Naive and unoriginal (but optimistic)

Friday News from Net Impact in Nashville.

On the plane to Nashville, I read the Business Week article on "Little Green Lies," about Aspen's Auden Schendler and his "bitter" (would bittersweet be a better description?) greening journey. Then the Net Impact Conference (1700+ MBA's interested in more sustainable business) started off with Yvonne Chouinard. YC is one of my heroes, but he started it off on a fairly tough note. A double hit of pesssimism. It was getting tough to maintain my "unrepentent optimist" outlook. Don't worry, I got over it. Being around all these highly energized Net Impacters helped.

A few highpoints from YC's talk:

"there is a proper size for every endeavor"
"from my climbing, I learned that the goal is not the summit, but how you climbed the route"
"hire people you want to go to dinner with, then leave them alone"
"leading an examined life in business is a pain in the ass"

Next up was our panel on Technology and the Base of the Pyramid. Rob Katz of WRI was a great moderator, and Tim Prestero of Design that Matters and Cindy Cooper of Speak Shop were wonderful co-panelists.

I liked Cindy's use of IT to empower Guatamalan language tutors to gain access to a global market. Very clever, and a wonderful example of using technology to help the poor go to where the money is. Note most aid has been aimed at taking money to where the poor are. And they do a free trial!

Tim was a riot. He has a gift for simple, funny stories... and then as you think about them, you realize they have several dimensions. For example, his Peace Corps experience (after getting his engineering degree) of digging outhouses. Tough work. But also realizing the gap between classroom learning and useful work, when he was asked about load tolerances of the concrete they were using, and realized he didn't know whether they could support someone sitting on the crapper. My favorite, though, was his response to an executive who said he didn't have time to talk to Tim about an LED projector for teaching the poor to read. Tim's response: "I can understand why don't have time for me, but how can you not have time for the 1 billion people in the world who can't read?" Ouch.

It was also fun to share some our our Envirofit stories- the good, bad and ugly. And it lead to my commment that my skill was being naive and unoriginal. These are actually good skills for an entrepreneur (even this isn't original). Being naive allows you to get in over your head without knowing it. And once you are committed, you just keep muddling along and occasionally you get something right.

As for being unoriginal, in BOP, it is a good idea to invent as little new stuff as possible. It is hard enough to just get traction in these markets, so figure out how to make it as easy as possible. I am pretty sure you don't get points for degree of difficulty (unlike Olympic diving, or developed markets, where such difficulties may provide competitive advantage).

During the panel, I may have implied that I am also lazy, in that entrepreneurs have to find the path of least resistance. Being a successful entrepreneur involves looking for the easiest answer for hard problems. This isn't really lazy, just efficient. And sometimes it is hard work to find these easier answers. So I don't think it is really lazy at all. Otherwise I would have to title this post "Naive, Unoriginal and Lazy (but still optimistic)," and that might give the wrong impresssion.

Your Big BOPportunity?

I will be in Nashville for the NetImpact meeting Nov.1-4. Please come to our panel on Technology and the BOP if you are in town on Friday morning. There are 11 sessions on the business and international development track, so this is a great bopportunity to meet others in the field.

Low Pay: A New Venture's Competitive Advantage

Recently, a former student was talking with me about creating a new venture in the non-profit sector. Pretty soon, we were talking about how to attract "great people." The pay, or percieved low level of pay, loomed large. He was worried that he might not be able to attract anyone to work for him. I suggested that he focus more on the mission and business model, and that actually, "low pay" can be a competitive advantage for start-ups, at least in the early years.

Pay is the first thing most people look at when they consider a job. I don't want to work with those people, or hire them. They are motivationally impaired. Usually (but not always) these people are pretty easy to spot, and you can avoid wasting time on them. Who wants to staff up with people that are in an organization because it pays "well"? Low pay will keep them out of your start up.

By having "low pay" be part of an early venture's core values... i.e., everyone agrees to work for less, but has an upside "out there" for when the business model flips... you can build a very strong team dynamic. But two things matter here... everyone on the team needs to work for less (with greater sacrifice by founders and execs), and this will not last for years. But if you haven't created value in years, you deserve to lose your employees.

At our companies, we try to have generous benefits (at least for a start up) and keep them equal across the board. We do the best we can, consistent with staying in business and having an impact. Part of a business model is deciding how to divide up the value your enterprise captures. Definitely a balancing act. Obviously we would like to reduce prices, pay employees more, and scale up our impact. But you have to prioritize. For now, it is keep the burn rate low, and get the products to market. Pay has to lag performance. So far it has worked pretty well for us. At Envirofit, we get unsolicited job apps, people offering to work for free, etc. I recently saw that New Belgium gets up to 200 applications for entry level positions. You know, I have yet to meet a New Belgium employee that is working there for the money. They work there for the vibe, the people, the beer, the free bike. But not the money.

When you start a non-profit, you miss out on one "lever" by not having equity, but done right, you can lengthen another lever called "purpose." What is equity? It is a right to share in the financial success or failure of the company. What is purpose? It too involves sharing in the success of the company, but here the participation is not separated from the employment relationship. So leaders in non-profits need to be sure to "leverage" the purpose lever so that co-workers feel connected to success. Instead of having "owners" and employees, a non-profit's employees must "own" the mission and its success. It simply can't just be a job, or your organization will be a failure.

I encourage entrepreneurs to work on for-profit business models if possible. Not because of pay, but because of the ability to attract capital to successful, scaleable business models. But in either model, purpose should be the starting point. A strong purpose will attract people more than strong pay. Design your company to attract those that share the passion and motivation for change. Better yet, figure out new types of options/bonuses on the social/environmental returns of a business. Invent a new model. Create more value for the venture.

One last thought. Much of the stuff about pay is in the context of people wanting "more." As you think about who you want to work in your company, think hard about character. Do they have the discipline to save early in their careers? Do they understand how limiting consumption can be? How important it is to avoid overdoing on credit? These are keys to building personal wealth and creating value in an enterprise.

There is no secret to wealth. Most of the time it is hard work over a long period of time. But people get stuck. And then they can't take the cool job they want. And then they are less happy with their job and life. The discontent is like a cancer. They think getting paid more will cure it. Unlikely.

So design your venture around purpose and impact. Build a business model that can fairly reward people for success. But don't get stuck on having to pay a lot in the early days to attract the right people. Trust me, they won't be the right people.