Sustainable Business Learning Community Conversations, Mar 2015 - Apr 2015

Sustainable Business, March 4, 2015 Topic: Return on Sustainability, Part 2

This week, we continue the discussion about the “return on sustainability”. In this discussion we’re seeking a deeper understanding of the difference between investing and spending and how sustainable business leaders might apply this understanding in their workaday world.

• Before beginning, everyone recognized John’s business, Earth Stones, for their winning the Best of Services Award, 2015, from the on-line home improvement and general contracting buying portal houzz.com. Congratulations to John and his team!
• To get things started, Tom suggested that, quite often, entrepreneurs tend to have “false intuitions” about adding features or services to enhance their business idea; in so doing, the entrepreneur believes he or she is somehow making the business more appealing. This tends to be a trap, because it distracts the entrepreneur’s focus from developing the core or seed of the business. Most often, the effort to add features simply dissipates the team’s energies, which can be especially problematic when the business is first getting started.
• One of the benefits of doing new things is learning: the experience of doing the new thing provides learning opportunities for those involved. So, whenever energy is expended and learning takes place, there’s an increase in people margin, which is a return on investment, versus simply an expenditure. There is, of course, a point of diminishing return. As noted above, the point of diminishing return can come quite quickly; this is especially true when the business is still in its germination stage. Too many new experiences (e.g., by attempting to add additional features) does not afford room to develop expertise. This can be thought of as the difference between someone who knows his or her particular field very well, versus a Jack-of-all-trades.
• When we consider how one might tell the difference between investing and spending, the answer may not always be clear. For a small or emerging business, one litmus test will lie in judging whether the energy is being expended on the seed of the business, or something else. Expending energy on developing competencies directly related to the seed of the business is investing.
• Darryl related his experience, wherein as when he began proposing the idea of developing Black Art Theater, certain folks suggested it was limited and he should consider expanding the scope. The seed of the business is Black Art Theater. To expand, or change focus, before expending energy on the seed itself, would risk the seed, and likely kill it before it started to grow. Some amount of energy must be expended to grow the seed before attempting to change its nature.
• Advertising may be seen as spending, whereas making potential customers aware of the product or service, and then somehow gaining their feedback about it, would be an investment, since a higher degree of learning will take place, versus simply advertising.
• Human beings tend to be attracted to bright shiny things; they are also subject to the phenomenon of complexification. All of nature is, in fact, subject to complexification, which is the act or process of making something more complex.

In The Phenomenon of Man, Fr. Tielhard de Chardin, SJ states, “This fundamental discovery that all bodies owe their origin to arrangements of single initial corpuscular type is the beacon that lights the history of the universe to our eyes. In its own way, matter obeyed from the beginning that great law of biology to which we shall have to recur time and time again, the law of 'complexification'. From the primordial, long before any complex molecules were formed, we see a continually increasing complexity to all of life. For more than 4.0B years, life on Earth has been evolving as a result of the phenomenon of complexification. Human beings are the crowning achievement of this phenomenon. As creatures with the most highly evolved central nervous systems and the ability to reflect upon the transcendental, human beings tend to complexify their existence – quite often, in ways they hardly understand. Because we’re attracted to bright and shiny things, and are subject to complexification, we tend to acquire stuff we don’t necessarily need and we create processes and systems so complex we lose sight of their original purpose.

• Susan related her story of producing and selling Christmas ornaments made from hops, which could be seen as a distraction from the seed business of growing hops for making beer. Yet, in this example, the selling of hop Christmas ornaments, is a business that – quite literally – has its roots in the seed business.

The hops used to make the Christmas ornaments were excess product that otherwise would have gone to waste. It would be one thing if selling hop Christmas ornaments was diverting product that otherwise would be sold into the core market – in this case to brewers. Since this wasn’t the case, the Christmas ornaments from hops can be seen as “complimentary” to the seed business, which is growing and selling hops for making beer.

• Building upon Susan’s example, an alternate business might be to grow hops specifically for producing Christmas ornaments. Christmas ornament hops could be grown on land that otherwise would not be used for anything else because of its level of toxicity. This business would be integral to the seed business of growing hops for beer. If the “hops for Christmas ornaments” business was supported by a highly effective marketing strategy, one that would realize an explosion in hop Christmas ornament popularity, the business would have the potential of becoming highly profitable as well!
• The lure of quick sales can sometimes become the bright and shiny object that attracts entrepreneurs; this is especially true in this age of easy access to online sales. For brick and mortar retailers, wherein the customer experience is extremely important, being distracted by on-line sales can be a significant detriment.
• The story of a person who is working in the non-profit realm came-up; apparently, this person has a number of marketable skills that would benefit a non-profit organization. The trouble is, the person spends much of her time volunteering her services, which takes time away from her finding employment and has led to a number of non-profits, who otherwise might pay for her skills, gaining the benefit of what she offers without cost. She has made great connections, and has gained a reputation for doing excellent work, yet she’s struggling to keep-up.
• Tom related his experience as a business consultant, wherein a person’s skills and experience are “marketable commodities”. A general rule of thumb for a business consultant is that it will take roughly three years to gain a “regional” reputation, and a total of five years to gain a national reputation. In other words, as one grows in competency, his or her reputation as a business consultant will spread across a given geography.
• The term “juicy rewards” came up as being something that can distract us and take away from our awareness of things – this is a derivation of our inclination to be attracted to “bright, shiny things”. A couple of examples of this phenomenon were given; they come to us from the public realm.

One is the tendency for some municipalities to develop costly infrastructure that cannot be funded without incurring huge sums of debt. The costs are simply passed on to future generations. Another example from the public realm is the investment municipalities will make to host the Olympic Games. Time and again, we see large sums of money invested in building the infrastructure required to host the Olympics, only to see the debt burden being passed on to future generations. Before being awarded the chance to host the games, officials will extol all sorts of benefits to be derived from them. They’ll talk about how the games will bring prestige to the city and how the apartment buildings and sports venues will serve the public for years to come, yet these wondrous prognostications rarely materialize. What happens instead is the debt load of the host city is increased by orders of magnitude, and future generations are forced to pay the price. This is what happens when some have the opportunity to “spend someone else’s money”.

• We then heard the story of a family owned business – a meat packing company – that’s been around for more than seventy years. It’s a successful, local business; back in the ‘60’s, it was a supplier to McDonald’s. The owner at the time was approached with the opportunity to be an exclusive supplier to McDonald’s. McDonald’s was undergoing explosive growth; the opportunity would have meant the same sort of growth for the meat-packing company.

The owner turned-down McDonald’s offer and chose to keep the business local; the business would remain customer focused and build resiliency in its relationships, rather than going after potentially lucrative monetary results. This meant helping employees develop as people and being a reliable and customer intimate supplier.

• John related his experience of entering into an exclusive supplier relationship with a large national retailer. His business underwent tremendous growth within the tristate region as a result of the relationship; then, the financial collapse of 2008 hit and the retailer decided it was too risky to have an exclusive relationship. The retailer proceed to take business away from John’s business. It was a very difficult time for John and the folks he was forced to lay-off as a result of the loss in business.
• The idea that growth is not necessarily a reliable measure of a business’s long-term viability is beginning to gain attention. We’re now beginning to hear the term “resilience” as being a better measure of a business’s long-term stability. Having the capacity to weather storms, because the business is resilient, versus simply being big, is becoming attractive to entrepreneurs.

If one is passionate about his or her business, then making money is not the objective, nor is it the reason the business exists. Because we’re attracted to shiny things – and money buys shiny things – we can get caught-up in going after money for the sake of having more of it, rather than going after the thing that fuels our passion. Sustainable business leaders should never lose sight of why their particular business is alive.

• Grant writing can create distractions. Because grants are a source of much needed financing, especially when a business is just getting started, there is a tendency to compromise the seed business to gain the grant award. Rather than staying true to the seed business, we sometimes see the tendency to change the seed business, or somehow adapt it, to satisfy the requirements of a grant and thereby gain the funding. This, of course, can be a dangerous thing to do.
• David brought-up the idea of Investing in the people around us as a means of building relationship and resiliency. Another way of looking at this concept is to ask: Do we have relationships with people who invest in us?
• Dave related the story of a young man he knew many years ago who was having trouble. He called Dave and they talked; it seems the man was having trouble at work: he was underperforming. The man was in a sales role and David suggested he take a Dale Carnegie course and that he ask his boss to pay the cost. The young man was convinced there was no way his boss would pay; for a time, he wouldn’t even ask. He eventually did and was surprised when his boss readily agreed; it turns-out, the boss thought it was a great idea.

After taking the course, the young man’s life was changed forever. His performance at work improved significantly. The point is, if we don’t take risks – and step-outside our comfort zones – we run the risk of missing-out on so much of what life has to offer. And when people make an investment in others, they’re taking a risk too, but there’s no telling what might happen.

• When it comes to buying decisions, we have the power to affect change: we can choose to purchase from local suppliers, versus large multi-national producers. This becomes difficult for some, though, because they rely on certain inexpensive products that tend to come from low cost, overseas suppliers.

We need to pay attention to these things; if the local business is making a difference, we ought to find a way to support that business. Our buying decisions can be informed through a different value paradigm. We do not need to justify every purchase on price or attractiveness alone. We can look deeper and support businesses who have as their mission making our world a better place.

• Business leaders make real sacrifices to see their ideas become a reality. Passion, creativity and artistry, poured about in an authentic bid to make a difference, is the stuff that makes for an enduring business. It’s this sort of stuff that goes beyond the profit motive; it defines what it means to be human and represents a portion of the people margin of a sustainable business.
• Some successful business leaders will “cash-out” and place their money in trust funds, or pass the wealth on to future generations in some other way. Looking at these sorts of things from a different perspective might see passing a thriving business on to the next generation, a business that provides jobs for people and fulfills a need in society, to be a far greater legacy than a pot of gold.
• Darryl related his experience of the difference between investing and spending. Over a period of several months, Darryl’s been building a relationship with a particular person; when the relationship started, Darryl wasn’t exactly sure where things would lead, but in faith, he’s continued to invest energy in developing the relationship. An opportunity now seems to be emerging from the relationship that will benefit Darryl and the things about which he’s passionate.
• There is this sense of seasonality to our experiences. In other words, who we are, what we’ve been through and the wisdom we’ve gained through life will place us at a certain point in time and space that can be thought of as a “season”. Not unlike the difference between the seasons of the year, and the difference between a particular season from one year to the next, our experiences can be thought of as seasons. Tom is going through a season now with the start-up of the El Moore: he’s enjoying the experiences of hiring people, working with the team and seeing everyone evolve as the project continues to unfold.
• Susan talked about her experience with the historical preservation project on which she is currently working. She’s learning about farming techniques from long ago; as a result, she’s gaining insights and coming-up with ideas that can be applied to her hops growing business.
• The idea of the “old-school” approach comes to mind here. We quite often have the tendency to discount older ways of doing things, when, in some cases, there’s much we can learn from the ways things were done in the past. Sarah’s experience with her family’s meat-packing business is an example of this. Upon reflection, there’s much about the direction the business has gone over the years that has led to building lasting value.
• The entrepreneur wears many hats; this necessitates developing an awareness of relationships and the connectivity they bring. Building lasting relationships is foundational to success. Without them, the entrepreneur will struggle under the weight of the sheer volume of things that must get done. In every person lies “greatness”; being aware of what this greatness is, and building lasting relationships in a way that will somehow manifest themselves in TBL value creation, is the stuff of which sustainable businesses are made.
• Julian reflected on images that came to his mind during the conversation. He had an image of a vine, which adapts to its surroundings – it grows in whatever direction is available to it; he also had an image of a rock, which presents a dialectic of sorts. The rock is not adaptive to its surroundings: it simply sits in one spot creating an obstruction.

Julian also had an image of a toad, which is an exceedingly old creature. Toads are, however, rather fragile creatures. So, over the long-term – they’ve been around for a long time – toads are resilient or “anti-fragile”; whereas in the immediate term, they can succumb to disease and extreme temperature shift, which renders them fragile as well.

A few ideas emerged from what was discussed:

• Time is a factor when we consider the difference between investing and spending: making an investment may take a relatively longer period of time to show results, whereas spending may show results quickly, but the result is not the same. There’s a parallel here between “delayed” and “instant” gratification. In the former case waiting for gratification often affords a richer experience, whereas in the latter case, the experience may be exciting, but dissipates quickly.
• Investing in learning and relationships offers a return that’s likely to be of greater value than the energy expended in the first place – this goes back to the fundamental difference between investing and spending.
• Simplicity is a word that seems appropriate in this context: Once we have an idea, it’s best to expend energy in a focused space and keep things simple in the beginning, when things are just getting started.