Growth for good: Let's create an epidemic
5 min read
24 March 2014
A new breed of "hybrid" for-profit businesses with a strong social purpose is emerging, says Martin Leuw.
Product and therefore company life cycles are rapidly getting shorter – it’s all part of the singularity effect. The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today (source: Professor Richard Foster from Yale University); this naturally trickles down to company’s of all sizes.
Technology is driving this disruptive and evolutionary change in a very exciting and dynamic way, acting as a catalyst for collaboration between Davids, between Goliaths and between Davids and Goliaths.
There are a number of key factors which drive growth acceleration in businesses, but the principle ones are access to: talent; partners; finance. However, it’s absolutely essential not to forget that whether we are in product or service sectors, ultimately, we are all in the business of selling total experiences (preferably positive ones!).
So surely we should conduct a regular reality check to fully assess what this experience is actually like for each of our stakeholders: i.e. customers, employees, business partners, local community and shareholders?
Even if our short term financial performance is strong, if our stakeholders are not our net promoters, we should be seriously questioning whether our performance is sustainable in the long term.
In my experience high growth businesses, regardless of sector, have some similar characteristics – the most important being a clear sense of purpose and an outrageous “stretch goal” growth ambition and a resilient leader who is the driving force. I also see growth businesses as shaped a bit like an ancient Greek temple.
The foundations are a clear sense of direction and strong, genuine employee values, cemented by teamwork. The pillars which hold the roof up are the areas of core competency and differentiated expertise.
The roof is tiled with testimonials of customers delighted to recommend the business to others. Growth businesses understand their core competencies, which are generally built upon a true understanding of market/customer needs and the agility to respond over time as those needs transform.
Another and newer way of looking at “good” is how it is integrated with a business’s’ primary purpose. Not long ago there was a much sharper distinction between the for-profit (business) and the not-for-profit (typically charity) sector.
Whilst social enterprise is not new, the current generation of social entrepreneurs is now starting to change the business landscape for all businesses and it is one of the most vibrant areas of new enterprise. The credit crunch and the age of austerity have acted as a catalyst for change.
Charities can no longer necessarily rely on their traditional forms of income, so they need to turn to social enterprise. Philanthropists are no longer always interested in writing a cheque, they want to be involved in creating growth.
What is emerging is a new breed of “hybrid” for-profit businesses which have a strong social purpose written into their constitution. This is good for business and good for the community – it’s what I call “Growth for Good”.
Tom’s shoes is a nice example of this. Toms is a for-profit company based in Santa Monica, California, that operates the non-profit subsidiary, Friends of Toms. The company which was founded in 2006 designs and sells shoes based on the Argentine alpargata design as well as eyewear.
When Toms sells a pair of shoes, a pair of shoes is given to an impoverished child, and when Toms sells a pair of eyewear, part of the profit is used to save or restore the eyesight for people in developing countries.
In the last industrial revolution it took the Cadburys, the Leverhulmes and the Wedgewoods to recognise this. Most current day examples are still sub-scale, but with the rapid increase in crowd-funding, evolving social enterprise tax relief and new equity models to fund social enterprises and businesses, I’m convinced new scaleable leaders will start to emerge. It is clearly in everybody’s interest to replace “Greed is Good” with “Growth for Good.”
Martin Leuw is a serial entrepreneur and former CEO of IRIS, the UK’s largest private software house