When Profit and Purpose Collide
Three dangerous pitfalls about solving for multiple bottom-lines
The first time I founded a stand-alone venture, I failed. But I also learned a lot.
Today’s reflection explores three challenges I encountered during my foray into social entrepreneurship. For each I share a leadership lesson about how to balance the demands of trying to do it all (make money, make change, and make sense…)
Also in this issue:
Calls for guest authors! (March-May)
Teaser of an upcoming announcement…
Running out of time
A decade has just passed since I shut down my first company.
We held a “summit” in mid-December 2013 with my core team, our three outside investors (friends and family), and two advisors. Walking through our sales projections and estimated expenses to continue operating in the new year, and discussing our personal priorities and commitments to the business, it became clear that we lacked a viable path forward.
My decision was clear, and painful. In the next several weeks I rushed to complete some paperwork to officially declare the end of operations (and avoid unnecessary fees and taxes in the new year).
Over the next several months, we distributed the remaining assets and IP rights, got all our accounts squared away, and closed the doors of LLESS Inc. and its moniker, Civic Games.
How did an inspiring story from the classroom and two years of relentless hustle end with such a whisper?
In a nutshell, I overestimated what a typical for-profit venture can and should do. As a result, I took on too much… and ran out of time.
These are three ways that my adding a “second bottom line” to a for-profit venture added complexity and tension on top of existing pressures. If I were to do it again, I’d consider sequencing, separating, and simplifying my efforts:
SEQUENCE: I thought I could create a market for a new category. This happens, but it’s exceedingly rare. It’s even rarer when serving under-resourced customers.
If you want to create a new market category you need major resources to educate your customers and prove the effectiveness of your solutions.
If you’re serving under-resourced customers, start by competing for their business in an existing category to develop trust and solve known pain, and then partner with them to evolve the market to support more innovative solutions.
SEPARATE: I thought I could leverage for-profit motives for propelling innovation. This happens, but it’s just as likely to work in the opposite direction.
Innovation on exciting problems is motivation by itself - that’s why there’s a robust non-profit sector. Carefully consider whether this problem needs profit incentive to attract talent and resources, and whether the pursuit of wealth should happen elsewhere.
Operating a for-profit venture creates incentives to avoid difficult problems as those involve risk and sustained losses during lengthy R&D periods. Consider building a profit-engine that can act the fuel and buffer to complex problem solving - but not necessarily the same engine of change.
Ethical business alone is a worthwhile pursuit. Making a living while helping customers, developing employees, and minimizing external harm is both praiseworthy and damn difficult. Don’t look down on it.
SIMPLIFY: I thought I could found a social-impact business and still have a life. Trying to solve for pioneering innovation and profitable business activity is far more demanding than doing either on their own. Trying to do both, and also have a sense of harmony in my personal life was naive.
Founding a venture that can be sustained is a multi-year, all-in effort. Having some essential boundaries for core wellness is important, but trying to solve the complexity and urgency of financial and structural issues for customers leaves little room for hobbies or luxury. Consider lowering expectations for impact from for-profit activity to protect your sanity, or lowering expectations for the rest of your life if you are going to pursue a transformational enterprise vision. “Eating ramen” may be a inspiring call to simplicity, rather than a disparaging take from a maximalist viewpoint.
I’ll tell more startup stories as time goes on, but when it comes to the origins of Timeless Leadership, the lessons above are some of the most influential ideas for this model. It’s part of what put me on a path to business school a few years later, to explore how the most impactful leaders build portfolios of impact across different venture types to effectively problem solve.
Calls for guest authors!
We’re into the second half of Season 1 of Timeless Leadership - the “finale” - where I’ll share the prototypes of my leadership framework - will come out Feb 27th.
After Season 1 my goal is to feature some guest authors while I prepare for Season 2 (summer launch). Would you like to write a guest post sometime between March-May? The kinds of topics you can write about include:
A story of when you had a “time crisis” and how you led through it
Your philosophy of managing time as a leader across personal, organizational, and societal spheres
A specific tool, resource, or framework that has helped you as a leader when facing time pressure - and why it helps
Something else that’s personal, unique, and thematically relevant to the Timeless Leadership topic!
If you’re interested, fill out this quick form and I’ll be in touch.
Teaser!
I started a new job yesterday! In an upcoming edition of Timeless Leadership I’ll share more about what I’m up to in my new role and how it ties into my personal journey as a Timeless Leader.
Time to go!
Joe