Throwback Thursday: The Cool Factor
On January 6th, 2015, The Sustainable Investor first examined The Cool Factor.We are living in the world of The Cool Factor. Why else would one stand in line (or sit in a tent) overnight, waiting to purchase their sixth version of an Apple iPhone with roots over a century ago by Alexander Graham Bell? Because the emotional response of owning the coolest new gadget overwhelms the rational thought of staying in bed. Similarly, Google is cool, Yahoo is not. The success follows. - The Sustainable Investor, 01-06-2015. We have subsequently discussed The Cool Factor as the concept pertains to many of our Company Case Studies. The Cool Factor acts as a catalyst - it has hurt companies like McDonald's and Walmart, yet rapidly advanced others: Tesla, Warby Parker, Converse, Spotify...the list endures.The implications of The Cool Factor are vast and thus the topic deserves revisiting.WHAT IS COOL?It is impossible to measure.It is sought after by many, yet delineated by few.It is the ultimate marketing tool, the most prestigious brand enhancer, an unsurpassed generator of revenue.It defies the status quo.Yet, The Cool Factor cannot be definitively described, as its fundamental essence is in an eternal state of transformation.CAN A COMPANY BE COOL IN PERPETUITY?In the words of Heraclitus, there is nothing permanent except change.If the world is constantly evolving, how can a company possibly remain cool? It is difficult to fathom a company such as Apple not being cool. Indeed, Apple has been cool for over a decade. Yet, there was a time when Apple was not cool. And there will come a time, perhaps many years away, when Apple is defied by something cooler.Selwyn Duke, writer, columnist, and public speaker, theorizes about evolution in terms of conservatism. "The only consistent definition of 'conservative' is a desire to maintain the status quo, while 'liberals' only consistent definition involves a desire to change it. This means 'conservatism' is always changing: tomorrow's version will reflect today's liberalism's success in altering the status quo."In contrast to the widely held notion that people become more conservative as they age, Selwyn Duke asserts the exact opposite. It is not that people become more conservative with time, rather their views become amalgamated into the status quo until challenged by the next generation with new beliefs.If you hold this credence to be valid, then that which is deemed cool today can only remain cool until defied by something cooler.Reality lends evidence. DIMINISHINGS RETURNS OF COOL:Consider Product X. If five people desire Product X, it is not cool by any definition, because hardly anyone knows about Product X. Yet, as the proportion of the market desiring Product X increases, Product X becomes cool.But The Cool Factor has a peak, subsequent to which coolness diminishes. Why? Because a quintessential aspect of being cool is being new. Innovative. Unique. Product X's peak coolness is directly related to consumer desire. When just enough, but not too many, consumers desire Product X, Product X has reached ultimate coolness.Millions of consumers desire Product X at ultimate coolness. But once Product X becomes too "mainstream", once it appeals to parents, grandparents, and/or consumers of various levels of wealth, Product X diminishes in cool. In fact, Product X will reach a point at which coolness diminishes so greatly as to instigate a loss in market share.The distinction between coolness of product and coolness of company must be noted.The Apple iPhone 3GS is not cool. Yet, Apple has maintained its cool image. Why? Because Apple has been defining cool for the past decade. Apple is telling its consumers what is cool, rather than waiting to be told. Apple has maintained a state of constant innovation - evolving its product set in tandem with the rest of the world.WHAT DOES COOL MEAN FOR SUSTAINABILITY?Consider Warby Parker. Originated on the premise of becoming a stakeholder-centric paradigm for other for-profit businesses, Warby Parker wanted to prove a for-profit company could use its business model to alleviate environmental and social deficiencies.Warby Parker's ability to impact is almost entirely consumer driven.I have spent the past six months casually surveying those whom I encounter wearing Warby Parker glasses. Though the company's major initiative, Buy a Pair, Give a Pair, is prominently displayed on its website, many of its consumers are unaware of said mission. The cause of the purchase is simply a desire for the product. The glasses have been deemed cool. Without The Cool Factor, Warby Parker's business model might not be as successful, and thus, without The Cool Factor, Warby Parker might not be able to alleviate poverty through eyewear, to the extent that it is doing today. In this scenario, The Cool Factor has a direct impact on the ability of business to act sustainably.It should be noted that today's frontrunners of cool are embracing sustainability: Tesla is striving to bring sustainable transit to the masses, Apple is building the world's greenest building, and Google, Facebook, LinkedIn, and the other Silicon Valley behemoths are seeking 100% renewable energy and spending vast resources on implementation of sustainability.The Key To Success In Business Is Evoking the Desired Emotional Response.Companies that can successfully elicit a positive emotional response to sustainable initiatives from consumers and investors will endure.It thus seems reasonable to conclude that the perfect sustainable business model is one that architects an impeccable marriage between exuding cool and doing good.