Does Entrepreneurship Have Appeal? Go The Principled Route – Forbes
Lots of opportunity awaits entrepreneurs, especially those who focus on principles.
In this post-pandemic world, jobs and workplace practices seem to be in turmoil. Employee engagement is slipping, and “quiet quitting” has become a worrisome reality in many companies.
A lot of people may be regarding entrepreneurship as more attractive than ever.
But the dream of “being your own boss” comes with risk as well as potential reward.
Investor and entrepreneur Leah Busque offers sobering advice: Life is like the monkey bars. You have to let go to move forward. Once you make the decision to leap into entrepreneurship, be sure to loosen your grasp on old concepts so you can swing your way to new ones.”
An approach that’s gaining attention is one that billionaire businessman Charles Koch has termed Principled Entrepreneurship. He defines it as maximizing the long-term profitability of the business by creating superior value for customers while consuming fewer resources and always acting lawfully and with integrity.
Andreas Widmer, a business professor at the Catholic University of American, has written a compelling—and very timely—book on the subject. It’s appropriately titled The Art of Principled Entrepreneurship: Creating Enduring Value. It offers wise insights for anyone—whether budding entrepreneur or leader in an established business—who wants to flourish in our increasingly competitive world of commerce.
Rodger Dean Duncan: While the virtue of principled entrepreneurship may be self-evident, why do so many entrepreneurs seem to operate in contrary ways?
Andreas Widmer: The main issue is a badly formed way-of-thinking about what work is all about. Work is not seen as a way to grow in personal excellence and use our talents to create value for others.
Nowadays, two negative paradigms of work are taught in business school. One is the Friedman doctrine where the only responsibility of a business is to create shareholder value. The other is Corporate Social Responsibility, a view that asks businesses to go beyond their scope and publicly “give back.” The trouble with these approaches is that they focus only on the outcome. Neither deals with the meaning and process of work itself. Good work allows us to grow as we collaborate with good people to contribute something meaningful to others. It should not simply be a means to an end. The disordered purpose of work has far-reaching consequences.
Duncan: What role does entrepreneurship play in the prosperity and overall wellbeing of a society?
Widmer: Entrepreneurship most often exists in small and medium sized companies, the engine of our economic growth. They make up 99.7% of all companies and represent the foundation of our prosperity and the essence of the American Dream.
About 50% of the working population in the U.S. (61 million individuals) work in a small business. These enterprises produce 16 times more patents per year than large firms.
Entrepreneurs create immense benefits and rewards for themselves and especially for society. They generate growth not only because they create innovative goods and services, but also new jobs. Although their wealth is often regarded with envy and suspicion, research by Nobel prize winning economist William D. Nordhaus (2004) revealed that on average, innovator-entrepreneurs capture for themselves only 2% of the value they create through company ownership and salary. The other 98% is garnered by the employees and the wider community through wages, cost savings, and living standard.
Entrepreneurs are able to attain social mobility through what they do and also create opportunities for many others. Without social mobility, we risk sliding back into a static social class system of nobles and serfs, to use the words of economist F. A. Hayek.
Duncan: You say principled entrepreneurs are not motivated primarily by the what or how as much as by the why of what they do. Please elaborate.
Widmer: Entrepreneurship is more an attitude than a list of duties. You might call it an “ownership attitude,” or an “always think like an entrepreneur” mindset. It’s a way of seeing and approaching the world—how you take responsibility for what is in front of you. It encourages individuals to become protagonists rather than disinterested bystanders. As such, it’s a deeply “other-directed” approach to life and business.
The quintessential question of the entrepreneur is “How may I help you?” I create and add value for others through my excellence. Also, the principledeEntrepreneur has a vision that goes beyond job titles. Once an entrepreneur, always an entrepreneur, inside and out. Their passion carries over to all their interactions in the community.
Principled entrepreneurs are creative problem solvers at all the levels and growth stages of different companies, NGOs, universities, churches, and society in general. Their solutions are creative, and their pursuit of human excellence is as important as the outcomes. Entrepreneurial behavior makes one happier because of the heavy use of creativity and initiative. We spend one-third of our life at work, most of our waking hours. Why not cherish excelling at work and using this precious time to become our best selves!
Duncan: How often does the notion that the economy should exist for people, instead of people existing for the economy, square with the realities of today’s business world?
Widmer: My friend Art Ciocca distinguished between “creators” and “harvesters.” Principled entrepreneurs are creators. In Art’s wine-making business, if he had harvested only the vineyard, he would have quickly depleted the land. Instead, he focused on long-term sustainability and excellence, both for the soil and for the people of his organization who became The Wine Group’s competitive advantage. That person-centered focus is how Art consistently created value.
A job where a person feels like a number or an easily replaceable cog is unfulfilling. Most (86%) of Americans say they’re not happy in their lives in general. And 65% of Americans are disengaged at work. During the past two years, more than a fifth of the U.S. workforce has quit their jobs. These trends suggest that as a community we no longer feel like the economy exists for us, but that we exist for it. Our economy is in dire need of a reawakening and principled entrepreneurship is a helpful path toward that goal.
Duncan: What questions should a principled entrepreneur ask to discover a genuinely customer-centered value proposition?
Widmer: Business work should always begin with the core question, “How may I help you (more)?” If we aim to create sustainable value and a fulfilling work life, we must determine what the world around us genuinely needs.
Principled entrepreneurs can ask themselves how to use their natural abilities to create value for their clients. Doing “what we do best” unleashes creative energy and leads to a positively energized work culture. After that, principled entrepreneurs must ask whether the goods or services they offer truly serve the good of the customer. This is a question of love, the Golden Rule question for business. As we say in Italian: Ti voglio bene! I want your good! What is the good you truly want for your customers?
Duncan: You quote Édouard Michelin of the famous tire company as saying, “Sometimes it is the ignorant person who has the advantage over someone who has learned, in that he does not live in the graveyard of ideas.” How can that observation inform an entrepreneur in running a business?
Widmer: Michelin points out that many businesses make the mistake of hiring solely for skill and knowledge. When principled entrepreneurs build their team, however, they also look for attitude and character.
A motivated employee will gain knowledge and develop skill, but it takes strength of character to try new things and risk failure. It takes a hopeful and future-driven attitude to not get stuck in the graveyard of the ideas that failed and look to the road ahead, using lessons from previous attempts to navigate more effectively. Michelin was essentially saying that the purpose of hiring is to find people who are not only focused on avoiding the potholes but who are able to get their team to the desired destination in fun and creative ways.
Duncan: Tell us about the steps an entrepreneur can take to establish a CSR (Create Support, Reward) culture.
Widmer: In essence, the steps are centered on two main premises—
1. Make the individual the center of your company. Help your employees acquire mastery in their talent areas. Direct them to serve customers with the “how may I help you” attitude and find out if you can create value for them.
2. Reset the performance and incentive system.
Most current corporate incentive systems are not conducive to long-term value creation. Instead, pay high and rising wages for employees who need security, and reward long-term decision making and succession planning.
Duncan: You embrace the adage that “culture eats strategy for breakfast.” What makes for an organizational culture that’s consistent with principled entrepreneurship?
Widmer: Culture is made up of the stuff a team does that goes beyond the rules—their rituals, what they do for fun and how they communicate. Yet, leaders often spend more energy crafting strategies than creating stronger corporate cultures.
Great corporate cultures empower people to unlock their talent and make good decisions. The cost of a weak corporate culture is needing to monitor and discipline those who, in a healthier environment, would show initiative and teamwork.
Duncan: How can leaders in already-established companies benefit by thinking like an entrepreneur?
Widmer: We impoverish the idea of entrepreneurship if we think of entrepreneurs only as people who start companies. The common thread among principled entrepreneurs is they are concerned with adding value for others.
Principled entrepreneurs are primarily creators. They build organizations that focus on long-term value where employees are part of the competitive advantage. They create successful products that stand for superior value. Harvesters, on the other hand, are short-term thinkers, focused on the balance sheet.
Customers and employees are the means to an end—financially looking good in the present. The trouble with this mindset is that it depletes the source and prevents long-term success.
Principled entrepreneurs think about the future and see the balance sheet as the way to create customer value. As long as this is the focus, the source of success will never be depleted.
Putting the customer’s needs ahead of our own is what makes for a sustainable business. One of the cornerstones of principled entrepreneurship is creative destruction. We must be willing to destroy or cannibalize our current products to innovate superior ones. Creative destruction ensures sustainability and long-term success for a company. This is how leaders think like entrepreneurs.