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Purple Line Associates

“Learning. Change. By Design.”

May 28, 2007 The trust dilemma

A recent story in the business section of the Chicago Tribune highlighted the growth of a local natural pet food business — Evanger’s Dog and Cat Food Company — in the wake of pet-food recalls and the melamine issue.

The good news is that companies like Evanger’s are emerging and growing, creating a more sustainable business model and alternative for consumers (Evanger’s offerings include an organic line). The challenge is in the growth part. Part of the Evanger model is buying locally, a strategy that is designed to ensure quality. But when you dig deeper under the “quality” attribute, what you get is trust. Evanger VP Joel Sher explained in the Tribune piece:

“You’ve got to know your suppliers and the kind of people they are. With the local ones, you can know as much as you want to know. You can visit them.”

That’s a very different kind of trust than, say, trusting that an FDA reference number on a supplier’s product specifications means that it really is what is says it is (one of the root issues of the melamine problem). Getting to know “the kind of people” your suppliers are is a practice that depends on all of your cognitive capabilities — your expertise, your beliefs and your emotions. And – it’s time consuming.

Wherein lies the trust dilemma. How do you scale your business rapidly when it depends on a time-consuming, very human process of developing trust?

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April 27, 2007 Deep listening, empathy and sustainability

I am attending the Business as an Agent of World Benefit Online Conference 2007, hosted by the Center for Business as an Agent of World Benefit at Case Western Reserve University. One of this afternoon’s keynote presentations by given by Chris Laszlo, a partner in the firm Sustainable Value Partners. Once again, I heard the theme of how successful, socially responsible companies are relying on a deep understanding of their customers and customer environments (“deep listening” in Chris’s words) to establish innovative new businesses. It’s the same theme driven home to me at Green Festival Chicago and from research shared in this blog.

Chris walked us through the state of change occurring (at a global level) as companies begin to explore the meaning of “sustainable” business models. The sweet spot for sustainability is where an organization simultaneously creates high value for both shareholders and stakeholders. Anything outside of that sweet spot puts the organization at risk (i.e., a non-sustainable position). For example: A chemical goods company was providing shareholder value and was entirely compliant with current environmental regulations. But it did not foresee an upcoming backlash (by a corporate customer) against a byproduct produced by one of its products. Had the company been more vigilant in scanning the stakeholder environment, it may have reduced the impact of this situation by addressing it earlier.

Chris also hit on the theme of base-of-the-pyramid (BoP) markets as being an engine of innovation. Check out the company Wizzit, which is using cell phones to establish a new model for banking in South Africa — reaching those who had no access to banking services before.
From Chris’s experience working in this new sustainability space, there are several lessons for managers. Chris’s final slide from the presentation sums up these lessons [emphasis is mine]:

Sustainability provides new insights into business strategy and the competitive environment

  • A “lens” through which managers can innovate along their extended supply chains
  • Sustainability is not about trade-offs. Investments can have paybacks of < 2 years
  • Moral responsibility remains the foundation but not the primary motivator for action

Sustainability solutions require collaboration with stakeholders

  • Partnering with stakeholders can reduce opposition and bring new knowledge
  • Effective stakeholder relationships take into account perceptions and emotions
  • Managers must accept that they cannot please all stakeholders all the time

Sustainability solutions need new organizational competencies

  • Skills include assessing and managing stakeholder impacts along the supply chain
  • Many companies lack the organizational capacity for listening and empathy
  • Supporting activities include social marketing, sales training and government lobbying

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April 19, 2007 Sustainable change and identity

This afternoon I attended part of an on-going lecture series offered by Northwestern University’s Center for Learning and Organizational Change. Today’s session explored the question “when is change transformational?” and was presented by Dorie Blesoff, a faculty member in Northwestern’s Master’s program in Learning and Organizational Change, and Pat Allen, an associate professor at the School of the Art Institute.

Dorie and Pat actually facilitated a discussion around two questions: When is change transformational, and what makes that change sustainable? (Dorie noted the paradox embedded in that question – if the change is sustained, it’s no longer a change; it’s a new state. But that’s fodder for another posting…).

This is a long preamble to the insight gained at the table discussion in which I participated. All of the lecture participants broke into groups of 3 or 4 to share “transformational” change moments, and to explore what common themes that emerged in our brief narratives. The group that I participated in ended up landing on “identity” as the common thread through all of our stories. They were all about being and not just doing or changing. Something happened, it inspired change, and that led to the emergence of a new identity (the sustainable outcome of the change).

I share this because it strikes me as a reasonable way to think about the type of large-scale change that leaders like Jeffrey Hollender allude to when they challenge companies to stop “compartmentalizing” social responsibility and make it more intrinsic to the corporate identity. It’s not only about thinking differently, perhaps, but also about embracing an identity which says ” we are different.”

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April 17, 2007 It’s about thinking differently

More from Jeffrey Hollender, the CEO of Seventh Generation. In the company’s blog (The Inspired Protagonist), Hollender takes a poke at Wal-Mart in his post What is it they still don’t get?

What I particularly like is his clarity on what is at the root of this. Hollender writes:

“It’s sad to see one of the greatest ‘potential’ forces for a more sustainable planet continue to undermine itself. Wal-Mart is on a dangerous see saw. One day, there’s good news, and the next it’s bad. This is a characteristic of too many large companies (BP and Merrill Lynch to name a few others) as they confine their sustainability and responsible business initiatives to a limited number of highly compartmentalized efforts.

These ‘non-system’ activities create as much reputational risk as they do opportunity. Until any company looks at its entire business and develops a ‘whole’ effort to manage all aspects of its activities with an integrated point of view there is little or no chance of sustained success. This is about changing the way we think, how we think, and what we think about.“ [emphasis mine]

This resonates a great deal with the thinking and research I’ve explored in this blog. I can go back to the executives I interviewed as part of my Master’s thesis research. Two sets of manager interviews were at companies that “compartmentalized” social responsibility. One set of interviews was in a company that clearly had a “whole” approach. Interviews with the “whole” approach company stood out in a material way. They:
- Explicitly characterized themselves as “different,” and used that to help establish new thinking.
- Used social mission as an engine for innovations that were intrinsic to the business, across all operations.
- Had continuous conversations and reflections across the company to help interpret how to convert social mission into operations in a consistent and valid manner.

The more I continue this investigation, the more I see the breadth, depth and consistency of these types of conversations as a leading indicator of whether a company is truly on the path to thinking differently. Were I to design an organizational intervention to accelerate the process of change to a “whole” mentality, it would focus on activities and tools that help create and inspire these conversations.

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April 5, 2007 Mindset 3.0 vs. CSR as ‘tortured concept’

I am mulling over recent readings, including those which were the basis of my two latest posts (Long live CSR and Mindset 3.0). A theme that is emerging is a debate, of sorts, between those who are beginning to see clarity around new concepts (Mindset 3.0) and those who are feeling the discomfort of a concept (CSR) losing its meaning. A recent article from the Journal of Business Ethics begins with “Corporate social responsibility (CSR) is a tortured concept within the academic literature.” Indeed.

What’s going on?

I suspect the common ground in this debate is the recognition that CSR is an aggregate concept that covers too broad a range of practices, thinking and new business models. The aggregation obscures the importance of looking at context — different industries, company sizes, global locations, structures, organizational maturity, etc. A GlaxoSmithKline practices social responsiblity in a fundamentally different manner than a Seventh Generation. That’s a blinding glimpse of the obvious — but not under the current, aggregate view of CSR.

There is clearly a line of thinking that now suggests we need to disaggregate CSR. And there will undoubtedly be debate about just how to go about that. But somehow I think the SustainAbility insights from the Growing Opportunity report gets at a more interesting tactic: Characterizing the common elements of a new mindset that drives new business models. As I read the Mindset 3.0 characteristics, I can see a common framework that helps explain the thinking that drives managers to change the game. That thinking will result in a variety of different outcomes — depending on the business context in which the manager operates — but the core mental model driving the change will likely have common characteristics across many contexts.

April 4, 2007 CSR is dead – Long live CSR

Business Strategy Review, the research quarterly of the London Business School, includes an article in the Spring 2007 edition entitled “Corporate Social Responsibility – At a Crossroads?” In the piece, co-authors N. Craig Smith and Halina Ward muse on the current state and ultimate future of CSR. This is obviously quite popular sport (of which I am an active participant), but the article is instructive because it provides insight from a U.K point of view, which bears similarities to the U.S. but also reveals several important distinctions. U.K. businesses also have arguably a more developed expertise in CSR and its predecessors; the article therefore provides a glimpse into what may be a more mature (experienced) dialog.
The authors interviewed 50 business and thought leaders on the state of CSR and its future prospects. Some highlights:

  • Interviewees generally believed that CSR in the U.K. was “too often a problematic concept, not one that offers an inspirational agenda for change.”
  • In part this has to do with the competing definitions issue (what is CSR?). The authors suggest that definitions split into two major groups. The first is a conceptual level definition that provides useful discussion of business and society relationship. The second group is operational, where CSR becomes splintered into distinct sub-agendas (human rights, environment, business and corruption, etc.).
  • Interviews revealed several “crossroads” themes. Among them were debates between advocating market-driven business actions vs. the need for more legally binding accountability; philanthropy vs. “intrinsic” business responsibility; pure business case for CSR vs. a combination business and moral case; and shareholder capitalism vs. new models that involve greater stakeholder considerations.
  • The role of policy makers in establishing the proper environment for socially-responsible behavior to evolve was also noted as a theme with important but knotty implications.

In the end, the authors conclude:

Fundamentally, [CSR's] future turns on the interaction of two factors. First, what business believes it “ought” to do, which is set by both the profitability and the moral acceptability of certain practices. And second, by what government says business “must” do.
That, to me, looks like the basis of on-going dialog. Whether we name it “CSR” or something else, it’s only through the dialog that we develop meaning around what we “ought to do” vs. “must do.”

Finally, I found one additional paragraph that struck me as very interesting. In most reviews of CSR, I see greater focus on the influence of market forces (consumer, competitor, industry) or regulatory/legal forces (government regulation, lawsuits, etc.). Rarely if ever do I see something that so clearly addresses the potential of organic change as this:

Managers are not automatons, passively responding to market signals. They can develop strategies that change the rules of the game, for example, stimulating consumer demand so that social and environmental considerations are a significant factor in consumer choice. Similarly, firms with demonstrable CSR could target investors that care about these issues (e.g., in private equity).

Long live CSR.

March 31, 2007 SustainAbility’s Mindset 3.0

Yesterday, I briefly referenced the new report “Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems,” authored as a collaborative effort by SustainAbility and The Skoll Foundation (among others). It is a truly thoughtful analysis of the “state of innovation” of social entrepreneurship and challenges faced by organizations that are defining these new business models. Among them:

- Access to capital. This is an issue for any entrepreneur, but the added challenge for social entrepreneurs is their hybrid nature: Are they not-for-profits or emerging, viable commercial enterprises? The result is they are not competing on equal footing for potential funding sources in either area.

- Ability to scale. As the report suggests, social entrepreneurs worry about “how fast can I grow, continue to deliver, and not compromise my mission?” Beneath this is a leadership development and talent management issue. There are scalable organizational structures, but recruiting and developing the right people to make those structures operate effectively (in a social enterprise context) is a challenge.

And note that access to capital and ability to scale are in addition to the central issue of any new venture: Delivering value to members of the marketplace it targets.

But the report’s most intriguing insight is around what it calls Mindset 3.0. Mindset 1.0 was about regulations and compliance; 2.0 was about corporate citizenship, including organizational accountability and volunteerism. Mindset 3.0, on the other hand, is about creative destruction/reconstruction, about “reperceiving” immense global challenges as opportunities to change entire economic systems.

The report further suggests that Mindset 3.0 has five main components, several of which resonate with themes I’ve addressed in this blog:

  1. Systems thinking and design. This resonates with research showing how socially responsible leaders have a more complex “world view” and how they fit within it. It also resonates with Howard Gardner’s “ethical mind.”
  2. Consumer engagement. Really, this is about co-creating marketplaces. It is similar to the mental model of successful, socially responsible leaders I’ve interviewed. These leaders all believed that if they looked deeply enough within the consumer’s mind and activities — and engaged with consumers in more collaborative ways — they could create new markets.
  3. Business models. A “theory of the business” and how it works that is some variation on traditional models.
  4. 360 degree accountability. This is similar to the way expert leaders think about triple-bottom-line accountability.
  5. Emerging economies. Bottom-of-the-pyramid thinking.

What all this means, I suspect, is that we are beginning to grasp the “what” part of “what is socially responsible enterprise?” And that’s a big part of the battle in addressing the three challenges. If we don’t develop clear meaning around the “what,” the systems to support the “how” will struggle to emerge.

March 26, 2007 More on Gardner’s five minds

Why is it important to look at thought pieces like Howard Gardner’s Five Minds for the Future, which really deals with describing positive, individual cognitive capabilities? In my view, this is an important (but often overlooked) aspect of understanding the driving forces behind organizational change. Let’s look at ethical principles as an example.

A previous post on the growing consensus on codes of conduct describes the work of several researchers (published in Harvard Business Review) who suggest that there are eight key principles that guide world-class ethical standards. These include:

Dignity principle: Respect the dignity of all people. Protect the health, safety, privacy and human rights of others; refrain from coercion; and adopt practices that enhance human development in the workplace, the marketplace and the community.

Citizenship principle: Act as responsible citizens of the community. Respect the law, protect public goods, cooperate with public authorities, avoid improper involvement in politics and government, and contribute to community betterment.

These principles are only meaningful to the extent that they are internalized (i.e., become operative and active parts of an individual’s mental models) and acted upon by members of the organization. The dignity principle comes alive via Gardner’s “respectful mind,” which notes and welcomes differences between human individuals and groups and seeks to work effectively with them. The citizenship principle would largely depend on development of Gardner’s “ethical mind,” which ponders the nature of one’s work and the needs of society.
One could make similar relationships between Gardner’s respectful and ethical minds and other CSR principles. Donna Wood describes the “Principle of Public Responsibility” for businesses, which states that businesses are responsible for outcomes related to their primary and secondary areas of involvement with society. An organization must be led by and composed of individuals with the cognitive capabilities described in the “ethical mind” to sort through the difficult and ambiguous territory related to this principle.

The critical point here is to look at living such principles as, in part, an exercise in architecting organizational activities and practices to develop the respectful and ethical minds. In his book, Gardner writes a bit about this in the concluding chapters. Developing these minds takes individual reflection (am I making progress, each year?); clear alignment on mission and purpose (do we have the same, positive goal?); and the presence of role models who live and reinforce respectful and ethical practices (how do high performers act?).

My reading of his insights also suggests that this is best done within the context of one’s professional discipline (e.g., marketing, sales, etc.). Excellence in the work products that are part of a profession is related to an individual’s development within Gardner’s other three minds: the disciplined mind, the synthesizing mind and the creative mind. And to develop any of those is at least a 10-year effort (Gardner’s general benchmark) for deep understanding of a profession, trade or discipline. Thinking “ethically” as a marketing professional must incorporate a effective integration of the ethical viewpoint within the deep expertise of the professional capabilities that produce excellence in work effort.
When you look at the success cases of individuals who represent the best of socially responsible business practices, I suspect you will find clear evidence of that integration of respect, ethics and professional expertise.

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March 22, 2007 Howard Gardner and the five minds

Howard Gardner’s latest book — Five Minds for the Future — is a prescriptive thought piece by one of the world’s leading researchers in psychology and cognition. In the book, Gardner defines five “minds” — highly refined cognitive capabilities — that he suggests are critical for survival in a deeply connected world. (In the new connected world, “in the long run, it is not possible for parts of the world to thrive while others remain desperately poor and deeply frustrated,” he writes).

The five are:

  • The disciplined mind — which has mastered at least one distinctive way of thinking (e.g., a profession, craft, etc.)
  • The synthesizing mind — which take information from disparate sources, understands it, and reformulates it in a way that makes sense to the synthesizer and to others.
  • The creating mind — which breaks new ground.
  • The respectful mind — which notes and welcomes differences between human individuals and groups and seeks to work effectively with them
  • The ethical mind — which ponders the nature of one’s work and the needs of society.

This is a fascinating avenue of research — and one which builds on a long-running project that Gardner and several distinguished psychology peers have been running for more than 10 years: The GoodWork Project. This is an effort to find examples of individuals and organizations which do work that is excellent in quality, socially responsible, and meaningful to its practitioners — and then understand how and why it works, to inspire more good work.

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March 18, 2007 A target market of "people who eat"

I am assisting in the start-up of an organization in my home city — Evanston, Illinois (a neighboring suburb of Chicago) — to establish an urban, organic farm within the city borders. “Sustainable food supply” is one of the work streams of innovation that I’ve identified as resulting from socially-responsible business thinking, and the work I am doing with the start-up provides insight into some of the mechanics of innovation.

I will continue to write case study snippets as the organization evolves, but here is a bit of background and some current insights:

  • In the U.S., “local organic” is the improvement on the growing marketplace for organically grown food. Illinois is a prime example. It is a state with a very large agricultural economy — but only 3% of the food consumed by people in the state is actually produced in the state. Which means there is unnecessary environmental cost associated with transporting and storing food as it moves from faraway producing areas to local stores and markets. It also forces an economic preference for large, mass-production farms at the expense of smaller, family owned farms. (For an insightful analysis of this issue in Illinois, see Feeding Ourselves: Strategies for a New Illinois Food System)
  • There are a wide number of groups and small organizations working to address this issue. The city of Chicago has organic farms within its borders. Not-for-profit organizations are supporting in-city markets for more locally grown food products. And retailers like Whole Foods and Wild Oats are helping consumers identify which food products are “local.”
  • Evanston’s effort to establish an urban organic farm is being led by a set of volunteers (with some notable experience and expertise). It is a self-organizing effort involving interest in food policy, organic production, sustainable practices and healthy living.

What we have is an incredibly dynamic system of players, trying to figure out a model for success. It is being organized primarily through networks of relationships, rather than a central organizing system. And in the process, people must shift their mental models — a first step in innovating.

An example from my own experience: In a discussion with Evanston volunteers about how we might successfully build a start-up business that has a chance of being sustainable as a business, we began talking about target markets. One of the volunteers — a food policy activist who is in large part the conscience of the organization — had a look on her face that suggested she was processing the question because it simply did not fit her policy/activist mental model. “Our target is people who eat,” she said.

She of course is right. And it is statements like these that challenge the business-minded participants to shift to a more effective model for social change.