Values-Centered Entrepreneurs and Their Companies

David Y. Choi, Edmund Gray

• Editorial: Routledge
• Año: 2010
• ISBN:
  9781135840853
• Edición: 1
• Categoría: Negocios y empresa
• Categoría: Emprendimiento

A new brand of entrepreneurs has arrived on the business scene, carrying with them a whole new set of values. They possess a sense of mission – to be socially responsible, protect the planet, and do the right thing for all of their stakeholders. Rather than focus exclusively on financial gain, they aim to achieve a balance between profits and one or more causes of their choosing. In fact, they view for-profit entrepreneurship as a vehicle for social change. The authors call these pioneers "values-centered" entrepreneurs.

Some of the values-centered entrepreneurs have been around a few decades. In recent years, however, the numbers have proliferated and the nascent movement has started to make a true impact. These entrepreneurs' approach to management questions our basic assumptions about how businesses should be run and what their role should be in society.

Several of these entrepreneurs have attained high visibility. Yvon Chouinard of sportswear manufacturer Patagoina has been a role model for integrating environmental protection to every aspect of Patagonia's business operation. Howard Schultz of Starbucks has been able to build one of the strongest brands in the world while being the first retailer to offer comprehensive health benefits and stock options to its part-time employees. Paul Newman, legendary actor and racecar driver as well as a leading maker of salad dressings, gives 100% of Newman's Own brand's profits to charity.

This book explores how these highly unorthodox leaders have built their profitable and socially responsible business enterprises, and what lessons can be learned for the next generation of entrepreneurs. The authors examine a group of over 40 entrepreneurial companies and how each balanced the profit objective with social responsibility in key aspects of their business operation – from their initial company formation, through growth, to exit – to build successful triple bottom-line companies. Choi and Gray particularly focus on how these firms' commitment to values affected their company missions, hiring and organizational policies, marketing strategies, financial practices, exit options, and giving programs, and vice versa. In some cases, the authors find that the entrepreneurs' social objectives have actually strengthened, not weakened, their business enterprises. Based on their extensive studies of these companies, he authors have distilled a set of commonalities. The book presents ten of the most dominant and interesting of these commonalities with a focus on those policies and decisions that appeared to depart from conventional business practice.

In addition to devoting chapters to each of the core principles learned from these companies, the authors also include in-depth case studies of four of the ventures featured in their study.

Part 1
Toward a New Breed of Entrepreneurs

1
Introduction

The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

—Playwright and essayist George Bernard Shaw¹

A New Brand of Entrepreneurs

In the Southern California beach community of Hermosa Beach, two young women, Gina Williamson and Melissa Scheurermann, have created a unique product and started a new business—making and selling biodegradable wax for surfboards. Their compelling purpose was to provide an environmentally safe alternative to traditional surfboard waxes which contain a variety of harmful chemicals. They hope this venture will contribute to keeping their beloved South Bay clean and, in the process, they wouldn’t mind making a few dollars.

Gina and Melissa are entrepreneurs by almost any credible definition of the word. They have identified a potential opportunity in the marketplace and set up a business to exploit it. They have committed resources to this end. Although they didn’t quit their day jobs, they did spend approximately two months of their free time developing the product, BT Wax. They also invested their own money in supplies of beeswax and other ingredients. They manufactured their merchandise in Gina’s kitchen and delivered it personally to a handful of local surfboard stores. Before that, they had to convince the shop proprietors to give their products shelf space. And, of course, they hope to grow their business and eventually run it on a full-time basis.²

In most respects these young women are no different from the millions of others who have embarked on entrepreneurial ventures through the years. They are unusual in one way, however; their principal motivation in starting the business was to protect the environment. It’s not that they don’t like money. But they believe that they can protect the environment and make money at the same time. The vast majority of entrepreneurs go into business for more selfish (albeit socially well accepted and perfectly respectable) reasons, such as increasing their income and escaping the drudgery or oppression of working for someone else. But these conventional reasons are just part of the motivation for people like Gina and Melissa. We may call them idealistic, selfless, or unreasonable. They think they can make money and improve society at the same time. In fact, they believe that the two goals will feed off each other.

Our research over the last five years has uncovered a statistically small but still surprisingly sizable and fast-growing group of entrepreneurs whose motives and business philosophy are similar to those of Gina and Melissa. These so-called social, socially responsible, ethical, sustainable, or “values-centered” entrepreneurs endeavor to “do good” and concomitantly “do well.” They have built profitable companies that significantly contribute to the greater good of society—an outcome which many of them believe traditional capitalism has been ineffective in producing. In this book we aim to examine the motivations, philosophies, and business policies and practices of these “values-centered entrepreneurs” (as we will refer to them from here on out) to learn what commonalities exist amongst them and what lessons (“best practices”) can be learned from them. We hope that our findings will offer helpful guidelines for those (whether they may be students, corporate employees, or entrepreneurs) who aspire to follow in their footsteps.

A Growing Movement

The concept of social or responsible entrepreneurship is not completely new. It has been around several decades. Some of the more well-known firms in this category are The Body Shop, Ben & Jerry’s, Stonyfield Farm, Patagonia, and Newman’s Own. Other widely recognized successful responsible ventures (no longer “ventures” per se) include large U.S. public companies run by their founders, such as Interface Carpets, Starbucks, and Whole Foods. In recent years, however, the pace of development of values-centered ventures has increased. While difficult to quantify (there is no registry for them), increasing numbers of socially responsible firms are being established. Even some of today’s hottest technology companies such as Google and Salesforce.com exhibit a heavy values-centered or social bent. For example, Salesforce.com founder, Marc Benioff, has written two books, Compassionate Capitalism and The Business of Changing the World, and set up the Salesforce.com Foundation to proactively give to causes. Following in Salesforce.com’s footsteps, Google set up a foundation early on and has invested in wind energy and other environmental/social projects. Moreover, an increasing number of venture capital and lending institutions, including Pacific Community Ventures, RSF Social Finance, Gray Matters Capital Foundation, and Shorebank (originally Shoreline Bank), have been established to finance social ventures. Even Kleiner Perkins Caulfield & Byers, the legendary venture capital firm that financed internet pioneers like Netscape, Amazon, and Google, has increased its focus on alternative-energy projects.³

The passion toward responsible entrepreneurship is growing, particularly among young adults. Universities and MBA programs nationwide, in particular, are finding a strong interest among students for courses in social entrepreneurship. In response to this trend, Brock et al. (2008) report, there are more than “250 professors … actively teaching or researching in social entrepreneurship from more than 35 countries, with 29 different competitions, with over 800 different articles and 200 cases used in social entrepreneurship courses.”⁴ The recent Global Social Venture Competition, a business plan competition among MBA students held in April 2009 at the Haas School of Business at UC Berkeley, received more than 200 entries (compared to the usual 20–50 entries in most competitions).

A New Sense of Urgency and the Role of Entrepreneurship

In recent years, especially with the advent of the new century, the idea of “sustainable development” has come to the forefront of societal issues. Sustainable development was initially defined as “development that meets the needs of the present without compromising the ability of the future generation to meet their needs.”⁵ Over time, sustainability, as it is frequently called, has become a multidimensional concept that extends beyond environmental protection to encompass economic development and social equity, domestically and abroad.⁶

Today, there is mounting scientific evidence that the quality of human life is at risk due to global environmental deterioration, dramatic economic inequality, and the immense scale of Third World poverty. At a pragmatic level, it means that we must arrest the acceleration of global warming, reverse the deterioration of our life-sustaining ecosystems, and raise standards of living in the Third World (not just because of our moral responsibility but also because ecosystem deterioration and social/political stability are implicitly tied to it).

Based on our observation, there seems to be an overall trend in the developed and even developing economies toward increased consciousness about the natural environment, human health, the treatment of people, and economic inequities around the world. More than ever, people seem concerned about corporate responsibility and transparency. They are asking concrete questions about the manufacturing practices of clothing and shoe companies, fair-trade purchasing practices of coffee chains, and environmental practices of the extractive industries, among others. Consumers seem more receptive than ever to sustainable seafood, organic farming, natural foods, and homoeopathic remedies—all closely tied to the health of the environment. In response, even a large industrial conglomerate like General Electric has said that it “wants to instill values in everything the company does—without compromising the profit principle.”⁷

The sense of urgency for action, by consumers and the public at large, is compounded by the fact that, while the concern for sustainability and responsible business practice has risen in recent years, the expectation that governments or multinational corporations will sufficiently address these issues has diminished. Although many large companies have started or expanded their corporate social responsibility (CSR) programs, most people also recognize that these won’t be nearly enough to have much impact given the magnitude of today’s problems. Indeed, today’s mounting societal and environmental problems seem to require a vastly different approach to business. As eBay co-founder and billionaire Pierre Omidyar put it, “I have learnt that if you want to have a global impact you can’t ignore business. I don’t mean corporate responsibility programs, but business models that provoke social change.”⁸ Considering the impact that business has on people and the environment, it is apparent that anything like global sustainability will be impossible without the engagement of industries and markets. The question however is: Who will show leadership in bringing about critical changes in business practice? Perhaps our entrepreneurs!

Our values-centered entrepreneurs are individuals who have felt compelled to take action. They make it their business to address the world’s social and environmental problems. They are idealists who understand and exploit the power of the capitalistic market system. Or, perhaps, they should be considered first and foremost social activists who instead of carrying picket signs make their statement through responsible business practices. As Gunter Pauli, President of Ecover, a Belgium-based maker of ecological cleaning products, plainly states, “We don’t lead boycotts. We don’t run Greenpeace campaigns. We are not in business to attack Proctor & Gamble. We are not in the world to punch Unilever in the nose. We want to be positive. We offer solutions.”⁹

Our values-centered entrepreneurs also challenge a fundamental notion about business and social values. They do not accept the widely held belief that there need be a dichotomy between how one conducts business and how one improves society. They demonstrate that it is possible, and in some cases more profitable, to build businesses and exercise their social values concurrently. To our delight, we have learned that they are also eager to share their stories—their dreams, challenges, and successes. They all seem to share our belief that, to address the magnitude of today’s problems, all businesses, small and large, need to be environmentally and socially aware and responsive. But they also fully understand that they must be profitable if they are going to be able to stay around and do good works.

The Pursuit of Values-Centered Entrepreneurship

In spite of the urgency of today’s challenges and the rapidly growing social venture movement, to most people in the business community, values-centered entrepreneurship remains a mystery. Common questions include: Is it really possible for a company to be good and do well? What are the real motivations and objectives of these entrepreneurs? Do they want to make money or serve a mission? Do they want to beat competition and grow or do they feel guilty about it? Where on earth do they obtain the needed financing? How do they balance making profits versus serving their cause? How do they treat their employees, the environment, and their communities? How do they build responsible companies in face of today’s fierce competition? Do they sell their companies for profit? Do they give much to charities?

While stories and anecdotes have been written about values-centered entrepreneurs, e.g., through autobiographies by the founders of some of the values-centered companies, few, if any, books or research projects have systematically examined the answers to the above questions. To our knowledge, ours is the first study to methodically examine the business strategies and practices of a relatively large and diverse sample of values-centered companies—46—throughout the key stages of their development and growth. We analyze their financial and non-financial objectives, financing methods, hiring practices, organizational design, marketing strategies, growth and exit patterns, and giving programs. We focus in on the policies and practices that have worked for our sample companies, particularly those that departed from conventional methods, and summarize these empirically derived commonalities in the form of ten specific lessons/guidelines. Although the book is grounded on years of academic research, it is mostly composed of inspiring examples and practical guidelines for aspiring entrepreneurs and managers to follow as they build their values-centered ventures.

The key principles or lessons/guidelines that we obtained from our research, which also provide the fundamental framework of the book, are summarized below. Each of these principles is discussed in detail in Chapters 3 through 11. Chapter 2 sets the theoretical framework for our study.

1. Commit to a (Meaningful) Purpose. View the business enterprise as a vehicle for not only achieving personal financial goals but also for pursuing social/environmental missions. (Chapter 3)

2. Raise Capital with Mission in Mind. Find and work with the right kind of investors who share similar views to build authentic, purpose-oriented, financially successful compa...