Startups: Between the Curse of Becoming a Taker and the Prospect of Being a Maker

Next months, these posts focus on the challenges of Earthlings of to bring humane cities closer. These posts represent the main findings of my e-book Humane cities. Always humane. Smart if helpful, updates and supplements included. The English version of this book can be downloaded for free here and the Dutch version here.

For centuries, entrepreneurship was linked to art and craft and rewarded by personal fulfilment, satisfied customers, and a good life. The term entrepreneur is still associated with giving direction, shape and content to new activities based on personal motivation and skills and thereby creating socially approved value. A description that applies to the self-employed, business entrepreneurs, franchisees or intrapreneurs and includes both commercial, institutional, and artistic activities. However, there are two problems. Overcoming them opens the way to become a better business.

The plunder of the earth

Nobel laureate Joseph Stiglitz has warned that the creative power of entrepreneurship can easily become destructive. A ‘maker’ becomes a ‘taker’ once creating value becomes making money in the first place. Indeed, for centuries, companies have robbed resources around the world, destroyed nature, traded millions of slaves and exploited domestic workers, creating the divide between rich and poor countries.

The creative power of entrepreneurship can also be aimed at sustainable prosperity, for their employees, the country, and the world. In that case, the “purpose” of a company precedes the pursuit of profit. Unfortunately, still a minority of all companies are moving in this direction while others pretending.

The decline of engagement and passion within the workforce

There is more. In developed countries, the blatant exploitation of labour has disappeared. Instead, the majority of employment relegates into low strain jobs. Research by Gallup and Deloite has shown over consecutive years that over 64% of all employees worldwide are not engaged or passionate. Find John Hagel explain this in a short video. The reason is clear. 20th century companies have organized their production according to principles of scalable efficiency and have top-down planning and control.  Room for initiative is therefore neither expected nor desired. Moreover, detailed protocols and regulations limit employment for people at a distance from the labour market.

In a rapidly changing world, companies must be adaptive and innovative. They therefore need flexible, interdisciplinary teams with a high degree of self-government and less pay differentials. According to recent research in 17 countries, this type of organizations (8%) outperforms in all respects.

Summarizing, to become a better business requires a double challenge: 

  • Replace the dominance of the pursuit of money with a social and environmental purpose. 
  • Mobilizing the entrepreneurial and other capacities of their whole work force by forms of self-organization and shared leadership. 

Why focussing on startups?

As only a limited number of companies meet these conditions, employees consider starting their own business. In the US alone, approximately two million workers give up well-paying jobs every year and become self-employed. 127,000 starters were registered in the Netherlands in 2018.  Of them, only a minority will become a startup, which means that they will successfully commercialize a promising technological innovation and grow rapidly on an international level.

Start-ups are potential engines of growth and innovation. In the US, their steady growth is compensating for job losses in the rest of the economy. Dutch startups created 20.000 of jobs in 2018 and 2019. A recent reportoffers excellent documentation of the identity, growth and potential of the 4,311 Dutch startups in 2019, most of which have fewer than 10 employees. 34% of Dutch startups can found in the Amsterdam metropolitan area.

The hope is that start-ups will rise to both challenges by nurturing their social and environmental purpose end fueling the commitment and passion of each employee, and thereby become a better business.

Yet, like any other businesses, startups risk becoming takers rather than makers, trading their social and environmental purpose for the pursuit of money and losing the engagement and passion of their employees. Fortunately, they can prevent this.

Eleven ways to stay a better business

  1. Embrace self-organization and shared leadership.
  2. Involve all employees in the continuous strengthening of the social and environmental purpose of the company.
  3. Enable all employees to become shareholders or even better co-owners.
  4. Cherish diversity within the employees.
  5. Secure shares in a foundation while enabling shareholders to support the purpose of the company. 
  6. Cap the profit to a level that guarantees the continuity of the company.
  7. Ban greed, cancel bonuses, or at most pay a limited and equal allowance to all employees.
  8. Place surplus profits in a foundation that spends money in accordance with the purpose of the company.
  9. Being a fair taxpayer who refrains from tax avoidance practices.
  10. Create a supervisory board to monitor the purpose of the company.
  11. Focus the founder/director/CEO role on monitoring the purpose of the company and the commitment of all employees and on fueling the discussion on how to deal with changing external conditions.

Rapid societal changes require a reinventing the concept of entrepreneurship. Because of their flexibility and commitment, startups are apt to embrace the dual ambition of pursuing a social and environmental purpose and of mobilizing all employee’s engagement and passion. 

Beyond smart cities: Digital innovation for the Good of citizens[1]

Next months, these posts focus on the challenges of Earthlings of to bring humane cities closer. These posts represent the main findings of my e-book Humane cities. Always humane. Smart if helpful, updates and supplements included. The English version of this book can be downloaded for free here and the Dutch version here.

Citizens involved in a participative policy formulation process

About ten years ago, technology companies started to provide cities with technological tools, luring them with the predicate ‘smart(er)’, now a registered trademark of IBM.  At that time Cisco’s vice-president of strategy Inder Sidhu described the company’s ‘smart city play’ as its biggest opportunity, a 39,5 billion dollar-market. During the years, that followed, the prospects rocketed: The consultancy firm Frost and Sullivan estimated the global smart city technology market to be worth $1.56 trillion by 2020. 

The persistent policy of technology companies to suggest a tight link between technology and the wellbeing of the citizens, angers me. Every euro these companies are chasing at, is citizens’ tax money. What has been accomplished until now is disappointing, as I documented in the IET Journal.  According to The Economist it is not surprising that a ‘techlash’ is underway: Many have had it with the monopolistic dominance of behemoths like Google, Amazon, Facebook and the like, because of their treatment of sensitive data, the lack of transparency and accountability of algorithm-based decision making and the huge profits they make from it. 

Regaining public control

However, let’s not throw out the baby with the bathwater and see how digital innovation can be harnessed for the Good of all citizens. Regaining public control demands four institutional actions at city level.

1. Practicing governance

Before even thinking about digitalization, a city must convert into best practices of governance. Governance goes beyond elections and enforcing the law. An essential characteristic is that all citizens can trust that government represents their will and protects their interests. Therefore, it is necessary to go beyond formal democratic procedures and contact stakeholders directly, enable forms of participatory budgeting and deploy deliberative polling. 

Aligning views of political parties and needs and wants of citizens takes time and a lot of effort. The outcome might be a common vision on the solution of a city’s problems and the realisation of its ambitions, and a consecutive political agenda including the use of tools, digital ones included. 

2. Strengthening executive governmental power

Lack of cooperation within the departmental urban organizations prevents not only an adequate diagnosis of urban problems but also the establishment of a comprehensive package of policy instruments, including legislation, infrastructure, communication, finance and technology. Instead, decisions are made from within individual silos, resulting in fragmented and ineffective policies. Required is a problem-oriented organization instead of a departmental one and a mayor that oversees the internal coherence of the policy.

3. Level playing field with technology companies

Cities must increase their knowledge in the field of digitization, artificial intelligence in particular. Besides,  but they should only work with companies that comply with ethical codes as formulated in the comprehensivemanual, Ethically Aligned Design: A Vision for Prioritizing Human Well-being with Autonomous and Intelligent Systems, drafted by the influential Institute of Electric and Electronic Engineers (IEEE)

Expertise at city level must come from a Chief Technology Officer who aligns technological knowledge with insight in urban problems and will discuss with company representatives on equal foot. Digitalisation must be part of all policy areas, therefore delegating responsibility to one alderman is a bad idea. Moreover, an alderman is not an adequate discussion partner for tech companies.

4. Approving and supporting local initiatives

Decentralization of decision-making and delegating responsibility for the execution of parts of the policy to citizen’s groups or other stakeholders helps to become a thriving city. Groups of citizens, start-ups or other local companies can invoke the right of challenge and might compete with established companies or organizations.

Steps towards seamless integration of digitalization in citizen-orientated policy

  1. Define together with citizens a vision on the development of the city, based on a few central goals such as sustainable prosperity, inclusive growth, humanity or – simply – happiness.
  2. Make an inventory of what citizens and other stakeholders feel as the most urgent issues (problems and ambitions).
  3. Find out how these issues are related and rephrase them if desirable.
  4. Deepen insight in these issues, based on available data and data to be collected by experts or citizens themselves.
  5. Assess ways to address these issues, their pros and cons and how they align with the already formulated vision.
  6. Make sure that digital technology has been explored as part of the collected solutions.
  7. Investigate which legal, organizational, personnel and financial barriers may arise in the application of potential solutions and how to address them.
  8. Investigate undesired effects of digital techniques, in particular long-term dependence (‘lock-in’) on commercial parties.
  9. Formulate clear actions within the defined directions for dealing with the issues to be addressed. Involve as many expert fellow citizens as possible in this.
  10. Make a timetable, calculate costs, and indicate when realization of the stated goals should be observable.
  11. Involve citizens, non-governmental and other organizations in the implementation of the actions and make agreements about this.
  12. At all stages of the process, seek support from those who are directly involved and the elected democratic bodies.
  13. Act with full openness to all citizens.

I can’t agree more than with the words of Léan Doody (smart city expert Arup Group): I don’t necessarily think ‘smart’ is something to strive for in itself. Unlike sustainability or resilience, ‘smart’ is not a normative concept…. The technology must be a tool to deliver a sustainable city. As a result, you can only talk about technological solutions if you understand which problems must be solved, whether these problems are rooted in the perceptions of stakeholders and how they relate to other policy instruments.


[1] This article was posted before at the Amsterdam Smart City website