easy as he had originally anticipated”.[5] The prototype project in Tibet had been “slowed and offered limited guidance on possibilities in other markets… [and the] apparent value proposition of the machine had become tempered with the identification of a growing number of challenges facing wide-scale promotion and expansion in the developing world.”[6]
Challenges for TMI’s CEB Venture
Problem 1: Production
As part of the prototype phase in Tibet, the new machine seemed to be plagued with problems stemming from the CEB machine’s “slower than expected block production and overheating” concerns.[7] While the inventor of the new CEB machine insists that the issues that the machine faced in Tibet are “only small bugs expected with any start-up manufacturing operation,”[8] Mr. Underwood is not factoring in the additional difficulties and lag-time of fixing these ‘small bugs’ in Tibet or other developing countries. Underwood seems confident that an additional month in the planning stages should be sufficient to debug such issues in various host countries. While this may be sound business advice this does not sufficiently account for the cultural dimension associated with this longer debug time. Underwood himself seems to hint at this cultural problem when he acknowledges that TMI’s Tibetan partners are not self-empowering. This inability for self-empowerment “means that small solvable problems can take a long time to fix.”[9]
Problem 2: Promotion
Looking to gain insight on promotion of CEB and other relatively inexpensive products to developing countries, Buffington contacted Martin Fisher, cofounder of ApproTec. Buffington was interested to know why he does not operate as a for-profit company instead of a non-profit. Mr. Fisher’s response was that “the products he sells require far too much hands-on marketing and training for the relatively small profit per unit he achieves.”[10] Smaller than necessary margins are a serious concern for TMI and their potential CEB machine sales. Mr. Fisher goes on to state that his organization “can spend up to two to three times what they make in revenue on marketing for a given product.”[11]
Problem 3: Piracy
Perhaps TMI’s biggest problem, many at TMI have “worried that the simplicity of the design leaves it vulnerable to copying by would-be competitors, particularly in the developing-country regions where TMI intends to have the technology manufactured.”[12] This is perhaps a particular worry since the prototype for TMI’s machine was in China, a country notorious for its piracy and violations on intellectual property rights. As part of Mr. Underwood’s design for TMI’s CEB machine, the unit is to be,
Safer, lighter, more portable, ergonomic in use, less expensive, adaptable to local power sources, and capable of local manufacture and repair. In essence, this machine was specifically designed for use in developing countries, with an emphasis on simplicity and engagement of local populations.[13]
This simplicity of design, while an advantage in many ways, leaves the machine vulnerable to complete and total copy. Mr. Fisher does not view the piracy issue as a significant threat, he stated that “if the ultimate goal is market development, piracy and increased competition could serve as a measure of success for” his organization.[14] While providing greater access to such technologies is certainly part of the larger mission of TMI, TMI will ultimately have to decide if its mission in the short term is worth possibly sacrificing its mission in the long-term.
Problem 4: Licensing Agreement
As part of Buffington’s analysis there was an expectation that TMI’s “licensing arrangements could create an incentive for a local TMI-selected manufacturer or distributor to try to eliminate TMI from sales involvement after initial manufacturing hurdles have been cleared and demand was growing.”[15] While TMI has had past successes “leveraging participation from government agencies, which have a special interest in assuring that the projects they are involved with run smoothly so as not to lose face,”[16] such an approach is inherently risky and by no means a plan for operation success.
Problem 5: Managing from Afar
The final problem facing TMI’s CEB machine globally is the “lack of significant local presence.”[17] In many developing countries there is considerable importance placed on ‘relationships’. Setting up TMI’s new CEB machines will require significant discretion on the part of the local government, manufacturers, industry and mortgage loan providers, etc. Without an established ‘relationship’ with these players, it will not only be difficult to prevent piracy, it may be difficult to make sure that production stays on track, that corruption does not ensue, and that market development happens fast enough and with appropriate measures such that this industry grows. Because of this, Buffington thought to “initially focus on those geographies where TMI operations already exist. TMI currently has formal operations in India, Nepal, Peru and the United States and coordinates on efforts in a number of other countries.”[18]
Conclusion
Taking all of the considerations into account TMI has a decision before it. There may well be opportunities for growth and success both monetarily and for TMI’s mission if the CEB machine project is given the green light. That said, TMI needs to be aware that there is a strong likely hood that the project will not succeed. Possible reasons include cultural misalignment, insufficient market acceptance, smaller than expected revenue margins, etc. Additionally there are significant concerns related to theft and piracy. Given its design, it may be very easy for competitors, in several countries, to cheaply recreate TMI’s CEB machine and cut out the middle man. From a business point of view TMI’s CEB machine is clearly competitive, if not superior to other CEB machines on the market. This superiority does not seem enough to outweigh the potential obstacles to success that TMI will face. If TMI’s goal with its CEB machine is to simply fulfill its mission and provide a superior product that can be easily reproduced and copied around the world by almost anyone then there is little reason not to go ahead with the production and training of people’s around the world on new CEB technology. If TMI is hoping to add this to the repertoire of TMI products and services and make a surplus on this project then this is certainly not something that TMI should invest itself in.
[1] Hamschmidt, Jost, ed. Case Studies in Sustainability Management and Strategy: The oikos collection. Sheffield: Greenleaf Publishing, 2007. Page 164. [2] http://www.mountain.org/ [3] Hamschmidt, Jost, ed. Case Studies in Sustainability Management and Strategy: The oikos collection. Sheffield: Greenleaf Publishing, 2007. Page 166. [4] Ibid. Page 162. [5] Ibid, page 163. [6] Ibid, Page 163. [7] Ibid, Page 180. [8] Ibid, Page 180. [9] Ibid, Page 180. [10] Ibid, Page 180. [11] Ibid, Page 180. [12] Ibid, Page 180. [13] Ibid, Page 166. [14] Ibid, Page 181. [15] Ibid, Page 181. [16] Ibid, Page 181.[17] Ibid, Page 181. [18] Ibid, Page 181.
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