Category Archives: Marketing

Lessons Learnt from Nortel’s Demise: How to go from a valuation of $400 billion to 0 in just a few years

Yesterday evening I had the chance to attend the event: “Nortel: The untold story. From innovation, to acquisition to bankruptcy” at the University of Ottawa.

Left to Right: Mr. Peter Chapman, Distinguished Professor Hussein Mouftah, Mr. Peter MacKinnon, Professor Jonathon Calof
Left to Right: Mr. Peter Chapman, Distinguished Professor Hussein Mouftah, Mr. Peter MacKinnon, Professor Jonathon Calof

The presenting team, Peter MacKinnon, Professor Jonathon Calof, Peter Chapman, and Distinguished Professor Hussein Mouftah, discussed the research they completed over the past three years. The comprehensive data was collected through surveys and interviews with former Nortel employees, including Executives, and Nortel customers. The report can be found here: http://sites.telfer.uottawa.ca/nortelstudy

I’ve jotted down notes I gathered from the research presented, with my own slant. I’d like to start a discuss on applying the lessons learnt to existing companies, such as Blackberry.

The question worth billions, what caused the company that was valued at almost $400 billion dollars in 2000, to decline to a value of $5 billion in 2002 –in just two years? The stock was at its peak in 2000, just a few years later it would be worthless.

The answer cannot be found just within those two years; the research team looked into the many years leading up to the collapse. Now, let’s keep in mind that this was once the 2nd biggest company in North America at one point, to take on the task of understanding exactly what happened, was almost certainly no easy one. Pinpointing blame to one area or to individuals would not be fair and would be too easy. Although, through this three-year research study, some light has been shed on Nortel’s areas of weakness, upon interpretation of this data, it can offer lessons to existing businesses.

Influencing factors of Nortel’s demise:

1) Unrealistic Valuation: Nortel acquired companies with their stock. Everytime there was an acquisition, it would increase the stock price. Which makes you wonder if the company was even worth $400 billion in the first place. I believe it was an inflated multiple of the actual worth of the company. So, when the industry suffered, company valuations were corrected. In fairness to Nortel, it may be wrong to say the valuation of the company declined by $395 billion when it was never worth $400 billion in the first place. They were hit hard. With a unrealistic view of their worth, I’m sure their hubris prevented them to imagine such a downfall.

2) Poor Acquisitions Strategy: They knew how to handle the market changes and disruptions, there’s even proof of plans they had written; however, they didn’t execute – they didn’t ask their engineers. However, they did make some acquisitions. They created less than perfect human dynamics by a poor acquisitions plan. They acquired many start-ups for millions/billions. Upon due diligence they found that some of the products didn’t operate as expected; however, continued with the purchase regardless. Ultimately, making the acquired start-up owners millionaires and new Nortel employees. These millionaires sat next to Nortel employees, who probably made $100,000/year, who now had to work on fixing and trying to integrate these newly acquired start-ups. Nortel helped make these startup owners very rich instead of their own people. The researchers also pointed out the need to “trust your own people” as they are more likely to tell you the truth and more relevant information.
In addition, of course, a strategic acquisition can be a lucrative move; however, it’s important to point out Nortel’s culture. They were built on organic growth. It seems their environment couldn’t support the integration of acquisitions.

3) Poor communication and trust between executive team and employees: Nortel’s technology was ahead of its times and simply superior. They had predicted the mobile technology we use today. While Apple launched the first iPhone in 2007, Nortel had a similar prototype 15 years prior. But when the engineers at Nortel presented the idea to the Exec team, the Exec team argued that no one would want to walk around with a phone in their hand!

4) Insufficient R&D: In earlier times, Nortel had parallel R&D projects taking place at once. As budgets got tighter perhaps due to market changes, R&D “efficiencies” (ot a cut of R&D) came into place, which reduced the number of projects, so there was less innovation. I feel as though they stopped taking risks and stood stagnant, becoming a “me too” company, with little differentiation from their competitors, as the research team of this project referred to them. From 2000-2009, if you look at their press releases, you’ll see nothing new, the research team point out. As their money went into legacy projects rather than new projects.

5) Failed to have a global outlook or perhaps emotional decision-making: They seemed to have put more weight on products that sold well in the U.S. rather than understanding the needs of the rest of the world.

6) Forgotten mission and vision and drive to help customers: Miscommunication between their business management and technology management. They had all the answers within their organization, but for some reason they just didn’t act on it. Would we be wrong to assume there was a huge communication issue within the company, perhaps like many large companies? Related to this point, near the end, the company was led by more business professionals over technology professionals. As a result, in decisions that were made, the technology analysis was missing in this technology company.

As entrepreneurs, we constantly hear of these factors. We try to avoid such mistakes. To see such mistakes completely eliminate a company over 100 years old demonstrates that their is no magic involved in keeping a company in-existence and thriving.

Now, with these factors in mind, let’s have a look at Blackberry. Back in 2011, I wrote a post on “How to Fix RIM” (as it was called then). I talked about the opportunity to grow their R&D initiatives to innovate new stuff and the need to have a focused plan.

There hasn’t been much innovation. New products have not been received well. Things have spiraled downwards for them since then. From July 2011 to September 2013, 11 750 employees were laid off, including employees from the R&D department.

However, in December 2014, they received a $750 million deal with Vodafone, a loan backstopped by the Canadian ECA, Export Development Canada.

Blackberry gets to survive. Unfortunately, we’ll never have the chance to see how Nortel’s technology would have done; however, with research findings from Nortel’s case study, more evidence on the key influencing factors of the success of a large company have been made available.

Esha Abrol © March 2015

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Local Parking Business Offers Group-Buying Deal

Industries such as healthcare, real estate, and parking have offered very little innovation over the years, especially in marketing. Advantage Parking is looking to change that. Ottawa’s parking company, Advantage Parking, is offering a group-buy deal. While researching new technologies to further ease the process for those who park in their locations, Advantage Parking wants to offer a limited-time group-buy deal to test the opportunity and desire for innovation in marketing within this industry.

Advantage_Parking_GroupBuy_Online_Flyer

Esha Abrol © December 2013

Before pitching to an investor, or on Dragon’s Den, Shark Tank…

A recent talk from former Dragon, Brett Wilson, at a Start-up Canada event during global entrepreneurship week has got  me thinking more about “the valuation of a company”, particularly a start-up. In this post I’ve jotted down  some thoughts that have been circling my mind.

Esha Abrol (who  participated in raising funds for men's health, Movember this year) and  Canadian entrepreneur/philanthropist/former Dragon, Brett Wilson
Esha Abrol (who participated in raising funds for men’s health, Movember this year) and Canadian entrepreneur/philanthropist/former Dragon, Brett Wilson

You walk into the meeting room and ready to pitch…

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Before that, here are a couple of things to consider when valuing your company:

1) Numbers (projections) are subjective
2) Know your value proposition, it is as important as the product/service itself

In this post I want to demonstrate how projections, per-forma statements, and forecasts are just predictions and subjective ones. In addition, rather than discussing valuing a company based on assets, sales, or market size (potential), I’d like to discuss the influences of strategy and value proposition.

Firstly, numbers – the following is a recent news story, demonstrating how even large, established company’s can miss their projections:

In April, upscale fashion company, Burberry, took control of their beauty line, as it was previous licensed out. As a result, they now posses full-control over their products; however, it also has added to their costs – marketing expenses added a heavy weight to their financials – they’ve realized that their marketing costs have doubled. This new strategic direction has been a costly one (at least short-term) and they’ve felt it hit their bottom-line. While they projected sales for their beauty division to reach 25 million pounds, they only earned 10 million, less than half.

The valuation of a company is partly based on projections; the above example is a great example which allows us to see how numbers too can be subjective. The overall picture is required for crafting strategy. Had the demand, current customer knowledge of the beauty line been measured, and need and costs of marketing been considered, would the projection of 25 million pounds been closer to the actual figures? If so, would Burberry have decided to take full-control or continue licensing?

In addition to the product/service itself, strategy and value proposition are key influencers in the success of the business.

Value Proposition:

Value proposition is the unique selling point, which illustrate why the consumer will benefit from becoming a customer, seeing the value in what you are selling.
While at a Start-up Canada event, I had the opportunity to chat with a fellow attendee, Omar, co-founder of YP-it (http://www.yp-it.com). Omar was telling my about his colleague’s, the founder of Canada’s beloved coffeeshop, Second Cup, story. In the 70’s, if you wanted a coffee, you had two choices – the generic cafe coffee and a branded one, both were “vanilla”. Soon after, Second Cup was born (before Starbucks), to provide hard-working folks with a treat, a gourmet hot beverage – priced higher than the other two available, but the value proposition (a unique selling point, which illustrates why the consumer should become a customer) allowed them to do so. They created a market through a vision.

Any recent companies’ value proposition catch your attention lately?

Esha Abrol © November 2013

Creating Opportunities

This post is meant to be a subtle reminder that self-limiting statements are simply rubbish. Let me explain how “the world is your oyster” through rejecting limitations. Please see the illustration below, let the blue “x” represent us. While the dome around the “x”, represents the limitations that we place on ourselves and allow others to place on us. In this post I’m going to explain what a “limitation” is through examples.

Limitations1

Imagine a world without this dome, then visualize the number of opportunities (represented by the white space) that lie before you, personal or as a business owner (this is unbelievably effective to keep in mind for sales calls/meetings). The good news is that this dome is formed of merely: ideas, thoughts, opinions, and perspectives – all of these can be altered. We intentionally keep this barrier around us to protect us from real and imagined or perceived threats. The goal should not to remove the dome, but to be aware of it to be able to weigh the actual risks from the fear of  discomfort, change, the unknown, or fear itself. Rejecting limiting beliefs and tackling new challenges bring new outcomes and perspectives, seemingly increasing the world’s opportunities. Allow me to elaborate with four personal stories as examples. Please read through them and reflect on how this dome affects your decisions and actions. Please share via e-mail, I would love to hear your stories. 

Example #1: Last summer a dear friend decided she would celebrate her birthday by signing a death waiver, strapping on a parachute, and jumping out of a plane. And, she asked her friends to join her. Just excellent. Before I knew it, I was just waiting around on a plane, waiting for it to reach the right altitude. We waited until we could release the plane door, be sucked-out into the atmosphere, pierce holes through the clouds to be able to touch the ground again. Ah, earth beneath my feet – that’s the way it should be!

So, was it really that bad? Not really, I would do it again. Jumping out of the plane does not feel frightening because my mind just couldn’t process what was happening – how often do we jump out of moving vehicles, particularly those 12,000 ft in the air? My mind just couldn’t register what was about to happen. However, prior to the jump I was uncomfortable, apprehensive, OK, and petrified. Hey, the anticipation of facing the unknown and the idea of conquering this daring adventure was a little unnerving. I also questioned my sanity: “What the heck is wrong with me… Why do I need to jump out of plane, again?!!!!!!!!”

Why was I scared? I was about to break out of the dome. The ideas, thoughts, opinions, and perspectives were scary. I kept repeating to myself and others, “I’m not the type of person who goes skydiving, I prefer calming and soothing activities, like yoga… I’m terrified of heights, I’d never be able to accomplish this, etc..” And I began to believe all of it. In reality, I actually knew very little about skydiving, but somehow I had already decided that it wasn’t for me. It was only something I had seen on TV, but never paid much attention to. So, let’s try to breakdown the fear:

The idea of jumping out of a plane- imagine it in your head? Humans don’t have wings (unless you drink Redbull). The visual of jumping out of a moving vehicle, from 12,000ft in the sky is scary because we’re supposed to feel earth beneath our feet. Because it is so scary-looking, the thoughts that run through my head are ones that validate the idea that this could kill me. Then, a friend asked me, “Esha, what if a bird pops your parachute? This is not for you!” My friends know exactly what to say to comfort me. Now, their opinions were based on their thoughts and ideas of skydiving because they had never actually done it themselves. They were perspectives.

I was terrified, but who wouldn’t be? As I drove to work that day, my eyes became a little moist as I said drove past a park where I played in my childhood – “I may never come back!” I thought. (This experience brought out a more sentimental and perhaps dramatic side in me)

It wasn’t easy to get myself on the plane, but once I was there, there was no turning back.

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I did it! You know, it was actually not that bad at all. I felt glad that I kept my commitment and followed through by rejecting the limitations.

The world now looked like this, I had given myself a little more space to explore:

limitations2

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Example #2: A few months later, as I walked into the gates of an amusement park with friends, voices in my mind repeated, “I hate rollercoasters. Rollercoasters are scary and dangerous. Stay away from the rollercoasters.” I’d heard many stories of accidents – belts failing, old equipment giving up, etc. My friends said to me, “Esha, if you can jump out of a plane, this should be easy, no?” So, I joined them and waited in line, for all three of the rollercoasters there. And, I survived them all.

Now, my world looked like this:

limitations3

Example #3: For years and years, I was told that India was not a safe place to travel alone, especially for females and,  that the food would make me ill. I really wanted to go; however, these images became fears in my mind – “I can’t go to India because I will become ill and possibly be kidnapped. I’m not the type of person who takes risks like this. I am content traveling somewhere more safe.”

Recently, I met someone sporting a bright-coloured suit and top hat at an event. In a more conservative city like Ottawa, he really stood out, I had to get to know him. Turns-out he was visiting from San Francisco. We immediately connected – his appreciation for creativity and doing things differently was obvious. We exchanged experiences, knowledge, and stories including this study he shared with me: A divider was placed in a fish tank, giving the fish access to only half of the tank. The fish would swim within the area that was available to it. After some time, the divider was removed. However, the fish remained in the same half of the tank that it was used to. It never crossed to the area where the divider once stood.

117_1686Upon an inspiring exchange of ideas and thoughts over tea with this extraordinary character, I went back to my office and booked my flight to India.  I departed in two weeks and returned alive, although with serious food poisoning I would be OK soon and my life had forever changed. India was absolutely magical – the people, the history, the art, the vibrant colours, and architecture – breath-taking.

My world now looked like this:

limitations4

Example #4: About a year ago, I was preparing to celebrate my third-anniversary working at a large company, the job I had started after university. For my age, I had become very “successful” as many old schoolmates, friends, professors, parents, and other family members would say. But, why didn’t I feel “successful”?

After school, I started applying for jobs because that’s what most people do after school. Originally, I only chose to study business to be better equipped to start my own business. I let myself forget that based on what I was seeing around me. The idea of applying for jobs and working with a stable income brought me more certainly and ease and it allowed me to “fit in”.

Three years at my job just flew by. As I was telling a special entrepreneurial friend about my upcoming anniversary, instead of congratulating me, he said, “Esha, just quit that stupid job already.” Forward and rude, but exactly what I needed, a reminder that I was letting limiting thoughts make my decisions, thoughts such as, “I am not as open to risk as I thought, I’m just not brave enough.” or “I have failed as a business owner before, I will fail again.” I finally quit my job (no 3-year anniversary cake for me) and this is what happened to the dome after I realized that my lungs would still have access to oxygen after I made this decision:

limitations5

We create a dome around us and allow others to ensure we keep it snug and air-tight. It acts as a barrier, blocking-off threats but also opportunities that may offer developments and improvements. These limitations are set based on excuses that we create to avoid discomfort that may challenge us. Of course challenges are not easy, people who encourage you to push yourself further are a key ingredient – I am thankful for the people who have been there to give me a little push when I needed it.

As we face new challenges, the domes around us continue to grow, allowing us to experience new things; however, the white space around it also seems to grow – how far do you want to go?

On a separate note, the next time I see you, remind me to tell you about the bandages on my hands in this picture:

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Cheers, Esha

Esha Abrol © September 2013

In this Story, the Brand Plays the Leading Role

KONICA MINOLTA DIGITAL CAMERA
Introducing Oscars for Brands…

Just a few weeks ago, for fun and in hopes of improving my presentation skills, I enrolled in acting classes.

I wanted to talk a bit about my first class. No different from any “first class”, we started with an introduction-round. We all shared our story, explaining what brought us in that room. There was a high-level of openness. With some corporate background, I’ve attended countless meetings and presentation. Comparing the emotions exhibited in class to a business meeting would be like comparing blowing your nose with Kleenex (the extra soft kind) vs. sandpaper. I realized that I’ve been quite unkind to my nose. Sorry, weird analogy, but I felt it created strong imagery (the reason for my apology).

After the intros, we got right into it. We were given a short dialogue. With a partner, we were given a minute to prepare a scenario, then rehearse the lines, act it out in-front of the camera, with the bright lights shining in our faces, the rest of the class crowded around the TV screen watching our every move, and the teachers providing very direct feedback, challenging us to show more emotions without over-acting.

Five words to describe the scenario? Un.com.fort.a.ble. We naturally resist everything involved in acting! Even with the butterflies in the stomach, it’s crucial to keep important details in mind, such as:

1) Connecting with your co-actors, demonstrating generosity by delivering your lines with full sincerity even if they are in the spotlight, allowing them to work with you to give their best performance

2) Working with the emotions you are feeling at the moment rather than pretending

3) Catch and toss: matching the emotions and tone of your co-actors

4) Avoiding our distracting quirks that we unconsciously do to “hide”, ex. tilting of head, raising eyebrows, forgetting to breath (apparently acting is 90% breathing). Afterall, we all go watch the flicks to see the awkward moments and uncomfortable emotions we are shy to emote in real life

5) The list goes on…

Although this was unfamiliar territory, I was able to find some comfort. As a marketing professional, I got to appreciate that branding and film-making were more alike than I had realized. Both should tell a story. Both should evoke emotions. In the case of acting, we are the product, we are the brand. Common elements in evoking emotions include: facial expressions, words, environment, gestures, tone of voice, and colours.

 

Sell your products with the Oscar in mind

Film-making means story-telling, expressing raw feeling, without hiding anything.

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Think about your own experiences with adverting as a consumer. Are there any commercials that you would actually watch rather than fast-forwarding through? Do you follow any company’s Facebook fan pages? Do you show preference over brands in the garbage bag aisle at the grocery store.

Odds are these brands are not just companies, but personalities. These personalities show us the value of their products and services through a truthful story. If we can relate to the story and personality, we will be moved in some way and build connection with this brand. With an established connection, we are more likely to pick their products over competitors when we are overwhelmed with options.

Marketing has come a long way, just over the past few years. Today, as consumers we are given a choice on whether or not we will engage in conversation with brands, we can share stories that move is in seconds, and we can better educate ourselves on products and services within minutes.

BrandsRole is an initiative that I founded with the hopes of helping companies of all sizes share their stories.  At BrandsRole we are always eager to seek and share inspiration through the power of story-telling.

 

Please contact me or see the BrandsRole website for more info: http://www.BrandsRole.ca

Let’s discuss.

Esha

-Esha Abrol, Director of Seeking and Sharing Inspiration, BrandsRole

 

BrandsRole © June 2013

Prices, Promotions and… Emotions

I tweeted this link (“Why JCPenney’s ‘No More Coupons’ Experiment Is Failing”) a few weeks ago. It’s still on my mind, so I thought I’d share my thoughts on it.

In a nutshell, JCPenney wanted to be fair with their customers by abandoning the illusion of saving through sales and coupons. As we know, retail stores often inflate prices, then promote campaigns, advertising discount offers to attract customer through this hype.

I think it was highly commendable of the company to implement this new strategy and create a campaign out of it – they took a risk. Unfortunately, the risk didn’t pay off, sales dropped. Total sales dropped by 20%.

I want to focus on two areas: i) Why it was a great idea; ii) Was the failing of this strategy caused by the campaign message not resonating with customers or did the “fair and square” practice fail to excite customers to return to the store as often?

Why it was a great idea

On paper, this sounds like a plan that cannot go wrong:

1) The brains behind the strategy was CEO Ron Johnson, the man responsible for the success of the Apple Stores model. This guy knows what he’s doing.
2) Wal-mart and dollar stores already practice this approach and have achieved success
3) They took care of their customers, by engaging in open, honest communication                                                                                                
4) The strategy was logical and rational from a business perspective
5) As a result of the abundance of information through the internet today, customers are more educated and aware of business tactics, so should this “fair and square” practice and the campaign been more appreciated?

What caused the poor response?

This article concludes that customers like the excitement of couponing. As Mr. Johnson admits here:

“We did not realize how deep some of the customers were into [coupons],” said [JCPenney COO Michael] Kramer.
JCPenney CEO and Apple retail God Ron Johnson weighed in on it too. “Coupons were a drug,” he said. “They really drove traffic.”

The effect “getting a deal” has on our mind, involves a greater understanding of psychology than we thought. It seems our brains are triggered to release dopamine when we are able to procure items at discounted prices. This is proof that pricing is more than just a mathematical formula.

JCPenney “Fair and Square” Campaign Touches on Customers’ Expectations

Wal-mart and dollar stores also practice the same strategy; however, their positioning and marketing has never gone where JC Penny did. JC Penny recognized how the abundance of info available on the internet and social media has changed customers’ expectations. Customers today are more educated and appreciate open, honest communication. So, JC Penny delivered an honest, open marketing campaign, revealing their stance on the illusion of saving.

Three reflection points:

1) For the entrepreneurs and marketing folks out there, this proves there is much, much more involved in developing a pricing strategy than simply the knowing the break-even point and target sales/profits/costs. The formula for determining the right price should be a collage of finance, accounting, consumer behaviour, what the competitors are doing, environment, and some blue construction paper, and glitter glue. What does the blue construction paper and glitter glue mean to you?

2) Other companies, like Wal-mart and dollar stores (entities which have proliferated lately!) offer lower prices on a regularly and have achieved extraordinary levels of success. Based on JC Penny’s sales drop, are customers resistant because the “fair and square” campaign message simply didn’t resonate with them, or is it the lack of excitement as this article implies?

3) Is consumerism getting out of hand?

Copyright © Esha Abrol. Canada. July 2012

Greek Yoghurt and Corporate Social Responsibility

I was watching a documentary called “The Corporation” recently. It made me realize, I don’t think we stop to think about the strides we’ve made in how we conduct business and the growing development of socially responsible behavior. Sure, there’s progress to be made, but we’ve come a long way!

How important is social responsibility and what’s the impact? Let’s look at some examples of how the word “corporation” has become so tainted:

1) Let’s look at the petrochemical era, year 1940, when the discovery of synthetic chemicals was made – that new chemicals could be fabricated at an unlimited scale out of the petroleum molecule. For pretty cheap, too. For example, pesticides, like DDT, which was dusted on people to stand typhus. It wasn’t until years later, after large amounts of data could be accumulated and studied, this era was recognized for its effects: cancer, birth defects, etc . Do you think the companies knew all along?

2) Then, rBGH, an artificial growth hormone injected in cows. It’s known to cause disease in cows, which in turn causes increased bacteria in milk – humans consume antibiotics through milk, creating resistance… all for short-term profits.

3) Sweatshops.

4) Not as dramatic as the previous examples, but I need to add Greek yoghurt (aka strained yoghurt) to this list! It’s marketed as a thicker yoghurt and more expensive than the regular stuff. For those who don’t know their yoghurts as well, as per our friends from Wikipedia, Greek yoghurt is:

“yoghurt which has been strained in a cloth or paper bag or filter to remove the whey, giving a consistency between that of yoghurt and cheese, while preserving yoghurt’s distinctive sour taste. Like many yoghurts, strained yoghurt is often made from milk which has been enriched by boiling off some of the water content, or by adding extra butterfat and powdered milk.”

When you read the ingredients label on most Greek yoghurts in the grocery store, you’ll notice that almost all of the top brands add corn starch, which is a thickening agent. So, you’re actually buying normal yoghurt, which has had a bunch of things added to it,like the corn starch. The marketing of the products implies differently, resulting in implied health benefits which may actually be false – the added ingredients may even cause more harm than good! I would classify deceptive business activities like this as socially irresponsible.
In today’s world, the good news is, consumers now have the power to educate themselves, which has had great impact on the developments we see. It’s really not that hard to gather info either. You don’t need to be an early adopter, or pinning on Pinterest to know the brands you bring home and what you’re consuming.

To be fair, I also think that “corporations” have made enormous stride in improving how they conduct business. Young business leaders have the knowledge and education that may not have been available decades ago. Back when I was a student, the commerce program in which I as enrolled included a required class on social responsibility.

A thought I’d like to leave you with:

At the end of the documentary, CEO of interface, a carpet company who changed how they did business once they were made aware of the harmful environmental effects they were having, raised a thought, “Some products can be made more sustainably. Those that can’t, maybe they shouldn’t be made at all.”

Copyright © Esha Abrol. Canada. April 2012