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. 

How much knowledge do we need more to save the world?

 images-2Knowledge has become ubiquitous. The same applies to stupidity, greed, fundamentalism and the quest for power. Definitely, it applies not to peace, happiness or wisdom. In spite of undeniable progress with respect to income, medical care, education and technology last decades the world did not become a better place. The ubiquity of knowledge has not been very helpful. On the contrary, knowledge has been a steady accomplice in the decline of the earth.

The production, distribution and use of knowledge

The number of academicians has never been higher than today. Moreover, knowledge is produced in many places outside universities: company research labs, high-tech start-ups, research institutions, think tanks and newspapers. Not to forget tacit knowledge that is emerging in practice. The growth of knowledge has gone far beyond anybody’s capacity to absorb. The time when academic knowledge could be stored in textbooks is long gone. The best scientists prefer to explore their own niches, sometimes between disciplines, using a variety of methods. Unfortunately they stick together in rather homogeneous clans.

imagesPrinted or electronic sources in which knowledge is stored are ubiquitous too. The sheer number of scientific publications is doubling every 9 years since 1950[1]. Unfortunately, many publications are incomparable due to differences in assumptions, variables, definitions, methods and size of research populations. Besides, potential beneficiaries from scientific research rarely read scientific publications. The chance that they will find information that is useful to them has decreased significantly during the past decades[2]. The fact that some publications explicate their practical relevance in a few sentences at the end is by no means a solution for this problem.

A new perspective

Fortunately, some politicians, entrepreneurs and public servants do be open for academic support for the benefit of themselves, their company or institution and for society. At the same time, a growing group of scientists regrets the arduous contacts between science and society. The solution is mutual engagement: Groups of scientists team-up with representatives from for example companies, NGO’s and not-for-profit institutions and try to match research interest and practical needs in collaborative projects.

Higher education

unknown-3Many teachers assume that students have to be saturated with disciplinary knowledge first before its application can be practiced. This outmoded idea has proven not to work because of the abundance of scientific knowledge, the blurring of disciplinary borders and the situated character of ‘real problems’. In stead, students acquire meaningful knowledge only if they learn to deal with unstructured problems from the first day they enter university. The development of a more structured knowledge base can wait and might be reserved for students who aspire a career in academia. Disciplinary bachelor programs might be replaced by the study of societal problems like environment, migration and integration, healthcare, energy and the like.

Knowledge in general is abundant but is meaningless for saving the world. In the meantime, knowledge that is developed and learned within the context of understanding and solving real problems is badly needed.

[1] A rather conservative estimation of the growth of the number of scientific publications: http://goo.gl/UkQbtj

[2]Pearce, J. L., & Huang, L. (2012): The decreasing value of our research to management education. Academy of Management Learning & Education, 11(2), 247-262.