I’ve noticed that most young entrepreneurs are more socially conscious today than ever before, which is a great trend. Unfortunately, some are so focused on this principle that they forget that every business, even nonprofits, have to practice the basic principles of capitalism (build a business model to make money) to cover their costs to do good things another day.
Examples of profitable companies practicing this model include Trader Joe’s, led by Doug Rauch as retired president, and Conscious Capitalism® board member, and the Container Store, built by Kip Tindell. Both of these are purpose-driven businesses that boast high growth, high loyalty, and very low employee turnover. You can find dozens more on the Conscious Capitalism web site.
Of course a profitable model isn’t required if you intend to rely totally on donations, or have deep pockets to fund your socially conscious efforts yourself. Conscious capitalism is the rational alternative approach, dedicated to advancing humanity, while using tried and proven business principles. The idea has four principles guiding and underlying every business:
- Higher purpose. Business can and should be done with a higher purpose in mind, not just with a view to maximizing profits. A compelling sense of purpose creates an extraordinary degree of engagement for all stakeholders and catalyzes tremendous organizational energy.
- Stakeholder orientation. Recognizing the interdependent nature of life and the human foundations and business, a business needs to create value with and for its various stakeholders (customers, employees, vendors, investors, communities, etc.). Like the life forms in an ecosystem, healthy stakeholders lead to a healthy business system.
- Conscious leadership. Conscious leaders understand and embrace the higher purpose of business and focus on creating value for and harmonizing the human interests of the business stakeholders. They recognize the integral role of culture and purposefully cultivate a conscious culture.
- Conscious culture. This is the ethos – the values, principles, practices – underlying the social fabric of a business, which permeates the atmosphere of a business and connects the stakeholders to each other and to the purpose, people and processes that comprise the company.
I see conscious capitalism providing leadership at just the right time – for young entrepreneurs who are a bit disillusioned with the image of “business” today, but want to be profitable without sacrificing trust, reputation, and credibility with their peers and stakeholders important to them. They want their business potential to support the overall human potential as well.
None of these positives obviate the need for a viable business model, in order to survive. I would expect that to seem intuitive to all entrepreneurs, but every investor I know has many stories about startup funding requests with no clear business model. The most common failures are solutions looking for a problem, lack of a defined market, and giving away the product.
Soon, companies that also want legal recognition of their socially conscious focus will be able to incorporate as a Benefit Corporation (B-Corp). The B-Corp status, already available in thirty-five states, including New York and California, is meant to reduce investor suits, and gives consumers an easy way to spot genuine social commitment, without assuming it is a nonprofit.
Entrepreneurs and startups are all about innovation, in business principles as well as in products and services. I see conscious capitalism as a great innovation to the foundations of capitalism, bringing compassion and collaboration to the heart of value creation. Maybe it’s time to take a hard look at your own startup, and see if you have fully and consciously capitalized on capitalism.
Startup Professionals Musings