This post was written by Barbara Dyer, President and CEO, The Hitachi Foundation, on behalf of the Case Foundation:
The Case Foundation creates powerful partnerships and vibrant networks designed to address many of today’s greatest social challenges. Read about how one of our partners, the Hitachi Foundation is sparking change within the entrepreneurial sector through its creative new programming.
The Long Now Foundation’s Interval Café is a place for conversation about long-term thinking. Nestled in a concrete warehouse at San Francisco’s historic Fort Mason, the Interval was a fitting watering hole for the nearly 2,500 participants in the recent Social Capital Markets (SOCAP) gathering. SOCAP’s annual pilgrimage to Fort Mason brought together innovators, investors, foundations and social entrepreneurs to “build a world we want to leave to future generations.”
But drive an hour south from Fort Mason to Silicon Valley and you’ll be reminded that short-termism is deeply embedded in our business culture. This epicenter of tech start-ups is defined by a business development norm of launch, scale and exit. Investors are more likely to ask, “What’s your exit strategy?” than “What’s your long-term vision?”
Today’s young business leaders came of age in the era of “short-termism” where companies enter and exit in five to ten year cycles and compete in a world where workers average 11.3 jobs during their careers. Dramatic disruption in the 1980s due to globalization, recession and technological change gave way to financial markets’ relentless push for short-term gains. Jim Collin’s 1994 book Built to Last: Successful Habits of Visionary Companies may have been a last bow to long-term business thinking.
Entrepreneurs dedicated to creating social value, and even impact investors seeking social returns are caught in the collision of short-term norms and the reality that progress requires a long-term strategy.
We’ve witnessed this tension as we’ve gotten to know early stage businesses and investors involved in our Entrepreneurship @ Work program’s new initiative – SOURCE: Solutions from Our Country’s Entrepreneurs. SOURCE, a partnership between The Hitachi Foundation, Village Capital and Investors’ Circle, connects entrepreneurs with the investment capital, mentoring, and support needed to grow their businesses. In this inaugural year, SOURCE is focused on four specific problem areas that affect low-wealth individuals – health, energy, financial inclusion and agriculture.
Through SOURCE, I’ve had the privilege of spending time with dozens of entrepreneurs and investors. One common theme from the entrepreneurs – each dedicated to creating social and economic value – is that they seem to struggle to imagine their businesses 10 to 20 years out. As impact investors push the ventures to define their scale-up and exit strategies – with less focus on social returns – it demonstrates the real challenges ventures face at the intersection of measurable financial returns and monetized social returns.
“Even with attractive margins and tackling a serious problem, an exit strategy remains critical to secure investment,” says Jason Hill, co-founder of Benevolent Technologies for Health, whose venture is part of the SOURCE health cohort. “As we work to build the next generation of prosthetic and orthotic devices, if we don’t include an exit scenario, they don’t take us seriously. We would reframe our offering and business plan if more investors were focused on our impact or job creation plans.”
There are exceptions to the “scale up and sell” norm. Our Good Companies @ Work program provides another view on the mature business economy as we’ve discovered nearly 100 businesses in manufacturing and healthcare that have maintained social and economic returns over the long-term. These companies, which we call Pioneer Employers, take a sustainable approach to their businesses, aligning the interests of customers with investments in employees and operations strategies that create strong results for shareholders, workers and entire communities.
SIPI Metals, for example, started as a scrap metal business in 1905 with a horse and buggy on Chicago’s west-side. For more than a century, SIPI Metals has endured despite the economy’s steep ups and downs. SIPI’s business is noteworthy for a number of reasons, including their strong pay and employee incentives. Production floor employees become expert in multiple tasks and machinery thanks to SIPI’s commitment to on-the-job training. SIPI is also committed to developing future leaders from within the company because as senior executives retire, their replacements likely will come from within their ranks.
The Hitachi Foundation looks across the business landscape for firms that solve social problems and compete successfully in the marketplace. We focus on both early-stage ventures and more mature companies in order to understand what it takes to run a business as if the future matters. From the start-ups we gain insights about the power of unbounded imagination dedicated to solving pervasive social problems. From the mature businesses we capture the wisdom and experience of businesses that generate long-term value at the intersection of people and profit.
It’s about building good businesses and building them to last – right from the start.
The Long Now Foundation is building a clock designed to tick for 10,000 years. How long will your business last?
Barbara Dyer is president & CEO of The Hitachi Foundation and Senior Lecturer at MIT’s Sloan School of Management. Ms. Dyer shaped the Foundation’s focus on the role of business in society with an emphasis at the intersection of people and profit.