We’re in Week 2 of our class’s journey through exploring how business can be designed to serve people. The theme of the week was “You Don’t Need Investors (but you do need customers). We had two readings that prompted this week’s discussions:
- The introductory chapter of From Head Shops to Whole Foods by Joshua Clark Davis, and
- “Ten Good Reasons Not to Seek Investors for Your Start-up,” a blog post by Tim Berry, chairman and founder of Palo Alto Software
The former became the center point of our discussions as the excerpt introduced to the class the concept and history of “Activist Entrepreneurship.”
This movement bloomed in the 1960s and 1970s alongside the left social movements of the time and the growing alienation and disillusionment with inequitable consumer culture driven by Big Business of the post-war era. The movement was diverse and not necessarily interconnected but all sought to promote equality, democratization and humanity in American enterprise. They sought goals beyond profit, striving to educate and create as well as being defined by independence, dignity and social responsibility. They sought more responsible products, business practices and development of communities.
“Their greatest power lay not in doing away with capitalism but in creating alternatives within the market economy to the…American corporations whose ultimate responsibility was to maximize profits for shareholders.”
The discussion perhaps veered away from the original theme of the class but nonetheless acted as a way for us to explore the idea of business explicitly intended for social missions. We distill some of the key takeaways below. For the part of the class more centered on operating an independent business, check out our blog on our interview and discussion with Carolyn Hagler.
Class Reading Takeaways
1. Goals & features of activist entrepreneurship
Though activist entrepreneurship takes many forms based on the cause of the activism, there are some common features amongst them. These features include: advancing and disseminating ideologies, creating “free spaces” for marginalized people, and boosting small businesses. The result of the activist entrepreneurship hence decentralizes, democratizes, distributes power, and puts power back into the hands of individuals instead of massive corporations.
2. Profit & activist entrepreneurship
Unlike traditional business and entrepreneurship, activist entrepreneurship does not seek to maximize profits. Instead, it seeks to advance some social goal as aforementioned. In the pursuit of these social goals, profit is often sacrificed. The reading puts it elegantly, “In short, business success might look one way to an economist or corporate manager, but an entirely different way to an activist.” As a result, activist businesses must create new metrics must be created to judge their success. Tangible metrics of “impact” must be set in addition to keeping the business profitable enough to stay afloat.
3. Culture and entrepreneurship
Culture is one of the most important parts of entrepreneurship as it is what coalesces the team, motivate the members, and builds team loyalty. One of the most powerful parts of this form of activist entrepreneurship is that team members share common ideologies and are attracted to each other, not for economic benefits but because they hold common goals and a shared purpose. To maximize this force, activist entrepreneurs should really sell their stories and attract team members that way. Additionally, culture extends beyond the internal team and can be used to attract investors and customers who share the same beliefs as well.
4. Humanizing work
As previously mentioned, a key feature of activist entrepreneurship is to create “impact.” This humanizes the work that is done as the main goal is to maximize good; profit is simply used to keep the business operational and becomes a means to the end. Work is expanded beyond profit and efficiency and is now focused on education, authenticity, autonomy, respect, social responsibility, work-life integration, workplace experience, and purpose.
5. Entrepreneurship doesn’t necessarily need investors
Entrepreneurs often jump into the field thinking that getting investment money and receiving a high valuation is the ultimate goal of startups. However, entrepreneurship can be done without investors. In fact, in addition to all the positives that investors bring with them, there are negatives too. These negatives include dilution of ownership, less freedom for the founders, misaligned different goals/incentives, too many different opinions, and too much of a focus on exiting. Thus, before jumping in and immediately seeking investors, entrepreneurs must first carefully evaluate the pros and cons of such a decision.
In-Class Discussion Takeaways
1. Today’s Activist Economy
Prominently catalyzed by the political climate surrounding the presidential election season, business in America has clearly been taking a turn towards adopting a corporate mission. Farm-to-table movements, eco-friendly practices, fair trade, sustainability and countless other causes have been adopted by brands. Some smaller and newer brands have wedged a prominent place in the market with a brand message that was leveraged to differentiate. Other more established brands, and even their high-profile CEOs, are increasingly compelled to adopt missions. Some were forced to take a stand or risk being labeled unfavorably. Is this the modern legacy of Activist Entrepreneurs? In class, we noted terms like “Activist Economy” or “Activist CEOs” becoming terminology that reflects what appears to be the new status quo. It is unclear if the dog is wagging the tail or vice versa but it’s clear that consumers, who have long adopted consumerism and brands as a way of self-identification, want to affect positive change and practices through their everyday lives. Whether in reaction to that or by volition as a part of the change, businesses are themselves leading social charges.
2. Genuine or not, and should it matter?
The running question in reaction to this sort of social mission or corporate responsibility that pervades business today was, is it sincere or is it all bogus? Are corporations really believing in the messages they promote or are they pandering to consumer trends? Big brands like Dove appear to become a stalwart for body positivity but then drop the ball in an embarrassingly tone-deaf marketing move with their body-shape bottles campaign. Meanwhile, brands like WalMart with a bad track-record truly achieve corporate-responsibility goals with more efficient milk packaging. Rihanna’s makeup line featuring a wider array of darker tones became a sensation and prompted a slew of copy-cats in the industry. It can all seem shallow but if it shows big brands at the mercy of its consumers and consequently results in positive change, maybe that’s good enough?
3. Spaces for community
A common characteristic of Activist Entrepreneurship was in providing spaces for concurrent causes, missions or communities. These “free spaces” seem to be the precursor for today’s conception of “safe spaces” but we can see that, for the most part, that has since strayed apart. Few of the businesses, even with the most socially-driven, truly act as a community space. It also reflects a general social phenomenon of retreating from public, social spaces to private ones. The front porch has been replaced by the backyard deck. Online platforms seem to often displace physical gatherings when fighting for causes. It seems this aspect is one sentiment of the Activist Entrepreneurship movement that never quite spilled-over.
4. Changes in Corporate Messaging
Another notable change we noted in terms of how businesses interact with their audiences is in the tactics of their messaging. While the old era of big conglomerate brands features advertising that preyed on insecurities and inadequacies, much of it has strayed away from that. In many ways, this shift is considerably recent with a higher public scrutiny of media. Today, much of advertising strategy is rather defined by positive empowerment. Instead of which brand can best fulfill what you lacked, now brands fight to show they can help you be a better you. While technology may have replaced physical public forums and communities, it has also allowed for consumers to rally and communicate directly. We have moved from a unilateral to a bilateral system for better or worse. The dynamic is not far more participatory, sometimes even leading companies to crowd-source their marketing. This changing relationship signifies how consumers have taken back a level of deciding how businesses operate.
5. Balancing the Mission and Operational Sustainability
While corporate responsibility may appear disingenuous, at least the missions they claim to support can really be substantial and possibly sustainable. One thing we noted was that often Activist Entrepreneurs were bad at operating their businesses. As worthy as their causes were, how would they pursue them if they couldn’t stay afloat? As we learned last week, profits allow companies to weather tough times, adapt and soldier on. The counter-question could be posed that, even if the mission is genuine, if it is ineffectual, does it matter? As signified in our theme for the week, being independent has its benefits but what are you without customers? Perhaps businesses with social causes should consider investments, and keep revenue a priority so it can keep offering the social impact is desires. Perhaps the answer is in between in a careful balance.
