Entrepreneurship - Problem Statement

A problem is a bad thing, right? Not necessarily. If you're trying to get hired to do a project for someone or start up your own business to provide various products and services to people, you have a clear problem you are trying to address.

The biggest issue I see with problem statements is that they generally come across as solutions or tritely state that the lack of this specific solution is a problem. In theory, it is great to be positive and go right to what you recommend in order to make your communications as clear as possible, but if there's no established problem, then no one will be listening, no matter how polished the sales pitch.

You have to bring attention to the imbalance, tension, or pain that exists in order to be able to show that your recommended solution will counteract it.

The following is a list of questions to ask to help define the problem. Without knowing the answers to these questions, the attempted start-up business is doomed to fail.

• Context - when does the problem occur?
• Customers - who has the problem most often?
• Problem - what is the root cause of the problem?
• Emotional impact - how does the customer feel?
• Quantifiable impact - what is the measurable impact (units)?
• Alternatives - what do customers do now to fix the problem?
• Alternative shortcomings - what are the disadvantages of the alternatives?

Look at each question and answer them honestly. Hopefully, an entrepreneur has a passion for their business, but sometimes that passion can create a blind spot, where it's difficult to be honest with how good the proposed new product/service is. Include some other people in the process who are willing to be honest in answering the above questions.

If you don't know when the problem occurs or who it occurs to, stop right there. Your target customer needs to be clear since they are the ones you hope will pay you to solve their problems. Knowing that there is a problem is one thing, but knowing what is causing it is something else. A more elegant solution will be to address the root of an issue rather than just the symptoms.

People are emotional. They're also logical. Sometimes one side of the psyche wins out. Sometimes the other one does. How much better is it if you can make both emotional and logical pleas?

If you see a problem, chances are someone else does, too. Sometimes problems are small enough that the big players in the market don't find it worth their time to address the niche. As you look at the current alternatives to solve people's problems, consider what both works well and poorly about those current solutions. You need to be able to find something you can do that they can't (or won't).

There are various ways of implementing a competitive solution to a problem. Sometimes the first person to think of an idea becomes known, and the first-mover advantage is enough to carry them in front of others who come later. But more importantly, it is important to implement a solution that is difficult for others to copy. Creating the solution is a topic for another day, but it does start with understanding other current solutions clearly in order to figure out what they are doing wrong so that you can suggest a better way.

Text and Multimedia Links on Conscious Capitalism

Mackey/Friedman/Rodgers debate: Rethinking the Social Responsibility of Business - https://reason.com/2005/10/01/rethinking-the-social-responsi-2/

After Words with John Mackey - https://www.c-span.org/video/?309877-1/after-words-john-mackey

What is a Conscious Business? - https://www.huffingtonpost.com/fixcapitalism/what-is-a-conscious-busin_b_8351802.html

Reimagining Capitalism with Higher Consciousness - https://www.youtube.com/watch?v=O8faXr6WhCM

The Business Case for Conscious Companies - https://consciouscompanymedia.com/sustainable-business/infographic-business-case-conscious-companies/

Concious Capitalism - https://www.youtube.com/playlist?list=PL86E52E7A0EC8FA8B

How to Create a Compelling Purpose for your Business - https://consciouscompanymedia.com/sustainable-business/how-to-create-a-compelling-purpose-for-your-business/

Roy Spence: The Power of Purpose - https://www.dailymotion.com/video/x10kj09

Fundamentals of Cultural Transformation - https://www.valuescentre.com/sites/default/files/uploads/2010-07-20/Fundamentals.pdf

How Southwest Airlines Built its Culture - https://www.youtube.com/watch?v=8_CeFiUkV7s

A Culture Discussion with Edgar Schein - https://www.youtube.com/watch?v=kq9XL0N_fR0

Introduction to Systems Thinking - https://thesystemsthinker.com/wp-content/uploads/2016/03/Introduction-to-Systems-Thinking-IMS013Epk.pdf

Managing for Stakeholders - http://www.stakeholderslab.nl/wp-content/uploads/Freeman-Managing-for-Stakeholders-2.pdf

Strategies for Managing Stakeholder Relationships with R. Edward Freeman - https://www.youtube.com/watch?v=MlK6582g700

Dan Pink: The Puzzle of Motivation - https://www.youtube.com/watch?v=rrkrvAUbU9Y

Business and Society in the Coming Decades - https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/business-and-society-in-the-coming-decades

The Social Responsibility of Business - https://www.youtube.com/watch?v=Z5KZhm19EO0

Leadership from the Inside Out - https://www.bkconnection.com/static/Leadership_From_the_Inside_Out_EXCERPT.pdf

Bob Chapman on Truly Human Leadership - https://www.youtube.com/watch?v=njn-lIEv1LU

Breathe In, Breathe Out - https://www.linkedin.com/pulse/breathe-out-raj-sisodia/

Paul Hawken: You are Brilliant, and the Earth is Hiring - https://gratefulness.org/resource/brilliant-earth-hiring/

The Healing Organization - https://www.youtube.com/watch?v=LWs6HFOkNEY

5 Reasons to be Optimistic - https://www.youtube.com/watch?v=JyV4PLSBxaU

Conscious Leadership

"Only three things happen naturally in organizations: friction, confusion, and underperformance. Everything else requires leadership." -Peter Drucker

Conscious leaders will sacrifice and serve those under them. They will create a vision to help others achieve what they did not even know was possible.

A leader needs to be both strong and caring. Strength without caring is brutal, while caring without strength is ineffective.

Leadership needs to be authentic, meaningfully communicate with and influence others, and create value. Artifice is too easily seen through. Not working with others is about the furthest from leadership possible. Doing the wrong thing is worse than not doing anything at all, as such a misdirected leader will not only fail to build what they should but will have their people digging a hole that must be filled in by others before restarting the building process after they are gone.

The most neglected stakeholders

Stakeholders are anyone or anything that either has an effect on our business or project, or who our project or business has an effect on. It is easy to forget those we have an effect on if their effect on us is less clear.

If you don't have a healthy planet and functioning society, nothing else matters.

The CEO of Wal-Mart discussed how companies can contribute to society. The first principle is to prioritize issues relevant to the mission of the company. A grocer, for example, would care about the sustainability of the world's food supply. Second is to draw on the company's capabilities. If a company has a resource they can use to help other people, they should do so. For example, a grocery store may donate food that is approaching its expiration date to a local food bank. It costs them nothing, as the food would have gone bad before it sold anyway. Third, aim for the triple bottom line. This includes considering how companies can positively affect profit, people, and the planet. Four is reshaping the system for lasting improvement. By collaborating to improve the system for oneself, the sytem is improved for everyone that is part of it. Number five is engaging partners in transforming systems. The challenges we face in our world are not ones that can be addressed solo.

It is interesting that someone from Wal-Mart would have this discussion, since they are known for brutally taking over their suppliers' supply chains in order to squeeze every drop they can from them. They do this in the name of efficiency which can be good, but it really turns out to be high volume and low per-unit net income at the expense of employee expertise and quality. A company who charges slightly more can afford to provide better service and a higher quality product.

It is often seen that businesses will attempt to maximize shareholder returns at all costs. The means don't matter, only the end of the almighty stock price. The problem with such thinking is that anytime we care about any end more than any of the possible means to get there, there is an inherent systemic motivation to cheat. This holds in sports, in school, in relationships, in business, and everywhere in society. By focusing only on the predetermined outcome, people will do whatever is required to steal or otherwise manipulate the inputs to achieve what is considered the best output. The thing is, if they would just focus on using the best means - cooperating, being kind, treating employees well, cleaning up the environment, and otherwise sharing their means, the best ends will result, whether or not they were the end we initially desired.

"Not everything that is confronted can be changed, but nothing can be changed until it is confronted." - James Baldwin

Systems Thinking

Traditional analysis focuses on the individual components, while systems thinking considers how each aspect interacts with other aspects of the system. There are three elements of a system. The first is the individual parts. The second is the way they connect to each other. The final is the purpose. The individual elements can be switched out, and if the connections and purpose do not change with it, the result will be th same, whether success or failure. By reorganizing, a big difference can be made. Just providing more information can be one of the biggest differences.

A system is a group of interconnected and interacting parts with a common purpose. Without a common purpose or relationships, we would have simply a collection, rather than a system. A bowl of fruit, for example, is simply a collection. While they may have a common purpose, the pieces of fruit do not interact with each other in the same way the cook, waiter, customer, and others might interact in a restaurant, resulting in the bowl of fruit being provided for breakfast.

The system must have a purpose, and each component plays its own part in helping achieve that purpose and in supporting the other components. The pieces are organized in such a way that they act efficiently and provide feedback to each other. These feedback loops may be linear where each process or component provides information to be used by its successor task until the process has completed one simple pass-through. They may be circular or recurring loops, however, where each phase or task feeds into another and then repeats back to the original, interating with each run. This would be like the difference between ordering a bowl of fruit to go and eating it at home. No matter what is in the bowl, it's too late to change it. It may change whether you go to that restaurant or order that dish again, but that particular bowl can only be eaten as is or discarded. Eating in the restaurant, however, the server may ask how the food is tasting, and there is an opportunity to add more food to the order or send it back if the fruit is warm or mushy. The second scenario is a more advanced system than the first.

As the feedback loops cycles repeatedly, it can create what is called either a virtuos cycle or a vicious cycle. A virtuous cycle is one where positive results lead to continued growth and positive results. On the other hand, a vicious cycle means negative results will lead to stagnation and losing sales or whatever else we are measuring. A balancing cycle is a self-maintaining loop where as good things happen and growth occurs, the growth will result in a less than idea situation, which results in loss, which then results in a better situation and the growth returns again - kind of like a swinging pendulum. When it is not obvious what is happening, a diagram of the system and results of the processes can help visualize and make clear to everyone what is working well or not.

To me a systems approach means considering all the likely results, putting processes into place to maximize good results and minimize bad results. When there are good or bad results, there should be at that point additional processes to deal with those results as well. The last thing you want to do as a business owner is to make any type of change without having any idea what the likely outcome is going to be. Everything you do should be tested and recorded so that when things get better or worse later, we know what the cause was. Changing too many things at the same time can result in two positive and negative reactions cancelling each other out or not being able to tell which of two things we changed are what created the effect we wanted. We then don't know whether to continue doing what we're doing or if we need to make additional changes. Even if we know the change we made was the sole cause of a given reaction, if that is not recorded and saved for later, years down the road new people may not have learned that same lesson and will need to repeat the same process we thought we already learned from.

As you consider the various stakeholders associated with a company, it is important that all work together for their mutual benefit. If any one stakeholder is focused too much on their own growth at the cost of the others, it will create an imbalance that can potentially lead to the company going out of business. By thinking about what others need and trusting that others will look out for theirs, everyone benefits together. You want to hire employees who are passionate about your company and its products.

“Business is not a game. It is not a math problem. It is not a machine. It is not war. It is one of the most human things we do. It is a living, interconnected and interdependent system, like a rain forest or the human body.”

“Employees and customers are like the two wings of a bird. A business cannot fly with only one.”

Too many businesses with a sole focus on shareholder value or any other individual stakeholder will result in creating chaos, imbalance, and tension. That tension will eventually have to be resolved or corrected. Why not do it right the first time?

Culture

Peter Drucker said, "Culture eats strategy for lunch." Raj Sisodia warns that it doesn't wait until lunchtime.

Concious companies need to be trustworthy and transparent. The minute information is hidden, it brings out the worst of the gossip mill. Perception is reality. If someone thinks a bad thing is happening, it doesn't matter whether or not it is actually happening. Empowerment is one of the keys to all of this. Expect the best and train them in the values and purpose. Then give them freedom to enact what you have trained them to do, all the while keeping the transparency there. Everyone should realize that whether they do the right or wrong thing, it will be known.

When creating a transformation within a company, individuals must buy in and be willing to change their behaviors. Enough people changing their individual behaviors will create the expected shift. Some people will be lost, however. Not everyone will be willing to make the change. Pushing out the naysayers, whether actively or passively, will serve to improve positive behaviors in two ways. One is that the naysayers are gone and their bad behaviors with them. Two is that those who remain will recognize that the company's commitment is there - it is serious. I ran into this as a manager. We were having quality issues, so we did training and let people know of our expectations, but we had to take some temporary but drastic steps to ensure that everyone was buying in to the transformation. Not everyone could handle the pressure and some left, as they were offended that I didn't fully trust them to do their job. The thing is, I believe in empowerment but at the same time expect greatness. Empowerment doesn't mean simply allowing people to do whatever they want. It means making it clear you expect a high level of performance and then giving them tools and trusting them to make it happen. The transition isn't always comfortable.

When hiring, make it clear what your criteria are. Attitude is most important. Skills can be taught, but attitude is difficult to change. Interview in groups to see how the person interacts with a variety of existing employees. Include front line employees in the process, as well as high level management to ensure the best people are hired and that new hires know the company is serious about what they ask of them. Culture and behavior are different but related. You can make a behavioral change by requesting people act in a certain way. Over time, the change in behavior will either be rejected or accepted. Eventually if accepted, it will be integrated into the culture. Rejected behaviors are not sustainable and will result in the requested behavior being subverted or dropped.

The sandwich chain Even Stevens is known for a delicious menu, live music, and most of all their charitable giving. Their deal is that for every sandwich you buy, a sandwich is donated to charity. This is in the form of each sandwich including a credit of about 50 cents that preselected charities can use to purchase food from their suppliers. Their website talks about how they are a collective rather than just individuals and that they care immensely about the enjoyment of food as well as making a difference in society. The downside is that they lost sight of this mission, expanded into too many stores too quickly, and had to close several stores and suspend the charitable donations. Their sandwiches are still delicious and expensive, but a couple years later they are unable to resume the sandwich credits. They claim they are still tracking what they owe their charities and will make it up to them. They serve as a warning against taking your eyes off the prize. They forgot about what set them apart in favor of rapid growth.

It will be interesting with the current pandemic to see how companies emerge on the other side with their strategy and their culture intact or improved, vs. those who will not weather the storm well. Many companies have moved to telecommuting after avoiding it for years in spite of research that shows people are often happier and more productive working from home. After having such a drastic change forced on them, I will be among those watching to see what changes when a cure is found. It is one thing to see which companies will survive the pandemic itself; it is another thing to see which companies can transition out of it when it is over.

Don’t start a business to serve yourself and use others. Start a business to express yourself and serve others.

A Business' Purpose

Victor Frankl wrote that happiness cannot be pursued; it ensues: it is the outcome of living a life of meaning and purpose. That comes from three things: doing work that matters, loving without condition, and finding meaning in our suffering.

If we wanted to rewrite that for a business, we may have to start with changing the outcome of happiness. People can be happy, but a corporation is not a person and can't be happy. I believe it can create happiness in others. Not every company would necessarily have happiness as a desired outcome, although perhaps every organization we have would make someone happy or else it would not exist. That may be part of the key - it is not that we would pursue something other than happiness but rather we need to ask who is this company supposed to make happy?

A related question may be whether it is possible to make people happy as a win-win or if happiness is a zero-sum game. Is one person's happiness at the expense of someone else's? In many sporting events, if one team wins by 5 points, the other team loses by 5 points. Most races work a little bit differently, where you'll have the first, second, and third place finishers receive medals - one overall winner but top finishers are acknowledged as well. Someone is still going to end up in last place, but finisher medals go to everyone who completes the race, knowing that finishing a marathon is still a fantastic achievement in and of itself. The Fan Favorite, Miss Congeniality, or Most Improved awards are other ways of letting more people win a little, because we recognize that more winners is better.

Golf is a little different in that a handicap can be calculated, which shows how close to par a golfer scores on average. This allows golfers of different skill levels to be ranked based on how they perform relative to their own average instead of directly head to head. As a golfer gets better, their handicap changes, forcing them to have to continue to improve. You still have one overall winner, just a different mathematical formula to end up with the final ranking. This means that if you modify the algorithm, even though everyone performs the same, the top to bottom ranking changes.

At some point, someone has to make the decision which algorithm is better, affecting who wins and who loses. A systemic conflict is created, where the winners believe the algorithm is good and the losers believe the algorithm is not good. It is said that an election is more about convincing the loser that they lost than it is about convincing the winner that they won. The winner always believes the election was fair. The loser needs to be convinced the results are fair so that they and their followers will not have reason to revolt. The U.S. has had a couple of elections where the electoral college algorithm gave the win to someone other than the winner of the popular vote, but that algorithm has survived as it provides a balance that the straight popular vote does not. Perhaps we need to take it even further and design a new system whereby everyone can win together.

Some board or card games are cooperative instead of competitive. An example of this is the board game Pandemic (which seems particularly appropriate these days). Everyone who plays either wins together or loses together. That's nice for a game, but the company who sells a cooperative board game vs. a competitive board game is trying to make money at the end of the day. There's an opportunity cost to buying their game - you can't use that cash to buy something else if you used it to buy the game.

A few years ago, Google changed its well-known motto from Do No Evil to Do The Right Thing. Just not doing something bad is different than doing something good. One kind of implies the other, but why not be explicit about wanting to do good?

It is sometimes said that integrity is what you do when no one is looking. But what about what you do when people are looking? If your proverbial mom is looking, you'll want to do the right thing, so this statement is that if you have integrity, you'll still do what makes your mom proud even if there was no way she would find out (someone has never lived in a small town, apparently). The part of this that has always bothered me is negative peer pressure or imbalanced power relationships. If you have integrity, you'll still do the right thing when people are looking - in particular those who may want to tempt you to do the wrong thing. Are you willing to stand against your so-called friends and do what is right in the face of temptation or danger? Integrity is doing what is right, period. It doesn't matter if no one is looking or if you're trying not to look silly doing the right thing when everyone is looking. We see photos of white people (students and adults) being out of control racists when the Little Rock Nine showed up to go to school. So what about those who were privately pro-integration? How willing were they to stand up to their racist friends? There are stories but too few and too far between.

I recently learned of an upgrade to the Golden Rule. The original aphorism states that we should treat others as we would like to be treated. The Platinum Rule takes this to the next level, which is that we should treat others as they would like to be treated. Not everyone is the same, so we need to adjust our responses to treat people in the way that is best for them. We need to take time to get to know them and work side by side to the point that we can give them something personally meaningful. Even this doesn't fully take into account that not everyone knows what is best for them. Adjustments still must be made when what is best for someone is not what the person wants.

Back to Frankl, if an individual can become happy by doing work that matters, loving without condition, and finding meaning in our suffering, then what is the equivalent for a company? There may be other principles that could be added, but my proposal follows a parallel structure to the original.

A company maximizes happiness within their sphere of influence by doing work that matters, treating everyone with respect, and reducing suffering.

A company has to start by choosing their sphere of influence. We can't fix every injustice in the world or provide products and services that everyone will want, but we can focus on a place where we feel like we can make an impact and choose work that will result in more good than bad. The important principle is that once we have set our sphere of influence, we have to treat everyone within that sphere with respect. This goes back to the Platinum Rule. It doesn't matter if it is customers, employees, suppliers, competitors, animals, government regulators, or people we encounter but have no official relationship with - we should cooperate with them all. We should do no evil. It is difficult to eliminate all negative externalities, but no one said this process would be easy. For the third principle, we take it one more step and not only do we not hurt others but we specifically reach out to do the right thing or the best thing. We actively work to reduce suffering. We promote building at the same time that we tear down destructive elements.

Finding Your Purpose

Notes from my continued reading on Conscious Capitalism:

Besides the day you were born, the most important day in your life is when you figure out the purpose for which you were born.

Purpose is the difference we're trying to make in the world.

How do you find your purpose? Look where your talents and the needs of the world cross.

Even further, then, they show a four-way Venn diagram with your purpose being the intersection of what you do well, what you love, what the world needs, and what you can get paid for.

Questions to help discover your purpose:

• Why was the organization originally founded?
• What were the guiding principles that this organization was founded on?
• What spirit or intention must be preserved and captured in our purpose at all cost?
• When we are at our absolute best, what is going on?
• When we love what we are doing, what is going on?
• When we’re failing, just getting by, in a slump, or not that interested in our work, what is going on?
• What is the ultimate impact we hope to make?
• When we’re at our best, what difference do we make in the lives of the people we serve?
• What is our organization’s greatest strength; what do we have the potential to be the best at in the world?
• What are we most passionate about? What do we love the most about what we do?
• Where can we have the most meaningful impact? Which big problems or needs in the world are we capable of and passionate about solving?
• What would people reward us for? What products and services would our customers happily purchase from us?
• What do you love most about this company or this brand?
• What does this company or brand do for you that no one else does?
• If this company or brand ceased to exist, what would be lost? What would you miss the most?
• At the most basic level, what do we have to offer people?
• Functional benefit: what does our offering enable people to do?
• Emotional benefit: how does our offering make people feel?
• Ultimate value: what is the ultimate value of these functional and emotional benefits in their lives?
• What is your heart calling you to do?
• What is absolutely essential for the purpose to be truly meaningful?

Roy Spence paraphrases Aristotle, that we should do good rather than simply be good. We need to change the story, bring competitors together, and use our strengths to serve a higher purpose.

Conscious Capitalism

Why capitalism needs to evolve:

Capitalism has improved income, quality of life, literacy, and lifespan, but most people don't trust businesses. The invisible hand of Adam Smith has worked to increased income for many people through the industrial revolution and other changes and improvements, but the idea of shareholder maximization has had the opposite effect of decreasing efficiency and productivity.

John Mackey, CEO of Whole Foods pushes back against Milton Friedman's assertion that businesses should only be looking out for maximizing returns for their shareholders. Whole foods considers a range of stakeholders that should benefit from a company's existence - customers, employees, suppliers, investors, vendors, communities, and the environment.

Mackey discusses what a common answer would be to the question about the purpose of business. The first answer is always to make money. At the same time, a doctor who is very well paid will not say healthcare's purpose is to make money. It is to help people become healthy. Of course, a hospital or doctor's office is still a business and one that shuffles a lot of money through it, but there is still an overarching purpose beyond just the money itself.

He argues that legacy companies with a different mindset will have to evolve or else they will be replaced by start-ups to have a conscious capitalism approach.

What is conscious capitalism?

The metaphor is given of a caterpillar who simply consumes as much as possible, adding no value. Eventually nature takes its course and the metamorphosis to a butterfly results in a creature of light and beauty that gives back as much as it takes.

The four tenets are higher purpose (why), stakeholder integration (what), conscious culture (how), and conscious leadership (who).

Conscious capitalism goes beyond corporate social responsibility, which only mitigates some potential negative impacts without significantly building beyond that. Other concepts such as sustainability, triple bottom line, and shared value capitalism likewise do not go far enough in terms of who can benefit from the company and how.

Raj Sisodia presents conscious capitalism as a philosphy of doing business rather than a business strategy or business model. Such a philosophy will create value rather than extract value, leading to a Win-Win, rather than a Zero-Sum result. The key is patience. Such a metamorphosis cannot happen overnight, and there will be failures along the way. Companies trying to practice conscious capitalism may fail, but that does not mean it wasn't a good idea. It just means they need to keep trying.

Just like a doctor or hospital is still a business but working towards a greater purpose of improving health, really any non-profit is at the end of the day a business. The local humane society can't fulfill its mission of taking care of pets if they don't have the money from adoption fees or donations. The thrift store can't keep the lights on if no one donates their used items. Individual owners and employees can still be paid decently personally while the organization gives back to society.

The CC Credo:

We believe that:

Business is good, because it creates value.

It is ethical, because it is based on voluntary exchange.

It is noble, because it can elevate our existence.

It is heroic, because it lifts people out of poverty and creates prosperity.