Business with a purpose

I have been thinking very hard about the "purpose" of business lately. This is because my team has been thinking and working through what we want our business model to look like for a food hub in Spokane. We keep getting intrigued by some of the contemporary business ideas such as, technological solutions, creating the leanest business you can which still solves the problem identified, and efficiency. We are trying to solve the problem of missing infrastructure in the Spokane food system which makes connecting small and medium sized local farmers to large food service institutions very difficult. This is a problem faced by most cities and towns around the country as our food system has been built into one of very large corporate farms which mostly export commodity crops while local towns and cities then import most of their food. 

Our struggle then, has to do with finding solutions to this problem which are still in line with our core values and stated purpose of this particular business; which is to maximize happiness. First, we thought that maybe we could just create a virtual food hub which is basically just an online platform for connecting farmers with those who wish to purchase their products. This seemed attractive for our technological age, but does it achieve our purpose? No, it does not. Part of maximizing happiness for us is creating good paying jobs in Spokane, which needs them. Another aspect of our purpose is ensuring that farmers receive the value that their products deserve. Yet another is building the market for local food which is healthier, has a lower carbon footprint and adds to the economic multiplier effect in our area by keeping dollars and wealth local. 

Then we started thinking that our business could just facilitate the distribution of local produce to local buyers without actually owning the produce (inventory) and with a minimal need for a facility. This was also combined with our notion that to be a competitive contemporary business you need to be ultra efficient. So, we would have the minimum services necessary to solve our problem, and therefore the minimum amount of employees necessary. We again asked if this model would achieve our core purpose and again the answer was no. 

It turns out that achieving our purpose necessitates a more complex business model. We need a building so that we can aggregate the local produce, grade it, pack it to meet the large volume orders from food service customers (B2B), and ensure high quality products. We also want to create jobs, build the local food system and maximize value for farmers. This necessitates not just aggregation and distribution, but also value-added processing equipment and perhaps a commercial kitchen where farmers and food entrepreneurs can turn raw produce into non-seasonal value-added products. 

We also determined early on that in order for us to achieve our purpose we need to choose the right business structure. As my friend and colleague Lauren Fruge noted in a recent post about private vs. publicly held companies, ownership and structure really matter and can strengthen or inhibit the ability of your business to live its values. We are building our model as a worker and farmer owned cooperative. This way the key stakeholders are in ownership and governance positions instead of those who simply contribute large sums of money to the venture. 

So, keeping the deep purpose of your business in the forefront of business model generation is of the utmost importance as your team iterates the model to solve the problem you have identified as a business opportunity. Sometimes the quickest, leanest, most efficient and technologically sexy model will not be that which most effectively achieves your purpose. We are a community of humans embedded in a natural system after all, so if we don't set and live out a purpose deeper than that of a machine, we will not create very desirable systems let alone maximize happiness. 

Stakeholder Start-up Strategy

I am always interested in how stakeholder engagement or analysis changes so much depending on your position and therefore your literal perspective. Much of stakeholder analysis and engagement literature is written for the large corporate audience. For instance, a great piece by Neil Jeffery called "Stakeholder Engagement: A Roadmap to Meaningful Engagement," is very helpful, yet pointedly aimed at the large corporate audience. Jeffery says, "It is particularly important in the context of running an organisation responsibly and is integral to the concept of Corporate Responsibility. An organisation cannot be serious about Corporate Responsibility unless it is serious about stakeholder engagement – and vice versa." I agree wholeheartedly with this statement, yet it is not something you would need to say to an enterprise that is embedded in its local context already. This statement would be like a resident of Cleveland that the city has the second lowest median income ( $18,500) among American Cities; the resident would know this fact well as it is part of their daily reality.

I was thinking about how we got to the place where businesses need to be taught how to successfully engage with stakeholders, versus it being the starting place in their business plan development and execution. It largely has to do with the scale of economic entities in our current system, in that many corporations are larger than many national governments and have revenues sizing in multiples of third world country's GDPs.

For an alternative example, lets look at Green City Growers (GCG) in Cleveland Ohio. They are one of 3 new worker-owned cooperatives which are part of the Evergreen Cooperatives, a community wealth building strategy to create jobs, build wealth, and stabilize neighborhoods. For starters, here are Evergreen's community engagement goals:

• Create a shared sense of ownership and responsibility based on the concept of partnership and co-investment between grassroots and institutional stakeholders.
• Build cross-neighborhood connections to promote a unified identity among stakeholders in the neighborhoods.
• Identify, develop, and support local leadership within local residents, groups and community organizations.
• Deconstruct historical barriers between stakeholders, enabling residents to the access the social capital opportunities provided by local anchor institutions, and helping the institutions to be more responsive to the community needs, interests, and priorities.

The Evergreen Cooperative Corporation (ECC) started with a robust stakeholder and community engagement strategy before they were even an operational network of worker-owned cooperative businesses. So, for Evergreen and Green City Growers, stakeholder engagement is the strategy for both launching and sustaining viable enterprises. As you can most likely tell from the goals above, this strategy is also place based or rooted in a particular context. I will now lay out some of my GCG stakeholder analysis, which will also help tell their story. 

ECC is the central organization in this strategy, in its operational phase. To start at the beginning though, The Cleveland Foundation is central. In 2005, the Cleveland Foundation was seeking to develop a "Greater University Circle Initiative" which would revitalize the Greater University Circle (GUC) part of Cleveland. This is a grouping of very poor and diverse neighborhoods surrounding what they termed the "Anchor Institutions" of the City. Those being large institutions, with significant economic impact, that are unlikely to offshore their operations. Among these Anchor Institutions were the Cleveland Clinic, University Hospital and Case Western Reserve University. These three institutions represented $3 billion in annual procurement of goods and services. The majority of this $3 billion was sourced from outside the Cleveland City limits, let alone the GUC.

So, the GUC Initiative was launched to address the issue of poverty and take advantage of the $3 billion anchor institution procurement stream opportunity. They quickly partnered with The Democracy Collaborative (TDC) who had expertise in community wealth building strategies. TDC lead a series of community roundtables and events to learn more about the GUC issues from the residents themselves and to gather community leaders to talk about solutions. The key conversations were of course with the anchor institutions. TDC then partnered with Towards Employment, a non-profit which connects low-income folks in Cleveland with jobs and training, thus acquiring a workforce from the GUC. They also partnered with the Ohio Employee Ownership Center (OEOC) for their expertise in creating business plans for worker-owned cooperatives along with specialized training in democratic ownership for worker owners.

The Evergreen Cooperative Corporation was created as the 501c3 that would oversee and hold together all of the pieces and parts of this strategy. The Cleveland Foundation, along with the anchor institutions, invested a hefty sum with Enterprise Cleveland, a community development financial institution (CDFI), to create the Evergreen Cooperative Development Fund. The fund would act as some low cost start-up capital for enterprises such as GCG. Also, as the cooperative enterprises under the umbrella of ECC become profitable, they will return 10% of their annual profit to the fund. This will allow the network of cooperatives to self-replicate by creating their own pool of capital to loan from.

The City of Cleveland was also important in this strategy. They are committed to improving the quality of life in the City of Cleveland by strengthening our neighborhoods, delivering superior services, embracing the diversity of our citizens, and making Cleveland a desirable, safe city in which to live, work, raise a family, shop, study, play and grow old. The City was able to help leverage New Markets Tax Credits as well as HUD Section 108 loans and grants to capitalize GCG.

GCG is a 3.25 acre hydroponic greenhouse operation in the heart of Cleveland. They will produce 3 million heads of organic lettuce and 300,000 pounds of herbs annually. Their key customers are the anchor institutions, which agreed to purchase the majority of their products. Another key stakeholder of GCG, are the worker-owners themselves. This enterprise has no employees as such, because everyone who works at GCG quickly becomes vested as a full owner.

To wrap this all up, stakeholder analysis and engagement can be used not only to achieve buy-in or legitimacy with certain groups, but as the key strategy for successful business incubation and operation as well.