Several weeks ago, there was a lot of buzz surrounding the three-way discussion between myself, Thierry de Baillon and Deb Lavoy. Deb had written a wildly insightful article about the value of intention in socially networked businesses. Thierry put together a well researched and nicely written article on why the "social enterprise concept" is dead. Lastly, I penned a semi-contrarian retort to de Baillon wherein I explained that technology is not solely about affordance and that companies driven by purpose are more resistant to commoditization.
Getting to the Bottom of Things
After all the dust settled, Thierry (and to a lesser degree Deb) had stated that economic gain was a stronger driver than purpose for enterprises. Thierry quoted Drucker in stating that "there is only one definition of business purpose: to create a customer." and then continued in his line of reasoning stating that "a company can make a social contribution only if it is highly profitable." and "if organizations would not have formed for economic reasons, they would have better left family businesses, guilds and other pre-industrial structures do the job. What the heck is the need to build a large company, when small ad hoc structures perform better?"
I'd like to say, that I hate to disagree with Thierry, but that would be untrue — I'm happy to say that I disagree with Thierry. I do not believe that the sole purpose of business is to create customers. I do not believe that companies can only be philanthropic if they are highly profitable. I do not believe that the companies not formed on economic basis are better left as family businesses and pre-industrial structures.
Getting Beyond the Bottom Line
First, it is not the sole purpose of business to create a customer. Drucker's undisputed reputation as a management icon not withstanding, this is not true. Of course many businesses are started for profit, but many others are started to scratch a different sort of itch. All sorts of thriving businesses are started and driven for reasons other than profit (even if you ignore the whole category of not-for-profit businesses). Why was Apple formed? To make a dent/ding in the universe of course. Why was Southwest Airlines founded? To stick it to the other Texas airlines and the government regulators. Why was Space X formed? To propel humans to the stars!
Second, companies can be philanthropic prior to being highly profitable. In fact, companies can use philanthropic goals as a means to become profitable. Many people and companies today subscribe to models that go beyond the bottom line. Binary questions lead to binary answers, but the three-legged stool defies them. Conscious capitalism and "the triple bottom line" (TBL) model refuse to answer reductionist questions that lead to profit-above-all-else answers.
The TBL model puts people and planet on an equal footing with profit and Blake Mycoskie has proven it can work in a way that drives profitability rather than preceding it. Mycoskie is the founder of TOMS Shoes which developed a low-cost shoe for the North American market, with the caveat that for every pair sold he would provide a new pair of shoes free of charge to the shoeless youth of Argentina and other developing nations.
While visiting Argentina, Mycoskie learned that the lack of shoes was a problem that had a serious impact, threatening the ability of children to go to school and prevent infection. Mycoskie built the company based on the idea that he could make money and better the world at the same time. The company first officially began selling its shoes in May 2006 and sold 10,000 pairs in the first six months. By 2011 over 500 retailers were carrying the brand globally and by 2012 over two million pairs of new shoes had been given to children in developing countries around the world.
Third, companies formed on a basis where purpose is primary and economics are secondary are ultimately more competitive and sustainable than companies formed on a economic basis alone. In stark contrast to providing shoes to the poor children of the world, Elon Musk (the real world Tony Stark) founded Space X out of passion and purpose. Of course the team at Space X makes money, but that is not why Musk and his team of Star Trek wannabes are there. Of course Space X needs to be profitable to continue to be a going concern, but economic profitability does not have to come at the expense of core values and company purpose.
Herb Kelleher, the founder of SouthWest Airlines, said it very well this past January in an interview for Forbes. When asked about Southwest's never having a furlough or layoff, Kelleher responded:
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