Video – Creating a Relevant Small Business

Entrepreneurial Sabotage

Marshall Goldsmith of the Harvard Review addresses this week why entrepreneurs sabotage the succession process. He makes an interesting point by bringing up the fact that many aging Baby Boomers have reached the age of retirement, but they’re not retiring. In this post he addresses how they can sabotage the process.

Do you have a founder who is still holding onto the reigns? Does s/he speak of hanging it up but that was perhaps a few years ago? Worse yet, are you running your business but afraid of what to do next with your life, since your business has become your life?

Typically, argues Marshall, successful entrepreneurs:

• Are usually driven people. They like to win. They are used to relying on themselves — and taking personal responsibility for decisions. It can be very difficult for a driven winner to let go and create an environment where others take the lead and do the winning. This hesitancy can inhibit successful transition — even in cases when the incumbent leader has every intention for the succession to work.
• Are a big deal in their communities. They often play important roles in local society. Leading a successful business brings social prestige and status. It can be hard to give up adoration and respect. While many founders claim to have little interest in social status — they are just as human as the rest of us. The prospect of facing a decline in status can make unconscious sabotage a real possibility.
• Are the go-to people in their world. They are not accustomed to asking for help, assistance, or directions while working their way out of a morass. Unlike corporate CEOs who have many advisors — both right- and left-hand men and women — assisting them. This may seem like a trivial concern — how hard is it to learn to ask for help — but if you have never said, “gimme a hand with this,” doing so for the first time at age 60 may feel like an admission of weakness — or even worse — old age!
• Have usually focused on one market over a long period time. They are not jacks-of-all-trades. Corporate leaders generally have to deal with a wide range of products, markets and geographies and get exposed to a variety of jobs (or Boards) they can segue into should they wish to work after passing the baton. Not so for founders. Their specialization and focus on a restricted market niche can make it hard for them to transition to a new role in a different type of business. Facing the prospect of leaving — with no place to go — founders may feel their interests are better served by staying right where they are.
• Often have their name on the door of the business. Even if they don’t literally have their name on the door, they are personally identified with the business. It is their business. For founders, leaving the business can feel like leaving an important part of their personal identity. It is hard to be replaced, especially when the replacement is not only doing what you did but becoming who you were.
• Are often parents, whose children may be involved in the succession process. While it can be difficult for corporate leaders to choose between two candidates who are equally respected, it can be much more difficult for founders to choose between two children who they equally love. This Sophie’s Choice dilemma may make it harder to decide and easier to postpone the selection decision.

Five Ways to Realize Profits and Missions

Emily Reyna & Daniel Wang of the Harvard Business Review have put out an excellent conversation starter. How do you pursue both profits and social chagne?

The following is based on their recent research:

1. Put the mission into action. The company’s explicit environmental and social mission is embedded not only in the business model but also in every major business decision and in daily aspects of the company’s operations. At Guayakí’s company meetings, for instance, leaders pass a gourd filled with mate (an infused beverage) from employee to employee — the organization’s way of connecting its people to the traditions of the company’s core products and mission.
2. Market premium products. Customers who value sustainability are willing to pay a premium. Maggie’s Organics, which sells clothing made of 100% organic cotton, initially identified potential consumers’ broad preferences and price points for their products. But when the company began selling its wares in natural-food stores, it found that customers were willing to pay more. Because hybrid companies spend far more time, expense, and effort investing in equipment, people, and relationships that match their core values, a premium price tag is more than good marketing; it’s financially necessary.
3. Get comfortable limiting the rate of growth. Hybrid businesses understand that scaling too fast inevitably brings ethical dilemmas that make it hard to square growth with mission-critical values. The solar cooking oven maker Sun Ovens International learned that the hard way: It chased after a fleeting Y2K market only to find itself struggling eight years later under the debt obligation of that decision. It has subsequently learned to balance short-term business decisions about finances (whether to sell off shares) or operations (where to allocate resources) with its long-term social and environmental missions.
4. Cultivate patience. Hybrid organizations are case studies in taking the long view. These companies recognize not just the reality of but also the value in changing customer habits over not months or even years but generations. For nearly a decade, PAX Scientific emphasized small, measured experiments (and accepted the inevitable hiccups along the way). More recently, though, the organization has very consciously begun to pick up speed — in response to market shifts that now strongly favor its position in the clean teach space.
5. Make it personal. Hybrid companies reject the idea that “it’s just business.” They create unusually close relationships with suppliers, producers, customers, and other stakeholders. Michael Potter, CEO of Michigan-based Eden Foods, says his employees’ personal relationships with the company’s supplying farmers and their families have created a competitive advantage for the organization: Eden has developed several new product ideas and capabilities based on input from these growers’ groups, he notes.