978-1259913747 InterfaceRAISE Raising The Bar In Sustainability Consulting Case Part 1

Unlock access to all the studying documents.

View Full Document

Structure of the Case

The case is written from the perspective of Jim Hartzfeld, Managing Director of InterfaceRAISE, the

sustainability consulting arm of Interface Inc. (Interface). He has just been approached by John Wells,

CEO of Interface Americas, who wants him to help come up with a joint plan for growing the consult-

ing business by $5 million in five years.

The first section of the case discusses the transformation of Interface from an oil-intensive carpet

manufacturer to a leader in sustainability practices. The story begins when Jim Hartzfeld, then a recent

MBA grad, presses Interface founder, Ray Anderson, with a question that he’s received from sales

associates and customers in California: “What is Interface doing for the environment?” When Interface

decides to organize a task force to address this question more deeply, Anderson places Hartzfeld in

charge. Hartzfeld tells Anderson that he needs to be the one to charge the task force with their new mis-

sion. As fortune would have it, a book by Paul Hawken, The Ecology of Commerce, lands on Anderson’s

desk a few weeks prior to his speech. Deeply affected by the book, Anderson shocks employees by

announcing that Interface will be oil-free by 2020.

The next two sections describe Interface’s progress toward achieving Anderson’s vision. The plan

(Mount Sustainability) is comprehensive, including zero waste, increased use of renewable energy

sources, benign emissions, and resource-efficient logistics. Early initiatives include the QUEST pro-

gram to reduce yarn waste, development of the Entropy line of carpet tiles (which use biomimicry prin-

ciples to minimize replacement materials), and the invention of TacTiles to reduce installation waste.

By 2009, Interface estimated it had saved $433 million in waste and energy costs while boosting sales

by 66 percent.

The fourth section describes the founding of InterfaceRAISE, the company’s sustainability consult-

ing arm. Mike Duke, then head of Wal-Mart International, invites Ray Anderson to speak at a Walmart

company retreat, and is so impressed that he asks to take a team to visit Interface’s operations. This

forces the Interface leaders to think critically about their sustainability practices, which they then for–

revenues and one part-time and three full-time employees.

InterfaceRAISE: Raising the Bar

in Sustainability Consulting

TEACHING NOTE

MHE-FTR-005

1259420477

REv: JAnUARy 6, 2012

Teaching Note — InterfaceRAISE: Raising the Bar in Sustainability Consulting

The case then discusses the impact of the 2008–2009 financial recession on the Interface parent

company and carpet industry. Along with decreased demand for real estate, the carpet industry faces

competition from substitutes such as laminate and wood. Interface’s main competitors in this market

include Shaw Industries and Mohawk Industries.

The next section describes industry dynamics within the $16.8 billion sustainability consulting indus-

try. The field is populated by both small niche players, such as InterfaceRAISE, and traditional consult-

ing powerhouses like Accenture and A.T. Kearney. Blu Skye is a middle-market firm that was founded

to help Walmart manage an environmental crisis (an opportunity that was declined by Interface at the

time).

that Jim Hartzfeld must answer include: Can InterfaceRAISE compete successfully in the consulting

industry? How much money will the company need? Is InterfaceRAISE’s growth plan at odds with the

strategy of the parent company? If so, should Interface spin the consulting company off?

A sad postscript is that Interface founder Ray Anderson passed away in August 2011 after a lengthy

battle with cancer, raising the question of whether the company can maintain its sustainability focus

without its visionary leader.

Suggested Answers

ANALYSIS: FOCUS ON EXTERNAL AND/OR INTERNAL ENVIRONMENTS

1. What is sustainability consulting? How is it distinct from management consulting?

Sustainability consulting is a subsector of management and strategy consulting. With revenues of

$16.8 billion in 2009, sustainability consulting represents just a small sliver of the management consult-

ing industry, which boasted annual revenues of $330 billion.1 Sustainability consulting and manage-

2. Is sustainability consulting an attractive industry (using Porter’s five forces)?

Porter’s five forces model can be utilized to determine industry attractiveness. The attractiveness of

3. What is InterfaceRAISE’s position in the sustainability consulting industry?

A strategic group model (see Exhibit Tn-2) can be employed to determine InterfaceRAISE’s position

within the sustainability consulting industry. Firms with the broadest offerings include McKinsey and

A.T. Kearney. McKinsey offers services across eight different functional practices (Business Technology

Teaching Note — InterfaceRAISE: Raising the Bar in Sustainability Consulting

of McGraw-Hill Education.

11 industries. At the other side of the spectrum, InterfaceRAISE, Blu Skye, and boutique consulting

firms focus entirely on sustainability consulting.

With regard to pricing, established industry leaders such as McKinsey and A.T. Kearney compete

less on price and more on prestige. Their clients are typically Fortune 100 corporations with a high will-

ingness to pay for the value they provide. Middle-market firms tend to compete for business amongst

4. Apply a VRIO analysis. What are InterfaceRAISE’s resources, competencies, and capabilities?

Can they be a source of competitive advantage? Why or why not?

InterfaceRAISE’s main tangible resource is Interface Inc.’s $115 million in cash reserves. This large

sum of capital can be leveraged to provide InterfaceRAISE with the funds necessary to hire the most

talented consultants and sustainability thought-leaders, expand InterfaceRAISE’s consulting breadth,

or pursue acquisitions.

One of the firm’s main intangible resources is its knowledge acquired from achieving sustainabil-

ity through practice. Few other sustainability consulting firms have such direct industry experience.

InterfaceRAISE can draw upon the collective knowledge of the parent company’s engineers, manag-

ers, and entry-level employees to determine how to best help its clients embrace sustainable practices

While all of these resources and capabilities are important, the main question is whether they can be

bundled together to form a sustainable competitive advantage for InterfaceRAISE.

• ApplyingtheVRIOframework,weseethatInterfaceRAISE’sresourcesandcapabilitiesarevalu–

able. The fact that Walmart engaged InterfaceRAISE to aid its sustainability transformation shows

that InterfaceRAISE’s expertise is highly respected in the marketplace.

Teaching Note —InterfaceRAISE: Raising the Bar in Sustainability Consulting

of McGraw-Hill Education.

• InterfaceRAISE’sabilitytoraisecapitalisimitable.Thewisdomthecompanyhasgainedfromits

own transformation to sustainability, on the other hand, is costly to imitate. GE has implemented

its ecomagination campaign, and Walmart has set its goal to be supplied by 100 percent renewable

energy, but these initiatives are costly and take time to implement. InterfaceRAISE is well ahead of

its competitors on the sustainability learning curve, increasing its appeal to potential clients seeking

external consulting help.

• InterfaceRAISE’smanagementcapabilitiesareorganizedtocapturevalue.Mr.Hartzfeldisaproven

manager and a key member of the team that worked with Walmart on their sustainability initiative.

Furthermore, InterfaceRAISE’s Speakers Bureau provides a means by which the company’s sus-

tainability wisdom can be formally captured and disseminated to clients. Thus, utilizing the vRIO

framework, it appears that InterfaceRAISE’s primary source of competitive advantage lies in the

experience it has gained through its own journey to sustainability. (See Exhibit Tn-3.)

5. Is InterfaceRAISE positioned to compete successfully in the sustainability consulting industry

(as judged by a SWOT analysis)? Why or why not?

Considering the potential for growth in the market, InterfaceRAISE appears poised to compete suc-

cessfully in the sustainability consulting industry. The firm’s access to capital and industry experi-

ence differentiate it from many competitors. Further, InterfaceRAISE’s contacts and reputation among

Fortune 500 firms (via the parent company) should enable it to gain significant sustainability contracts.

However, the firm will likely need to grow in size to be able to provide a team of dedicated consultants

to larger clients. (See Exhibit Tn-4.)

Strengths

• InterfaceRAISE’s parent company, Interface, is a known leader in sustainability. This provides

InterfaceRAISE with instant credibility and access to clients.

Weaknesses

• Sincethecarpetindustryiscyclical,theavailabilityofcapitalforInterfaceRAISEmaybecorrelated

with the parent company’s industry performance.

Teaching Note — InterfaceRAISE: Raising the Bar in Sustainability Consulting

Opportunities

• Politicalsegment – Governmental subsidies are provided to help firms become more environmentally

sustainable.

Threats

• With agrowingemphasison sustainability,the sustainabilityconsultingindustry mayattractan

increasing number of new entrants. Other firms (such as GE) that have created internal sustainabil-

ity initiatives may follow Interface’s lead and start to offer consulting services.

FORMULATION: FOCUS ON BUSINESS, CORPORATE,

AND/OR GLOBAL STRATEGY

6. What strategy should Jim Hartzfeld propose to grow InterfaceRAISE to $5 million in fiveyears?

InterfaceRAISE first needs to determine its business strategy (in other words, how it will compete

in the sustainability consulting industry). Mr. Hartzfeld should start by determining the firm’s value

proposition, or how to create the largest gap between the perceived value of the firm (v) and the firm’s

costs (C). The greater the gap (v-C), the greater the firm’s competitive advantage.

InterfaceRAISE’s competitive advantage lies in its sustainability knowledge base and implementa-

tion experience. This should be the basis for how InterfaceRAISE differentiates itself from its com-

InterfaceRAISE should keep its scope of competition focused toward the market niche of Fortune

1000 firms looking for transformative sustainability implementation. Mr. Hartzfeld currently does not

Teaching Note —InterfaceRAISE: Raising the Bar in Sustainability Consulting

of McGraw-Hill Education.

have a high willingness to pay. Exhibit Tn-5 displays how InterfaceRAISE can capture more value

by increasing a client’s willingness to pay, despite having a higher cost structure than McKinsey or a

boutique firm.

The core competence–market matrix (see Exhibit Tn-6) can be used to plan a growth strategy. The

lower right corner represents InterfaceRAISE’s current core competencies. The firm should first seek

7. What corporate strategy is best for Interface, Inc.? Does it make more sense to remain vertically

integrated, or should InterfaceRAISE become a standalone company?

In order to achieve its targeted growth, InterfaceRAISE will need to develop a corporate strategy that

leverages the firm’s core competencies to compete effectively in the sustainability consulting industry.

It may choose to remain vertically integrated within Interface or to spin off as a separate unit or merge

with / be acquired by another consulting firm. In weighing the pros and cons of remaining with the

parent company, Mr. Hartzfeld must take into account that InterfaceRAISE’s core competencies are

derived mainly from its relationship with Interface, Inc.

• RemainverticallyintegratedwithInterface,Inc.

InterfaceRAISE is in a nascent stage and may require outside funding to achieve its targeted

growth. One possibility is that InterfaceRAISE could remain a separate entity under Interface’s cor-

• Spinoffasaseparatecompany.

If a vertical integration strategy proves not to be an optimal solution, InterfaceRAISE could explore

the possibility of a spinoff. Under this scenario, the firm would become a separate legal entity.

Teaching Note — InterfaceRAISE: Raising the Bar in Sustainability Consulting

of McGraw-Hill Education.

The biggest downsides to this alternative include increased financial risk and a potential loss of

credibility (if it loses access to the Interface Speakers Bureau). InterfaceRAISE would no longer be able

to rely on financial support from its parent, should the firm experience growing pains affecting its

ability to remain a going concern. To avoid the risk of loss of credibility, InterfaceRAISE could sign a

licensing agreement with Interface to have access to the Interface Speakers Bureau.

• Acquisitionby,ormergerwith,anothersustainabilityconsultingfirm.

A potential acquirer would be a thought-leader in consulting that seeks related diversifica-

tion. McKinsey is one potential candidate. Currently a leader in the management consulting indus-

try, McKinsey offers services across eight different functions and 18 different industries. Acquiring

InterfaceRAISE, with its leadership and deep knowledge base in sustainability consulting, could pro-

vide benefits for both parties.

Alternatively, InterfaceRAISE could seek a merger with a direct competitor in sustainability consult-

ing, such as Blu Skye. Joined together, these two firms could significantly increase their market share.

Since Blu Skye is located in San Francisco, California, and InterfaceRAISE is headquartered in Atlanta,

Georgia, the two firms would also realize increased geographic diversification.

IMPLEMENTATION: FOCUS ON RECOMMENDATIONS

AND HOW TO EXECUTE THEM

8. Which competitors does Mr. Hartzfeld need to monitor most closely as he implements his

chosen strategy?

InterfaceRAISE should primarily concern itself with competition from middle-market niche sus-

tainability consulting firms such as Blu Skye, as they are likely to target the same clients. Fortune 500

Additional Resources

1. For additional reading: