In economics, Pareto optimality is when no individual can be better off without making someone else worse off. Here’s how you can apply it to sustainable product innovation.
Let’s say we have a product on the market, a face cleanser for instance. At some point, an innovation occurs on the market – face cleaners made using alcohol (the medical kind, not the drink kind). Well, let’s say alcoholic face cleansers are x% better than those currently on the market. In other words, it’s an innovation! People get a cleanser that’s better than the old, and everything is good. That is, for a while.
Some time passes, and we find out these alcoholic cleansers are actually bad for the environment. Like, very bad. Whoops! Well, what do we do now?
Initially, some short-term answers appear. Companies attempt to differentiate themselves by making organic, environmentally friendly cleansers (aka just the cleansers of before, rebranded). This is all well and good, but with one major problem: the cleansers aren’t as good! Instead of stepping forward, we’re just taking a step backward and treating it as a sacrifice for Mother Earth. Consumers aren’t buying it, and most stay with the alcoholic cleansers.
But here’s where things get interesting.
Eventually, a new innovation comes out on the market. Let’s call it something very creative, like “alcoholic sustainable cleansers”. ASCs for short. Well, these ASCs are in an interesting alignment: they retain the properties of the alcoholic cleanser, while still being environmentally friendly. ASCs keep the convenience factor of before, while still being good for the environment. In this case, everyone wins.
This product is Pareto optimal.
In our example, we have two axes: sustainability and convenience. In the case of alcoholic cleansers, we made convenience better off while making sustainability worse off. With organic cleansers, we made sustainability better off while making convenience worse off. But with ASCs, we made both better off – it’s at the optimal point!
In my opinion, every product should strive to be Pareto optimal, for two reasons. The obvious reason is that it’s the best for the customer – if you create something efficient that also doesn’t negatively affect them, it’s better for society. But the other reason is that Pareto optimal products will always dominate a market, thus leading to major profits. Of course, there are other innovation factors to consider here (like if the innovation is old enough in the trend to be developed at a profit), but usually, the first company that can reliably produce a product that is optimal on these axes is going to succeed. Therefore, if a company really wants to get ahead, it should focus on trying its best to maximize both sustainability and convenience – and to hit its Pareto optimality.