Mini-workshop: Five tools and tips for relevant green finance programs that don’t lead to green gridlock

 

We’ve said before that green finance programs that are more meaningful to customers are actually safer investments.  Here are five tools for increasing your program’s relevance to customers.

Problem →Most green finance programs drive green gridlock

No one wakes up planning to create ineffective incentives, yet it happens. Despite the mega-billions of taxpayer dollars sunk into incentives, rebates and other tools designed to stimulate green building and energy efficiency, most green finance programs aren’t getting the kind of traction needed to stimulate private investment and bring about real energy security and sustainability.

Green finance failure is evident in the thousands of redundant, fragmented monetary incentives littering the market, even as building owners complain about insufficient green funding options.  You see it every time an owner retrofits only enough to qualify for a couple of incentives and ignores other energy-saving opportunities.  He lacks the organizational bandwith to access more programs scattered throughout the market.

It’s also apparent in the choking bureaucracy investors experience in trying to access grants and loan guarantees.

Missed signals → fragmented, uncoordinated policies and incentives → green gridlock → frustration

Even more insidious are the ways in which distorted signals about funding lead to even more fragmented, ineffective incentives, adding to the confusion. Click on the graphic to enlarge it and see how that happens.

So an already clogged, murky vat of regulations, policies and confusion continues to calcify, blocking green capital flows to the very initiatives needing funding - gridlock.

The point here is not that “incentives are bad.” It’s that there needs to be more thinking about the customers these programs serve and the kind of job they’re supposed to accomplish.

This requires you to adopt a different mindset about designing and delivering green financial services for your customers.

1→ Reality check: Traditional real estate financial services is an old Buick

Commercial real estate financial services, in general, are like a gas-guzzling old Buick, and putting together commercial real estate transactions is an expensive and time-consuming endeavor.

Over a property’s lifetime, gigabytes of redundant data will be duplicated each time there’s a transaction, generating large amounts of wasted time and expense — gas-guzzling. When a property deal “breaks down,” there are no generic spare parts that you can immediately buy to fix things. Every single repair is a painfully expensive custom job.

Still, we see most green finance programs simply cloning the same gas-guzzling models that have been around for the past few decades. It’s a boring product that’s way past its prime. No wonder investors are unimpressed.

Ask yourself: when’s the last time you were excited about buying a very complex product that forced you to spend tons of money just to acquire it, with absolutely no assurance of whether your true problem would be solved once you used it?

Tip: During your program’s design, make sure you’re not simply replicating the typical commercial real estate financial product. It’s a tired, expensive commodity.

2→ Watch your customer’s movie to solve their real problem

Just as you need to understand the setting of a movie in order to understand a character’s story, you have to get a clear view of the market context that your customer operates within in order to put together a green finance offering that is most meaningful to them. What is their end goal? They’re probably not pursuing sustainability as an end in itself. Rather, sustainability is usually a valuable tool for navigating the tough bigger picture changes happening in their world, including:

• Economic instability
• Social values
• Global markets with greater local influence
• Increased customer expectations about services and products generally
• Building standards and technology improvements

While traditional financial services products are not designed to help property owners navigate these kinds of changes, any property owner who is taking on sustainability by using your green finance program will usually be grappling with these issues.

The key is to understand the particular big picture issues affecting your customers and prioritize their impact. Last month, we talked about our Real Estate Innovation Advisory® services and how they help elicit these kinds of deep insights from customers, increasing your program’s relevance to their business.

Tip: Find out your customers’ true end goals. Build your program around supplying the key resources that help them meet those objectives.

3→ Get into their world with process visualization

The successful green finance program has to beat, not just meet, traditional financial service offerings. To do so, you must know how your green finance offering fits within the customer’s world.

A quick way to immediately improve your green finance program is to look at the range of typical activities that take place during your user’s transactions.  We use Mindjet Mindmanager 8.0 ($349 retail) to sketch mind-maps of customer activities. The example below represents the core components of a property owner’s world.

Put your client’s activities into a process map:

When we work with clients, we catalog their activities and lay them out into a process map that includes the client’s service offering within the customer’s activities.

There are many different kinds of process maps. Below is a simple mock-up of a timeline process map that we  created with Smartdraw. Click on the graphic to see the enlarged view.

This immediately helps everybody to visualize and define the issues that the green finance product addresses, using the same language. We go over the details of these processes and their impacts in our workshops, or you can find out more by contacting us directly.

Tip: Collaborate with customers to learn the typical activities that form their world. The resources below can help you to map your your green finance offering to your customer’s key processes.

Quick reads about process mapping:

• http://www.ehow.com/how_5070753_make-process-map.html
• http://en.wikipedia.org/wiki/Business_process_modeling

3 process-mapping software options:

• Flowbreeze; $39-$59: http://www.breezetree.com/buy.php
• Smartdraw; $197: http://www.smartdraw.com
• Visio 2007 Standard; $399: http://office.microsoft.com/en-us/visio/fx100487861033.aspx

4 → Three design questions for better green finance programs

Tip: To study your new process map, ask yourself the kinds of questions designers do when they create products and services. Here are three starters that you should answer:

• Does your program enhance or hinder any of these activities or events within real estate finance?
• How many ways does your green finance program touch these events?
• Which activities touch whom? When? How?

5 → The bottom line: Start with a model of good green finance

If you’re starting from scratch, of course you could just work from a better model to begin with.

We use the following model to think through the key elements of successful green finance programs, and to work with clients on pinpointing opportunities and problems. It can help you to see the kinds of problems your program will run into if you copy traditional financial services or leave out some other key component.

Summary

Green gridlock is a needless waste of money and turns the positive intention of greening buildings and saving energy into frustrating experiences and unsuccessful programs.

Many green finance initiatives would become more relevant to property investors and other customers that local governments and utilities try to influence if they a) stopped copying an already flawed finance model and b) took the world of the user, the property owner in this case, under consideration.

Use a model of successful green finance programs and a process map to visualize how your programs fit in the customer’s activities. This will make you more successful because programs that appeal to customers are definitely more successful, and therefore less risky.

What do you think?

Do you have any positive or negative stories of dealing with green finance programs that you would like to share? Let us know. We’d love to address these kinds of issues in future posts.

Want to read more Mini-Workshops?

• #1: GAPS! in practice with 7-Eleven Corporation