How HIP Is Your Revenue Mix?

Will You Be a HIP Conglomerate?

Wall Street analysts and institutional investors examine sales growth, international sales, product mix and business unit ups and downs. All of these are financial in nature, and critically important to an enterprise’s economic prosperity.

But those metrics can also be lagging or incomplete. Customers buy products for a reason. HIP Investor’s research and analysis shows that the most successful companies typically hone in on solving a human problem – health and wellness, financial security, eco-efficient equipment, equal access and increased trust and credibility.

Products that are “HIP” generate both Human Impact + Profit ™, because they are designed that way from the start, screened along those criteria during research, development and launch, and deliver a core environmental, social or human benefit to customers, while making money for shareholders. Yes, they Do Good AND Make Money.

At PepsiCo, CEO Indra Nooyi (BIO) is integrating a business strategy of “Profit With Purpose,” which includes initiatives in health and nutrition, environment and people. PepsiCo is now tracking its product revenue in the categories of “good for you” (like Tropicana, Quaker Oats, SunChips, Naked Juice, SoBe and Ethos Water) and “fun for you” (like Doritos and Mountain Dew). At last count, Pepsi’s “good for you” products represented 30% of its revenue, which it expects to increase over time (though the Q1 2009 earnings presentation highlighted a “maniacal” focus on cash). Pepsi is a top performer in HIP ratings – and Q1 2009 return on equity is over 40% - which has enabled it to outperform the S&P and Dow indices.

At General Electric, the “ecoMagination” strategy has evolved from CEO Jeff Immelt’s self-admitted “good public relations” to real revenue and profit. GE’s wind turbines, fuel-efficient railroad engines and compact fluorescent light bulbs are examples of 70 products in ecoMagination, contributing top-line 2008 revenue of $17 billion, or nearly 10% of sales worldwide. GE expects that to grow to $25 billion by 2010, building off its $1.5 billion ecoMagination R&D budget. GE has also announced they are an anchor R&D partner for Masdar City (the world’s first zero-waste, carbon-neutral, renewable-energy city, based in Abu Dhabi). GE’s leadership in these segments are generating revenue and profit growth as well as energy efficiency and emissions reductions, but the company has been hampered by its un-HIP exposure in financial services and leverage. GE’s management practices (lower carbon is on each executive’s performance goals and reviews) are very HIP and recent ROE is above 10%, but shareholder performance has not lived up to historical norms.

What is YOUR HIP revenue share? Most companies still don’t know exactly. While HIP’s approach examines environmental, social and human impact created for customers by the products and services of the company – and how they generate profit, our interviews with companies have found that there is not yet tracking of this metric systematically like Pepsi and GE.

HIP’s five categories of impact (health, wealth, earth, equality, trust) are based on solving human problems that are highlighted by Maslow’s hierarchy of needs. Many times the industry dictates a company’s category of primary impact, for example:

= Health: Obviously, the mission of health care is healing patients and encouraging wellness. Data mining technologies help Cardinal Health’s MedMined help track outcomes, and support pharmacies in managing complexity. An example of a Health+Earth product is Hospira Inc.’s VisIV, a new IV solution container resulting in 40%-70% less waste than similar products.

= Wealth: In these times, it’s hard to identify firms that are solving financial challenges in banking or investing. Before the meltdown, Wachovia Bank shared how its CRA (community reinvestment act programs) were becoming a business strategy, to help the poor become richer. (Unfortunately, Wachovia’s toxic assets led to its acquisition by Wells Fargo.) In social investing, State Street and Northern Trust offer mutual funds and exchange-traded funds (ETFs) that enable investors to invest in HIP firms, supporting human impact and profit.

= Earth: Innovative materials companies are pioneering environmental breakthroughs: PerkinElmer’s suite of sensor products (in industrial, auto and safety) annually reduce 22 million tons of carbon emissions. Allegheny’s grain-oriented electrical steel (GOES) is used in lightweight and eco-efficient equipment, saving energy and emissions. Ball’s award-winning 100% recyclable, lower-weight-than-glass wine bottle that uses both product and process innovations to drop the overall footprint and cost over its lifecycle. Juniper’s new routers save 30% energy and half the data-center space, and Tellabs 5500 digital cross-connects drop energy usage 85%.

= Equality: Whether gender, ethnic, income-level, or species, HIP products seek to equally serve the full range of society. BB&T Financial is increasing its support of community-development corporations to better serve the full diversity of customers. Cosmetics firm Estee Lauder is seeking the elimination of animal testing in its product development.

= Trust: Technology helps provide new lenses into great deals for customers. eBay provides competitive and transparent pricing (though buyers need to validate quality), Progressive Insurance compares prices to its competitors for consumers, and Amazon enables a competitive marketplace against its own retail products.

This strategic view about solving human problems focuses innovation and R and D on the most pressing opportunities – which also creates loyal customers, engaged employees, and committed suppliers. These products also tend to be first to market, higher margin, market-share grabbers and have the potential for long-term profitable lines of business.

Can you be a HIP Conglomerate? One example of a multi-impact company is McGraw-Hill. While many recognize its affiliation with textbooks, McGraw Hill (a multi-generational family controlled company) owns several lines of business across all five HIP human impacts.

= Health: Harrison’s Practice is a mobile resource that provides doctors and nurses with the latest medical advances and knowledge via the web and hand held devices, which can be used with patients more easily than books.

= Wealth: Standard and Poor’s, author of the S&P500 and other indices, tracks daily changes in stock prices around the world, and provides timely information about the state of portfolios – and makes it easy to diversify as well as be used as a platform for firms that manage customer wealth.

= Earth: Platts’ energy commodities price assessments are now incorporating info about emerging emissions, biofuels and liquid natural gas markets; and McGraw Hill’s construction industry media, product information, market trends and forecasts are incorporating details on green and sustainable building projects.

= Equality: iSpeak is a device that turns an MP3 player into a portable translation device, while Acuity is an accountability testing program for public schools.

= Trust: Customer satisfaction surveyor (and consultant) J.D. Power and Associates’ creates a deeper understanding of what customers want – and showcases it with awards that increase transparency about who’s a top performer. Increases in customer satisfaction scores also correlate with higher revenue growth, profit growth and shareholder value.

How much of YOUR revenue is HIP? How is your company solving human problems for profit? What is your strategy for creating Human Impact + Profit?

= Share your successes with us at HIPrevenue@HIPinvestor.com – or contact us to advise you on how to create more HIP products and generate more HIP revenue. =

Finally, THANKS! To all the HIP portfolio research associates who have contributed to the 500+ companies that HIP Investor has researched across Products, Human Impact (health, wealth, earth, equality, trust), Management Practices — and how they drive Profit.

HOW HIP IS OBAMA’S STIMULUS? A HIP SCORECARD

CAN MEASURE THE HUMAN IMPACT OF OUR TAXES

When investing in a business, you are a shareholder expecting a return on your investment (ROI).

But as a citizen, you are typically called a taxpayer. In reality, we are tax-investors. Our tax dollars need to generate a positive human, social or environmental impact. In this economy, businesses have slashed capital spending, forcing the government to “reinvest” hundreds of billions for recovery.

So, how will America measure the return on investment (ROI) of the federally-approved stimulus? More importantly, how will President Obama highlight successes, call out failing programs, and ensure the highest possible “return on investment” of taxpayer dollars?

The American Recovery and Reinvestment Act ( full 407 page PDF) authorizes an Accountability and Transparency Board and specifies urgent (“flash”), quarterly and annual reporting to track metrics like job creation and economic growth.

When President Obama, governors, mayors and officials use a scorecard to track success, we recommend they track HIP metrics like these:

WEALTH: Job creation, income per person and net worth per person. And which investments will create the most jobs? According to this chart from Congressional testimony using Dept of Commerce data, each $1 million federal investment can create 23 educational services jobs, or 17 public-infrastructure jobs, or 16 “green” jobs. That beats tax cuts (14 jobs per $1 million), military spending (11) and oil and gas (4). The Reinvestment Act also specifies that worker compensation be in line with typical pay rates of similar work (and hire only American workers for companies taking TARP bailout funding).

HEALTH: Access to affordable health care, coverage for workers, and increases in health metrics. Wellness programs at corporations, from General Mills to Motorola to Xerox, show highly attractive financial paybacks (2-to-1 and more) and increased quality of health for the employees participating. Future demand for Medicare can be reduced as well. More corporate examples and payback data are here:

EARTH: Greenhouse gas emissions (GHG), energy usage (BTUs), water usage (volume), waste (volume). Major retrofits and increased eco-efficiency of buildings will reduce monthly expenses for fuel and utilities, as well as eliminate pollution, For a “green” school, a $3 per-square-foot investment would yield $11 per sq.ft. in energy/emission/water benefits – and another $63 per sq.ft. in healthier staff and increased performance of both teachers and students – see the data.

EQUALITY: Gender equality, ethnic balance, income-class distribution. US society is 50-50 men/women, and a mix of ethnicities (e.g. 14% Hispanic-American, 13% African-American, 4% Asian-American), but employment does not always match up with the citizens served. Government contractors like Lockheed Martin and Northrop have some of the highest rates of supplier diversity, due to the requirements of federal contracts. Furthermore, battling illiteracy can reduce the number of criminals (and save money). While 60% of prison inmates are illiterate (as are 85% of juvenile offenders), inmates receiving literacy help have a 16% chance of returning to prison, as opposed to 70% who receive no help. Taxpayer could save $25,000 per year per inmate and nearly double that amount for juvenile offenders, with an investment in education.

TRUST: Transparency of information, including the impact metrics per dollar invested above. The Recovery Act mandates “appropriate use of taxpayer dollars,” and funding details should also be posted on a website. The more transparency about progress and expected benefits will lead to higher public confidence and recognition of high ROI projects.

In my conversation with Honolulu mayor Mufi Hannemann this week, he highlighted the kick-off of the first light-rail system for the Hawai’ian capital. It was possible a few decades ago, but the local politicians opposed raising the taxes to match federal funds. Mayor Hannemann, elected in 2005, worked to secure state funds for the city, before applying for Federal dollars. When completed, the new elevated-rail system will yield lesser congestion and pollution, and a healthier, eco-efficient and more equal transportation for citizens and tourists.

The HIP Scorecard can be used for tax-investors and governments, as well as for-profit corporations. We all seek Human Impact and a Positive ROI – whether as tax-investors to government, donor-investors to charity or shareholder-investors of corporations. And that is the essence of being a HIP society.

* * *

How can you track the Human Impact of the forthcoming reinvestment? Go to www.Recovery.gov to provide feedback and participate.

What HIP metrics should be tracked in your city, county or state?

What should the ROI of your tax-investment be?

ADD YOUR COMMENTS BELOW:

January/February 2009: “MICROFINANCE INSIGHTS” MAGAZINE

HIP HIGHLIGHTS 3 WAYS TO GROW REVENUE FOR CORPORATES PARTNERING WITH MICROFINANCE GROUPS (MFI’S)

By R. Paul Herman and Tom Willis of HIP Investor Inc.

Microfinance institutions (MFIs) have a large customer base of 100 million reliable entrepreneurs seeking to build the health and wealth of their family. These citizens also desire a cleaner environment and equal opportunities. By comparison, the 50 largest global companies comprise about 20 million workers. For forward-thinking MNCs partnerships with MFIs offer the opportunity to meet these “human needs” by generating both positive “human impact + profit” – or what we call “HIP”.

How does a Corporation Become More HIP ? By partnering with MFIs (microfinance institutions), there are three ways to be HIP: generating results for the top-line and bottom-line, as well as society:

1. Encourage products that make money for micro-entrepreneurs too.

2. Tap micro-entrepreneurs to be leaders of sales networks.

3. Collect information about group demand - and purchasing power.

READ THE FULL FEATURE, AND DETAILED CASE STUDIES OF
HOW TO BUILD PROFIT - AND HUMAN IMPACT

Enterprise Rent-A-Car, likely the most customer-friendly in the industry, is positioning itself to make more money. How? By appointing Pamela Nicholson, who’s worked her way up from the front-line ranks when the company was only 200 people over 27 years ago, to the role of President in this family-owned private company.

Does adding women leaders make companies more money? The research of Catalyst.org, a non-profit based in New York, has consistently shown that the top 25% of companies with the largest share of women Directors on a public-company Board beat the bottom quartile companies with a return on equity 53% higher (13.9% for Boards with more women; 9.1% with fewer or no women). For public-company Boards with 3 or more women (the upper echelons of the top quartile), the return on equity skyrockets to 16%. Read more details about higher financial returns when women are represented in leadership which is not yet close to the 50% of women in the population, or the 47% in the workforce. At HIP Investor, we evaluate how companies that represent the population in Boards, executive teams, managers and staff drive higher “Human Impact” which tends to increase “Profit” and financial returns. This Human Impact + Profit, or HIP, correlation can be tracked and a useful measure for both companies and investors. Read the rest of this entry »

Fallout from the Lehman Brothers’ collapse will result in tighter credit conditions and falling share prices for cleantech firms, but experts are confident that the longer-term outlook still looks solid, Danny Bradbury of BusinessGreen reports.   Learn more and read HIP CEO R. Paul Herman’s expert analysis on what to expect in the short- and long-term.

Read the full article in BusinessGreen.com HERE

How can you vote HIP in 2008 ?  Do equity prices and incomes rise more in a Democratic or Republican administration?  How should you think about your investment portfolio?

WATCH this HIP Investor webinar ( CLICK HERE ) to see how McCain’s and Obama’s proposed policies as President compare, according to the HIP methodology, including:

• HEALTH - will 47 million uninsured Americans be covered?
• WEALTH - how might your taxes shift?
• EARTH - who will support actions for climate change?
• EQUALITY - how will all Americans have an equal chance to succeed?
• TRUST - who will advocate transparency?
• INNOVATION - what policies will support renewed jobs and revenue?

The event featured HIP Investor CEO Paul Herman, HIP Associate Wil Keenan, and Sam Dorman from the League of Young Voters.

Please CLICK HERE to view this highly valuable, one-hour webinar. (You will need to click the “dimdim” logo; and then there will be a five-second pause before the audio starts.)

If you would prefer to view the PowerPoint (PPT) presented in the webinar, CLICK HERE .

PLEASE VOTE ON NOVEMBER 4, 2008 - AND SHARE THIS WEBINAR WITH THOSE WHO ARE SEEKING MORE INFORMATION ON THE ISSUES.

We sought out 10 HIP places to park your cash and savings nationwide: make money and do good at the same time!

Download the 10 HIP Places to Park Your Cash one-pager, which was also presented at the March 2008 HIP Investor Roundtable.

You will find banks that build up enterprises that create strong Human Impact (Health, Wealth, Earth, Equality and Truth) and also drive Profit – for your portfolio, the bank and society overall!

IN THE NEWS:  HIP CEO’S CLEANTECH MEMO
TO PRESIDENT-ELECT BARACK OBAMA
BusinessGreen.com, November 7, 2008 issue

What should U.S. President-elect Barack Obama do about clean technology, renewable energy and the environment?

Danny Bradbury, of online cleantech publisher BusinessGreen.com: “We tracked down several of the leading players in the US cleantech and environmental movement to find out what they want to see from an Obama administration and what they expect to get.  From signing Kyoto to awarding Presidential Medals of Freedom for clean tech heroes, here are their responses:”

R. Paul Herman is chief executive and founder of HIP Investor, a San Francisco-based financial firm with a number of green funds and indices:

“We need an integrated economic-environmental-social strategy across all three sectors (business, NGOs and government) that tracks results with an overall performance scorecard. By measuring the quantifiable improvements in environmental, social and human effects – and how they drive economic vitality – an Obama administration could better design the tax code, regulatory framework, and cross-sector incentives to stimulate an improved society.

Read the rest of this entry »

• HIP 100 Index™, designed to weight the HIP fundamentals (Human Impact + Profit) of the S&P 100 companies.
• HIP 30 Index™, designed to highlight the top 30 companies of the HIP 100.

Read the rest of this entry »

The October issue cover story of Treasury and Risk magazine, written by Anne R. Field, profiles the opportunity to “green” your organization’s supply chain - and implement supplier scorecards. HIP’s CEO R. Paul Herman is interviewed:

“Mandating changes in supplier practices can deliver 90% or more of your greenhouse-gas reductions”

In addition, the feature analyzes Wal-Mart, Hewlett-Packard and Federal Express.

READ THE FULL COVER STORY HERE