Proposal Project

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PROPOSAL FOR Eco-Cycle’s Recycling App

Prepared for: Suzanne Jones

Executive Director at Eco-Cycle

By: Elena Filatova

University of San Francisco Student

December 14, 2016

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Transmittal Letter

Elena Filatova 431 Spruce Street San Francisco, CA 94118 [email protected] 720-938-6384 Suzanne Jones Executive Director at Eco-Cycle Municipal Building, 1777 Broadway Boulder, CO 80306 Dear Ms. Jones,

I am very excited to present this proposal to you and hope that you enjoy it. The project proposed intends to increase recycling rates in Boulder, Colorado. The time, effort, and inconvenience of recycling causes low residential recycling rates. If we make it easier for tenants and homeowners to participate, then recycling rates will increase significantly. The solution I suggest is an application that allows people to easily and conveniently recycle by creating an on-demand pickup service. This will bring additional revenue to Eco-Cycle and will advance Eco-Cycle’s mission of achieving Zero Waste in Boulder. Please do not hesitate to contact me if you have any questions about this proposal. I look forward to speaking with you about this opportunity.

Best Regards, Elena Filatova

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Table of Contents Executive Summary 4 Introduction 5 Problem/Need Statement and Analysis 6 Solution Analysis 8 Work Plan 9 Budget/Cost Analysis 11 Evaluation 12 Conclusion 13 References 14

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Executive Summary This proposal is a plan to increase motivation to recycle among residents of Boulder, Colorado. Recycling rates are stagnated in the United States despite heavy technological innovation and the entry of many diverse recyling firms into the industry. The solution is a convenient service in the form of an app that will allow individuals to request a driver to come to their home and take their recyclables to the appropriate facility at a time that is convenient for them. Modeling the service after large companies like Uber and Amazon increases the likelihood of success. The steps to accomplish this idea include: app development, establishing partner relationships with other companies, testing, implementation, and follow-up analysis to ensure best results. The structure of the project involves a partnership between Eco-Cycle and many other recycling facilities that specialize in recycling or redistributing rare items. This app and the service must be free for the customer so that as many people download it as possible. An investment of $120,000 by the Closed Loop Fund will cover software development and startup expenses. Once the app is up and running, monthly member fees by partner companies with cover costs. In return, they will receive the benefits of customer acquisition and advertising done on their behalf by Eco-Cycle. By the end of 2017, Eco-Cycle will make a profit of $13,200 per year and growing.

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Introduction Participation in recycling nationwide is too low to achieve the Zero Waste goal of many communities. The main reason is that people aren’t willing to put in enough effort to recycle. The purpose of this proposal is to provide a solution by creating a service that makes recycling easier for the individual consumer. The interface for this service is a phone application dedicated to collecting people’s recyclable items in a convenient way and redistributing them to the appropriate facilities. Contact information: Elena Filatova 431 Spruce Street San Francisco, CA 94118 [email protected] 720-938-6384 Proposal intended for: Suzanne Jones Executive Director at Eco-Cycle Municipal Building, 1777 Broadway Boulder, CO 80306 Date of Proposal: Presented on October 21, 2016. The solution will be put into effect on January 1, 2017 and will be implemented fully by the end of 2017.

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Problem/Need Statement and Analysis Problem A major problem affecting the recycling industry is that people aren’t willing to put in the time and effort to recycle. Despite the increase in resources and players in the industry, recycling rates have stalled at about 34% for the last few decades (B.E., 2016). To understand why this is happening, it is necessary to evaluate the individual’s perspective. Common reasons why people don’t recycle include inconvenience, confusion, time, and storage (Schiller, 2010). The recycling industry puts high responsibility on the consumer without resolving these issues. When too much is asked of people, they lose interest. There are many organizations that focus on developing ways to repurpose unique objects, but since all of these resources are scattered, they are difficult to access and use. This creates too many steps in the process of recycling an item. The consumer must research an appropriate company and follow their procedure, which often times means physically taking the item to the facility and paying them to take it. In 2015 the overall diversion rate in Boulder, Colorado was measured to be only 20% (Eco-Cycle, 2016). Considering the existing technology and its potential, this low rate can be traced back to people’s unwillingness to recycle. Who It Affects Risks and consequences of not recycling include climate change, pollution, landfill overflow, exhaustion of natural resources, poor health and more. As the world becomes more populated and our consumer lifestyle evolves, these risks become more urgent. Furthermore, many consumers understand these consequences. According to the GPI report on Consumer Attitudes and Beliefs on Recycling and the Environment, an average of 55.2% of consumers nationwide are concerned with the loss of natural resources, 46% with the threat of climate change, and 38% with overflowing landfills and dumps. Why Solve It Having reached a 20% diversion rate in Boulder, we are still extremely far from the Zero Waste goal. Zero Waste is the commitment to eliminate the production of waste and maximize recycling and conservation of resources. Considering the opportunities and current technology that exist today, 85% diversion is considered to be the realistic benchmark that measures Zero Waste. In order to reach this goal of 85% by 2025, we must be proactive and approach the issue from this new angle.

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Ideal Situation Enough people will adapt to this service that we will be able to reach the goal of Zero Waste in Boulder, Colorado by 2025. When this strategy is proven to work, Eco-Cycle can expand the service to other cities to increase the national recycling rate and contribute to making the world cleaner and safer for future generations.

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Solution Analysis

Solution The proposed solution is an app centered around redistributing items from the people wishing to dispose of them to the correct recycling facility. The service will incorporate other businesses’ recycling services such as Olio for food redistribution, Preserve Products for Brita filter recycling, etc. (Jillee, 2014) and provide individuals with a solution that is two clicks away. All the customer will have to do is type the name of the item into the app, and select a convenient pick-up time. Eco-Cycle handles the rest, which means transporting the item(s) to the accurate recycling plant to be processed. This app will serve as a tool to combine all individual recycling organizations into one accessible resource for public use. This is the same principle that Amazon is based on: combining many suppliers into one convenient online store. What Needs to Be Done Flawless logistics and customer service will be at the forefront of the project. The key to this service is to be simple, user-friendly, and free. The program must also be efficient and organized in a way that the costs are distributed fairly among participating organizations. To begin, Eco-Cycle will need to come to an agreement with other recycling companies and hire employees to do pickups, manage the project, and write the app. After creating the app, it will be tested on a small area of Boulder and the results will be analyzed. Eco-Cycle must also construct a detailed, organized plan to run smooth operations and keep customers happy. Benefit Recycling rates will increase and the sustainable lifestyle will grow closer to mainstream. The efforts put into recycling on the customer’s side will be significantly reduced and the process will be simple and convenient. The volume of things getting into the right hands to be repurposed will increase, causing recycled materials to be more abundant. This will boost Boulder’s 20% diversion rate. If we can make recycling easier, more convenient, and less time consuming, then the community will be able to achieve Zero Waste and shift to a closed loop system. A closed loop system is the ultimate measure of sustainability because it means that whatever we are using, we can repurpose or recycle instead of disposing of it (Skinner, 2010). Currently most companies and communities are operating under an open loop system, which means that most of the things we use are thrown away.

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Work Plan

# Phase Tasks Completion Date

1 Procurement

and Development

• Negotiate participation and terms of the business plan proposed with potential partners.

• Develop website and application.

Second quarter of 2017

2 Preparation and Testing

• Finalize all contracts with early participating partners and standardize the process to make incoming partnerships easier to manage.

• Prepare and test logistics plan in a sample portion of the city of Boulder.

End of April of 2017

3 Launch Full

Service

• After analysis of the sample test run, including customer surveying and cost/benefit analysis, launch the program in the rest of the city of Boulder.

Third quarter of 2017

4 Follow-Up Analysis

• Follow up with analysis of satisfaction and efficiency, making changes if necessary.

Fourth quarter of 2017

Job Descriptions Programmers

• Two to three outsourced programmers will write software to ensure best customer service quality.

• They will test the software to eliminate bugs and inconveniences. • Continue maintenance throughout lifetime of the app.

Logistics Managers

• To be determined by Eco-Cycle management: either a new employee or already hired managers that are able to take on more work.

• Will plan and supervise operations throughout all phases of the project. • Will ensure smooth communication and transactions between Eco-Cycle, partnering

companies, and clients. Drivers

• Drivers will receive compensation based on individual rides. • Demand-supply based structure similar to Uber where drivers only drive when there is

somebody requesting a pickup. • Incentives and bonuses will boost motivation.

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Budget/Cost Analysis Considering that the management and production side of the operation is already set up and mature, fixed costs will be a lower percentage of the total cost than in an average project launch. The bulk of the initial investment will be spent on software development, after which variable and fixed costs will be covered by commissions of partnering companies. Cost-Volume-Profit (CVP) Analysis In February of 2017, a fixed cost of $100,000 will be paid to programmers for the development of the app as a one-time sunk cost. This estimation is made based on “The True Cost of Building a Mobile App” published in in 2014 in Forbes magazine. Marketing professional Anna Seskind provided insight about average marketing costs. Beginning in the third quarter of 2017, per month: Revenue $6,000 Variable Cost $3,900 Contribution Margin $2,100 Fixed Cost $1,000 Net Operating Income $1,100 Breakdown of Expenses/Income: Expenses:

• 40 pickups daily*$4 per pickup, split halfway between Eco-Cycle and receiving partner • $1500/month for driver incentives and bonuses • $1,000/month marketing budget • Management is excluded because prices depend on how Eco-Cycle chooses to organize.

Income: • $500/month advertising cost for each partner*estimated 12 partners at first. This is a

variable income and will increase when number of partners increases.

Funding A group of large corporations including Walmart and Coca Cola recently spent 100 million dollars on investments to create a Closed Loop Fund, and implemented programs to support environmental protection development (Economist, 2016). Considering the unique nature of the proposal and its alignment with the closed loop agenda, this organization of companies will be interested in investing the modest sum of $120,000 that will pay for software development and early marketing costs.

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Evaluation

In implementing this solution, it is necessary to take advantage of examples of similar successful ventures. Uber, Amazon, GrubHub, and other companies that are part of the evolving business model described by J. Walker Smith for the Independent Review, provide evidence of company structures and objectives that have been proven to work in this unique time in technological development.

Strengths

• Increase percentage of population recycling

• Produce more recycled materials to resell to manufacturers

• Recycling facilities already exist and are developed

• Large portion of the cost is variable

Weakness

• In order to accomplish goal, the service must be free

• High cost per pickup request • High dependence on

outsourced partners and employees

• Test analysis may alter the timeline

Opportunities

• Combine the progress of vast rare recyclable research

• Convenience is a new and competitive approach to recycling

• New clients will bring economies of scale

• Bring city closer to Zero Waste goal

Threats

• Economies of scale needed to cover driver wages and other fixed costs

• Partners may exit contract or not agree in the first place

• Prospective investors may not agree to proposed plan

SWOT

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Contingency Plans • Companies do not agree to proposed financial arrangements.

Ø Solution: Negotiate an agreement that will satisfy both parties. • Number of pickup requests rises disproportionately to the number of participating companies

so that variable cost outweighs commission paid by partners. Ø Solution: Use outcome metrics to determine revenue increase in partner companies

due to the program’s customer referrals and charge another fee based on commission.

Ø Solution: Include ads from different companies in app. • Prospective investors don’t agree to invest.

Ø Solution: Find a private venture capitalist willing to invest instead. Ø Solution: Ask for a bank loan.

Case Studies The app will be similar to that of Uber, GrubHub and Amazon. “What’s ahead is a shift in the dominant business model, one in which all consumer goods will be available as a service and all consumer services will be available on demand” (Walker Smith, 2016). These companies have made it the new standard for everything to easy, accessible and efficient. The recycling app will be a combination of resources, like GrubHub’s pool of restaurant menus and Amazon’s catalogue of vendors. By combining the resources of all of these companies, they become easier to access which benefits both consumers and suppliers. The solution proposed attracts customers by offering free pickup, like Amazon Prime. Though the investment will not be cheap, it will be worth it. “It’s also a strategy that has cost Amazon billions of dollars. On its own, fast shipping is a costly proposition, but factor in all those extras, and Prime quickly becomes a money pit” (Fortune, 2016). By providing this service, Amazon beat its opponents by a landslide with the number of customers and their devotion, which benefitted both Amazon and the companies whose items it resells. Adding this amenity to Eco-Cycle will create exceptional customer service and cause an increase in participants. As demonstrated by GrubHub’s success, sharing the costs of pickup and delivery among all partners is a feasible plan. “GrubHub charges restaurants a commission of 13.5% per order for the advantage of representation and the acquisition of customers on their behalf” (Quartz, 2014). Since GrubHub is acting as the middle agent, they receive commissions for their services from partnering suppliers. This represents the future relationship between Eco-Cycle and partnering companies.

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Conclusion Eco-Cycle should approve this proposal and spearhead the change in the recycling industry. I would like to work with you to implement this solution successfully. Since the dangers of global warming are growing closer by the day, recycling participation is an extremely urgent issue to address. Besides increasing Eco-Cycle’s demand, this app will create a much needed change in the world of sustainability. In addition to providing extra revenue, this innovative idea will further Eco-Cycle’s core value of pioneering in the industry. This solution will cause recycling rates to rise and make Zero Waste an achievable goal. I look forward to creating progress together with you. Please contact me to set up a meeting and discuss next steps and questions you might have. Thank you for your time and consideration!

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References

A. Seskind, personal communication, October 4, 2016 B., E. (2015, April 22). In the bin. Retrieved September 30, 2016, from

http://www.economist.com Glass Packaging Institute (April 2014). Consumer Attitudes and Beliefs on Recycling and the

Environment. Glass Packaging Institute, pages 4-7. Retrieved from http://www.gpi.org

Jillee (2014). 25 Things You Can Recycle You Might Not Know About. Retrieved September 20,

2016, from http://www.onegoodthingbyjillee.com Mangalindan, J. (2015). Inside Amazon Prime. Retrieved September 27, 2016, from

http://fortune.com Mehra, S. (2014, November 11). The True Cost of Building a Mobile App. Retrieved October 05,

2016, from http://www.forbes.com Schiller, A. (2010, October 25). Why People Don't Recycle. Retrieved October 01, 2016, from

http://earth911.com Skinner, Wendy (2010, May 17). Close the Loop for a More Sustainable Future. Retrieved

October 17, 2016, from https://sustainabletompkins.org Summary: Curbside Recycling, the Next Generation. (2002, August 7). Retrieved September 27,

2016, from http://www.calrecycle.ca.gov Walker Smith, J. (2016). The Uber-All Economy of the Future. Independent Review, 20(3), 383-

390.