How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives

A CEO’S PRACTICE OF CONSCIOUS CAPITALISM

“The coolest part,” writes The Container Store founder Kip Tindell in his book Uncontainable, “is when you’re doing a performance review and give an employee a much bigger raise than she was expecting. She starts crying, you start crying, and the magic spreads across the company, and out into the world.” This short passage about compensation reflects the heart of Tindell’s philosophy of “conscious capitalism” in which the best way to make money is to do the right thing by employees, customers and the community.

Tindell’s authenticity and generosity are shown through his use of words that are rarely, if ever, found in any business book. Words such as “yummy,” which is used as the core description of the company’s culture and environment. “I know, chief executives don’t often use words like ‘yummy’ when talking about their companies,” Tindell writes. “But it’s a word we use all the time around here. When folks ask, “What do you mean by ‘yummy’?” I say, well, it’s the opposite of yucky.” He goes on to explain that “yummy” is “the deeply pleasurable sensation employees and customers get the moment they walk through the doors into our store.”

How do you translate a concept such as “yumminess” into a business model and real-world business practices? The answer, according to Tindell, is found in The Container Store’s Foundation Principles. What stands out in these principles is the unwavering and unapologetic embrace of being kind, generous and even sentimental, of believing that there is good in everyone and that by building on that good, you create a money-making venture. Uncontainable is a respectful (Tindell believes in not saying anything if you can’t say anything kind) but firm rejection of Jack Welch and Milton Friedman.

The Seven Principles are:

1 Great Person = 3 Good People. The Container Store does everything it can to hire the best people, including compensating them at significantly higher rates than the average in retail. With his company consistently chosen as a Best Place to Work in America and boasting a turnover rate of 10 percent (the retail industry average is 100 percent), Tindell proves that his company is filled with truly great people.

Fill the Other Guy’s Basket to the Brim. Making Money Then Becomes an Easy Proposition. This principle is reflected, for example, in the company’s win-win relationships with suppliers, who are treated as partners. In fact, Tindell writes, good relationships with suppliers are win-win-win relationships because the customer also wins.

Man in the Desert Selling. Don’t just give the man in the desert a glass of water. Tend to all of his needs. Don’t sell a box. Sell solutions to the customer’s living needs.

Communication IS Leadership. The Container Store practices open-book management (with the exception of individual salaries). Open communication, Tindell explains, “is a crucial part of our commitment in valuing one another and making sure we all feel appreciated, included, safe, secure and empowered.”

The Best Selection, Service and Price. Most business will not attempt to achieve all three. “We work to hit the Triple Crown every day,” writes Tindell.

Intuition Does Not Come to an Unprepared Mind. You Need to Train Before It Happens. The average length of training in the retail industry is eight hours. In their first year, employees of The Container Store receive 300 hours of training — and the training continues throughout their career.

Air of Excitement! When greeted by enthusiastic employees genuinely interested in helping customers resolve their organizing needs, those customers become just as enthusiastic, Tindell explains.

Conscious capitalism is not always an easy sell, despite the do-good sentiment expressed in every form of corporate communication that emerges from a company’s PR machine. If there is a core lesson from Uncontainable, it is that truly conscious capitalism exists only if the CEO leads with his or her heart.

Maybe most CEOs will never be comfortable using words such as “yummy” or sharing the tears of pleasure that come with a raise. Not all CEOs can be Kip Tindell — but after reading this book, you’ll almost wish they could.

Overfished Ocean Strategy

Microsoft is researching a way to turn data servers into residential furnaces – saving millions on cooling off data centers while providing a crucial utility to homes across the world. FLOOW2 is making money by allowing businesses to sell their temporary overcapacity – underutilized machines, skills, and real estate – all with the click of a button.

Puma is getting rid of shoe boxes in favor of the remarkable intelligence of the light and reusable Clever Little Bag, while BMW has stopped selling cars and is now selling mobility, electricity included. In Peru, the first billboard that converts air into drinkable water has gone up, while in the Netherlands, wasteful party confetti biodegrades and grows into flowers.

These are just a few examples of the new movement in business, which Nadya Zhexembayeva describes in her book Overfished Ocean Strategy. She offers five essential principles for innovating in this new reality. Zhexembayeva shows how businesses can find new opportunities in what were once considered useless by-products, discover resource-conserving efficiencies up and down their value chain, transfer their expertise from physical products to services, and develop ways to rapidly try out and refine these new business models.

How might these principles apply to your business? For the answer to that question all you need to do is register for our next Soundview Live webinar: Powering Up Innovation for a Resource-Deprived World. You will hear Zhexembayeva give a deeper explanation of these principles, along with examples of what is happening right now throughout the world.

Join us on January 22nd and invite your whole team to attend with just one registration. It will be well worth your while if you find even one resource that your company could be reusing right now.

Notes on Startups, or How to Build the Future

FINDING VALUE IN UNEXPECTED PLACES

When you start a new business in an industry that already exists, writes PayPal founder Peter Thiel in his book Zero to One, you are adding more of something to the world that’s already there. You are going from 1 to n, he writes. But when you start a business that is unlike any other business on the planet, you are truly creating something new. In Thiel’s terminology, you are going from 0 to 1.

And you want to be the “one.” Thiel is not a fan of competition — not just because of the required battle for customers but because competition makes companies focus on competitors more than customers. “If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most,” he writes.

Thiel uses the ongoing battle between Microsoft and Google as an example. Originally, he writes, there should have been no reason for a fight. Microsoft was operating systems and office applications, while Google was a search engine. Then the two companies developed an obsession about each other. “The result?” Thiel writes. “Windows vs. Chrome OS, Bing vs. Google Search, Explorer vs. Chrome, Office vs. Docs, and Surface vs. Nexus.” The battles were bloody, and the companies, Thiel writes, paid the price by watching Apple surpass them both in dominance. In January 2013,Apple’s market capitalization was $500 billion, while Google and Microsoft combined was $467 billion. “Just three years before, Microsoft and Google were each more valuable than Apple,” he writes. “War is a costly business.”

Building a Monopoly

For monopolies, the situation is quite different. You can charge the prices you need to make the profits you want. There are no competitors driving down those prices. It’s true, as Thiel explains, that monopolies would be bad if nothing changed: They could command any outrageous prices they wanted with no recourse for customers. But in the dynamic world of business, where unhappy customers represent an opportunity for a new competitor to enter the space, monopolies are motivated to create value for their customers, he writes.

There is no simple recipe for building a monopoly, but according to Thiel, there are several elements that entrepreneurs should look for. These include

Proprietary technology. As a rule, proprietary technology should be 10 times better than the nearest technology.

Network effects. This means other users are using the technology. Facebook works because everybody is on Facebook. But it’s important that early users still find the product valuable even on a small scale (e.g., Facebook was just for Harvard students at first), because it will take some time to scale any product.

Economies of scale. Not all businesses benefit from economies of scale. Going from one yoga studio to 10 doesn’t really yield economies of scale: you just need 10 times more instructors. The best startups have economies of scale built into the business model — Twitter, for example, can build up to 250 million users without making any significant changes to its operations.

Branding. You’ll want to create your own unique brand. But be careful to start with substance before brand.

To make these elements work in creating a monopoly, Thiel writes, you need to start small. Look for those groups of people who have a need that is not fulfilled by any one company. Avoid the big markets: Yes, there are lots of customers, but also lots of entrenched competitors. Once you have your niche market created, he writes, it’s time to scale up… carefully. eBay didn’t jump from Beanie Babies to industrial surplus. It continued at first to cater to small-time hobbyists until, Thiel writes, “it became the most reliable marketplace for people trading online no matter what the item.”

Beyond how-to steps, Thiel does not ignore the importance of mindset and thought processes. In one brilliant chapter, Thiel talks about those who have a definite view of the future (they know what is going to happen) and those with an indefinite view: the future is inscrutable, so why bother to prepare for it. To Thiel, indefinites rule the world. Entrepreneurs have a different worldview, however. They intend to make the future they seek.

Filled with insights ranging from financial advice to philosophical discussions, Zero to One is one of the most thoughtful books on entrepreneurship on today’s shelves.

The Art of Turning Uncertainty into Possibility

DON’T STOP AT THE EDGE OF YOUR KNOWLEDGE

We are not rewarded for not knowing, write veteran consultants Steven D’Souza and Diana Renner in their fascinating book Not Knowing. We are not expected to  not know. People look for certainty in their leaders. But beyond the expectations of others, there is our own comfort, the authors explain: not knowing is uncomfortable, and it’s better to know. And when you don’t know, the answer, for the sake of ourselves or for the sake of those who believe in us, is to fake it. We pretend to know.

Another danger of the tyranny of certainty is, according to the authors, to have unwavering faith in the experts. For 1,400 years, the ancient Greek physician Galen of Pergamon was the ultimate authority in medicine; it wasn’t until the mid-16th century that Flemish physician Andreas Vesalius finally dared to question Galen, whose mistakes and discrepancies should have been apparent to all by that time (the authors note that a medical school professor holding up a human heart after a dissection would comment on the three ventricles as described by Galen, although there were clearly four in the heart he was holding).

Darkness Illuminates

In truth, the authors explain in the second part of Not Knowing, “darkness illuminates.” D’Souza and Renner tell the story of the tragic Burke and Wills expedition in Australia. Robert Burke and William Wills were the first men to cross the continent but died of starvation on their way back home. They died of starvation despite the fact that the Aborigines in the area had thrived for thousands of years and did everything they could to help the white men. But Burke and Wills didn’t want their help; they didn’t, in their opinion, need the people whom they considered savages to tell them what to do to survive.

Burke and Wills died staying at what the authors call “the edge” of their knowledge, refusing to go no further. It is the willingness to not stop at the edge that allows artists to create, scientists to discover and entrepreneurs to launch their enterprises. How does one find the value in the unknown, especially when in so many domains — areas such as business, politics or even social situations — not knowing is viewed as a weakness or a barrier?

The answer lies in what the authors call “negative capability.” This is the ability to “negate” rather than add: the ability to clear the mind rather than fill it. “This idea of negative capability,” the authors write, “is powerful because it captures the need for making space in the mind to allow new thought to take root. It clears the mind of existing knowledge, clichés or existing assumptions.” The concept also emphasizes that clearing the mind is as much a “capability” as filling it. Building on academic research, the authors note that silence, patience, doubt and humility are all examples of negative capabilities.

Empty Your Cup

In the final section of their book, the authors group negative capabilities under four headings (each earning a separate chapter):“empty your cup,” “close your eyes to see,” “leap in the dark” and “delight in the unknown.”

“Empty your cup” is a metaphor for seeking to make room in a mind that is filled with knowledge. Experts are rarely revolutionaries because their minds are already filled with what they think they need to know. Thus, it was a non-banker who revolutionized the industry with microbanks. Grameen Bank founder Mohammad Yunus didn’t know that it was wrong to do what he was doing, including lending to the poor instead of the rich and focusing on women instead of men. If his cup had been full, he would have known and abided by the rules, and never launched the microbank revolution that made him famous.

“Close your eyes to see,” is the art of observing, listening and questioning. Improvising, experimenting and embracing mistakes are some of the activities associated with “leap in the dark.” Finally, the authors encourage readers to “delight in the unknown” by, among other ideas, unleashing their curiosity and creativity and not being afraid of foolishness and play.

A learned mix of academic studies and scores of compelling stories from a wide variety of domains, this brilliant, inspiring book will have readers leaving their desks (figuratively, one hopes), finding their way to the edges of their own world, closing their eyes and opening their minds, and waiting for the ideas and insights that will come from “not knowing.”

Building a “Better” Company

Back in August, we looked at a recent business trend as evidenced by a surge in books about Purpose. Today I’d like to dig into a related trend just beginning to show up in books – The B Corporation.

A B-Corp is an organization certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. B Lab has been at the forefront of this movement and certifies each organization, a group which has topped 1,000 companies from 80 industries and 35 countries.

There is a B Assessment that a company can take to see if they qualify for B Corp status, available at BImpactAssessment, and the website BetterWorldBooks which brings together books in the field of sustainability, B corps, and similar topics.

The first book to come across my desk specifically about B Corps is The B Corp Handbook, written by Ryan Honeyman, himself a B Corp owner. Honeyman worked closely with over 100 B Corp CEOs and senior executives to share their tips, advice, and best practice ideas for how to build a better business, and how to meet the rigorous standards for–and enjoy the benefits of–B Corp certification.

This book makes the business case for improving your social and environmental performance, and offers a step-by-step “quick start guide” on how your company can join an innovative and rapidly expanding community of businesses that want to make money and make a difference.

The B Corp Declaration of Interdependence says it all:
We envision a new sector of the economy which harnesses the power of private enterprise to create public benefit.

This sector is comprised of a new type of corporation – the B Corporation, which is purpose-driven, and creates benefit for all stakeholders, not just shareholders.

As members of this emerging sector and as entrepreneurs and investors in B Corporations, we hold these truths as self-evident:

That we must be the change we seek in the world.
That all business ought to be conducted as if people and place mattered.
That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all.
To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and the future generations.

This group holds to quite high aspirations and the movement seems to be growing. You can see what we’ve covered in this area through recent summaries of The Purpose Driven Economy in September, and The Responsible Entrepreneur coming out next week.