Turning biodegradable diapers into profits in the US$5.7 billion disposable diaper industry.
The lights dim and before an intrigued audience, the latest take on a familiar, everyday consumer good is beamed onto a large screen. The boring, industry-standard color has been replaced with trendy shades of blue, green, pink, red and yellow. The architecture has been redesigned with new and practical considerations, with end users in mind. The item is naturally intuitive to use through well-thought-out, engaging design. An item that no one ever glanced at twice, is suddenly a desirable, must-see fashion accessory.
The latest keynote presentation in Palo Alto? No, it’s the latest diaper, or nappy as it’s being called for the newly launched UK market. A product used in millions of homes every day around the world has just been reinvented, and promises to help save the environment too.
When Jason and Kim Graham-Nye (YPO Oregon) read a report a few years ago citing 50 million diapers were being dumped into U.S. landfills every day, they were astounded. They where even more horrified to learn that it took around 500 years for them to biodegrade. Kim was pregnant with their first child at the time and remembers feeling an incredible sense of responsibility that stretched beyond her pregnancy.
“Along with the awareness of my new baby growing inside me I had this vision of generations that had come before me and those that were yet to come. I thought of the ignorance of past generations who had done so much harm to the planet through bad environmental practices, in complete ignorance, and how we ourselves might be judged by our children in the future one day if we allowed this type of behavior to continue,” says Kim.
Clichés, such as “The planet is not something we inherit, it’s something we’re looking after for our children,” suddenly rang true with Kim and became very personal to her.
“I could see my kid in the future asking me, ‘Didn’t you see we were going to run out of holes in the earth to dump our garbage?’ Somehow, my reply of ‘well it was just so convenient at the time,’ just wasn’t going to wash,” she explains.
The numbers they had read in the newspaper that day bothered the couple for months. Kim and Jason spent days trawling websites to find alternate solutions to a problem they wanted no part of. Eventually realizing that options in minimizing your toddler’s carbon ‘poop-print’ were limited, and with no prior industrial design or diaper production knowledge, they let the idea go and focused on more immediate issues, the arrival of their first-born. Kim and Jason embarked on the cloth diaper route at first, while still looking for alternatives. They found cloth inconvenient and not very reliable. At last, by complete chance, they came across a diaper online that consisted of a washable outer cover and biodegradable, compostable absorbent pad. While they didn’t invent this technology, the couple immediately saw the potential.
Cloth diapers cost around one tenth of disposable diapers and have captured around US$200 million of the diaper market, with disposable cornering a massive US$5.7 billion. Interestingly, the cheaper option has only been embraced by only 5 percent of American families, leaving disposable diapers a clear winner.
Kim and Jason had always been entrepreneurial and had rarely seen a widely available product, such as diapers, that only had two options – cloth or disposable. It was unbelievable to them that no third option existed in a multi-billion-dollar industry, which in other industries of this calibre would have hundreds. It was hard to believe that an opportunity wasn’t to be found here. Some basic observations helped clarify the business plan.
“We couldn’t see 90 percent of the population returning to cloth diapers, especially in this day and age of both parents working, children in childcare and the time constraint of washing and drying diapers. This model was not feasible, but it didn’t mean that plastic disposables needed to be used every day instead. The eco-disposable pad the couple had found online was given a ‘cuteness’ tweak by Kim and gDiapers was in business.
Disposable diapers cost around 10 times more a year, per child, than cloth, yet the couple aren’t marketing gDiapers as the money-saving option. They believe the novelty and environment-friendly aspects more than compensate for this.
“We’ve given our product an emotional appeal,” says Kim, “and in a world where design and user-friendliness have become a major factor in a product’s success, we’re trying to make people feel good about diapers. Turning this process from a burden to an inspiration is what we’re aiming for.”
Kim has ideas for celebrity designers to contribute to the look of the brightly colored collection, and Jason is eyeing the potential of sports team branding. In the endless search by marketing firms to find untapped sites to place advertising, the couple have inadvertently unlocked a massive market. Move over Hollywood celebs who think it’s cool to expose designer underwear – the toddler market is about to get way cooler.
Kim recently shared a stage with Warren Buffet where she was recognized by Fortune as one of the top 10 most powerful woman entrepreneurs in the United States. While most people can improve their products or services, Kim and Jason are more interested in how to run a company in a very different way. At the Fortune event Kim also got to talk to the CEO of PepsiCo, Indra Nooyi, who wields incredible power as leader of the world’s second largest food and beverage business and also as a member of the Foundation Board of the World Economic Forum. Kim found it refreshing that Nooyi shared the same sustainability objectives as the couple – hers on the global stage and Kim’s at a local level (although this is changing fast).
“I think it’s so important for a business to have a code of ethics,” says Kim, whose original thoughts on sustainability had less to do with saving the planet and more to do with wondering if all the excess and disparity she saw around her was necessary. Moving between developing countries, such as Tanzania, where she lived for many years, and developed countries such as Australia and the United States, has given her perspective on this.
“For me, the issue is more about asking questions such as, ‘how much do we really need and does this really make me any happier? My focus has always been more on humanity, rather than the environment. What happened in 2008 with the global economy really made me think. Somewhere along the way business lost its conscience. Doctors and lawyers have a code of ethics they need to follow by law, but MBAs don’t. Business is a huge force in society and business owners should have a responsibility to communities, manufacturing supply chains and employees,” says Kim.
“Many people think that by us becoming involved in a sustainable business, it somehow qualifies us as being different from what others can achieve. As if running a baby diaper company gives us the exclusive right to run our business differently. Regardless of what business you’re in, there’s an unconventional paradigm that can be exploited.”
The whole idea of turning the diaper business into a desirable, game-changer has not, however, changed certain expectations among the wider business community when it comes to gender.
While Kim, as both co-founder of gDiapers and a mother marketing to other mothers, has a central role to play in the financial success of her business, it’s Jason’s voice business people want to hear in the boardroom and at presentations. While some of this can be put down to Jason’s innate humour and endearing Australian accent, it does reveal the bigger bias toward men in the world of big business.
“For the last ten years the number of women in senior management roles has stagnated in the United States,” says Kim. “Even Afghanistan has more women in these roles, per capita, than we do. I don’t think this is a conscious decision by our society, it’s more the fact that Americans have not created the platform for mothers to play an equal role in business, while still allowing them to be mothers.”
At gDiapers Kim is president and Jason is CEO. They joke that Kim gets to do all the fun stuff. As ‘keeper of the brand,’ she gets to do the design and marketing, while Jason ends up with the opposite – legals, board management and raising capital. Although he has embraced social media in a big way and spends many hours tweeting and communicating on Facebook with a growing fan-base of parents.
Kim gives some insight into how they relate as a couple in business. “A couple that communicates clearly is critical. It’s very much like a successful marriage. Negotiations happen every day in a marriage and also in business – there is giving and receiving along the way. We follow the philosophy of being ‘hard on issues, soft on people’. Nothing ever gets personal.”
With the company now firmly established in the United States, explorations underway in the French and Canadian markets, and the recent launch in the U.K., gDiapers is set to prove that even the most mundane task or product has the potential to reinvent itself. “We see little value in launching a venture that is solely focused on profit when without a lot of incremental effort, a company can achieve far more, and go some way to changing the world.”