Crafting a responsible business model
Starting a business is a challenge in itself. Starting a responsible business takes added thought and action, but when done, it provides a solid foundation for growth in revenue and impact. A responsible business creates shared value, which means it generates a profit and builds a positive impact within society, the environment, or both. Shared value means all stakeholders are considered, including team members, customers, partners, suppliers, shareholders, and the communities where they serve or employees reside. You can see the added pressures in designing and building a responsible business.
Starting with Purpose
Embracing purpose is always a worthy place to begin, especially when starting a responsible business. Initially, the focus is on the customers, including who they are and a deep understanding of the real problem to be solved. From this point, the entrepreneur is likely thinking about the type of company they want to create and who may be interested investors. The first is about the people, and the second is about the funding sources. Purpose enlivens both.
Purpose includes thinking about virtues. Virtues encompass something more significant than self, and relevant societal concerns likely figure into what virtues matter for a new business and its stakeholders. Example virtues to consider include:
Accountability: Accepting and ensuring full responsibility for decisions and actions.
Compassion: Engaging empathy in understanding who is served or impacted by decisions and actions.
Diligence: Concentrating on doing the right things in the right way.
Trustworthiness: Keeping our word and agreements with integrity and transparency.
Virtues are practical and inspiring. Considering which ones are important to the type of business you want to be demonstrates being responsible for who you want to be and what type of culture and business you want to build. Here are 100 virtues to consider, but find the ones that resonate within you as a founding team.
Leadership Focus Areas
Virtues center your startup’s vision and purpose. With your selected virtues, there are four other leadership areas to develop.
Venture Leadership: Building a business and impact model. It includes vision and strategy. It includes how profit and purpose will be achieved.
Operational Leadership: Developing the tactics to realize the business and impact model, including budgets, aligned action plans, competitive moves, go-to-market plans and actions, sales plans, and metrics. Embedded within this area is the organizational culture through hiring, firing, and other policies.
Social Capital Leadership: Developing vital communities, which include relevant stakeholders (e.g., employees, investors, communities)
Adaptive Leadership: Humanizing the ability to learn and apply new lessons quickly and meaningfully. Change is inevitable. How leaders understand and adapt to change is not a given.
Diving Into Each of the Leadership Areas
The four leadership areas are critical to building a responsible business. Let’s explore considerations for each.
© Jon Mertz, 2019
Venture Leadership
Venture leadership is essentially about the models – business and impact. With most responsible businesses, there is some change the founders and team members want to see in the world. It can be social or environmental, and it can be local, state, national, or global. Defining the change model is critical to understand how the intended impact will be realized.
On the business side, how revenue and profits will be generated is vital to support the impact model. In some cases, the impact model is embedded in the business (e.g., community solar), and in all cases, the business model supports the impact. The business model includes what type of investors would ideally support the business and the impact. Impact investors are a relatively new area to explore.
Your business and impact models need to include a sound governance framework. Who will ensure accountability? How will accountability be incorporated into the business and impact models? Accountability guides the direction and delivers ethical boundaries to keep within.
Venture leadership includes many elements, including strategy and value propositions. Developing the right venture leadership thinking is foundational since it will serve the other areas in terms of financial and impact viability.
Operational Leadership
Operational leadership ensures you have your act together; it is how it all works together to produce results. Team members and investors will want to see progress and results. Vision and strategy are essential, but both are just words without traction. Impact without tangible actions is just intentions. Competitors need to be understood, as does the value chain of your offering. Earning early and growing sales proves a sales model, and lead generation and market recognition show good go-to-market strategies. Understanding and tuning the operational connections within your business are paramount.
The impact core of your operational leadership can be enhanced by utilizing the B Corp Assessment. It is a free tool providing insights into where you are making progress and where you need to focus. It can serve as a guide for startups, but gaining certification in the early stages may not be worth the effort. The guidelines can serve as a path. Certification can be pursued when ready and serves as another accountability check. Regardless, incorporating as a Benefit Corporation also supports making a profit and realizing a purpose, giving shareholders and board members guidance on how to guide decisions.
Social Capital Leadership
Social capital is about building, sustaining, and growing relationships. It is about communities. For a responsible business, the communities include employees (i.e., organizational culture), investors, areas of impact, and stakeholder groups. While there will be separate communities to develop, they will (and should) overlap to achieve profit and purpose. Defining each community will be essential, just as empowering them will be. Within each defined community, building capacity will be vital. It may be the capacity to change, or it may be the capacity to achieve intended results. Whatever capacity may be required, you must lead to understand and then create.
Adaptive Leadership
Keeping the relationships fruitful requires healthy self-awareness, good ethical practices, and sound conflict-resolution techniques. Change will be constant, and adaptive leadership requires bringing out your best self and the best in others. Adaptive leadership concepts include moving seamlessly from the dance floor to the balcony. Being an adaptive leader means doing the work and taking breaks to observe and absorb. Different views deliver different actions. A responsible leader cannot lose sight of what is unfolding or may need to unfold. Meanwhile, they must find the best talent to deliver the best results in different scenarios.
Adaptive leadership is about having a growth mindset – learning and growing. However, it is not about a solo growth mindset but one for all active stakeholders. It is about Absorb, Convert, and Act as a leadership approach, and it is continuous.
A Responsible Business: More Needed
While starting a responsible business may be more challenging, the rewards are more significant. Many stakeholders expect businesses to do more than make a profit; having a societal impact builds community, brand, and results based on virtues and purpose. Our society and climate have many growing challenges. Responsible business leaders can make a positive difference. Continue to build your venture while building your leadership practices and capacities. The points here can be a starting place.