I am a big fan of the work going on at the Startup Genome, and I enjoyed reading founder Max Marmer’s posting about Transformational Entrepreneurship on the HBR this morning. He identifies a new set of opportunities to apply the high scale and low capital requirements of cloud-mobile-social businesses like Facebook to important social problems like health and human happiness to create companies like…well, like Wahanegi.
As you might expect, I applaud the framework and the sentiment. It does seem there is a new opportunity for positive societal transformation at hand, and we should absolutely encourage more transformational entrepreneurship. If I didn’t believe that, then Wahanegi wouldn’t exist. The idea of changing the world and building a successful business is very exciting in general, and because Transformational Entrepreneurship is cloud-based, data driven and aims innovation at broad human needs, any successes can not only dramatically improve the human condition but also build a foundation upon which to build the next set of transformational businesses. If you want more detail on the ideas, Max’s lengthy posting on the Startup Genome blog is worth reading.
However, my earlier life experiences intercede here, and I think it is also important that we are clear about the exciting but ultimately limited nature of this definition of ‘transformational.’
First, clicking through the links to lists of the world’s biggest problems that Max provided in the posting is a sobering exercise. What are the Facebook-style scalable solutions to clearing mine fields, ending ingrained societal corruption,* blunting religious persecution,* stopping infectious disease, reversing global warming? If we brainstormed, we may come up with some worth trying – maybe using peripheral enabling technology like crowd-funding the sappers who clear minefields to both provide money and a strong empathy channel to publicize the problem – but the emphasis on high scale with low capital requirements ends up being a very fine filter. Second, when you apply the next filter of running a profitable business based on those ideas, you must face not only the inherent difficulty of building a business and high entrepreneurial failure rate in general, but also the challenge of building a business where the business model, revenue growth and profitability is inherently more constrained – e.g. if there were no resulting constraints on profits and growth, then there would be no need for the benefit corp structures popping up around the country to protect double/triple-bottom-line executives and board members from shareholder lawsuits due to underperforming financial results.
I suspect those limitations underlie Michael Porter’s broader focus on “Creating Shared Value“…in other words, another way to get to massive scale is to start there in the first place. I certainly saw the value of making small leveraged changes inside large organizations as a young officer in the Air Force, and as a product manager at Macromedia and Adobe. It is also hard to do, but if you can get the big guys to change, you can move mountains with a high level of certainty.
I say all this in support of Max’s ideas, and to encourage more thinking in this area. I certainly the ideas are right, and we aim to offer more proof in the future with Wahanegi.
*In terms of societal change, it is easy to bring up how Twitter/Facebook and Apple’s iPhones were enabling factors for the Arab Spring, or to tell stories about how they help people connect for good causes in all sorts of ways. However, that was and is not their purpose as corporate entities, and for me that calls into question Max’s designation of these companies as examples of “Transformational Entrepreneurship.” If you create a company that changes the world for the better because you really wanted to build a great product or a great business, that is fantastic, but clearly based on those examples there is no need to have a major societal benefit top of mind when you first found the company, or even once you are running it at scale. Steve Jobs and Mark Zuckerberg are geniuses, and they created great opportunity for all of us to create and do amazing new things on top of what they built, but they didn’t have to be saints to do it. Those companies are as happy to connect people to share LoL Cat pictures and porn or to bully and ostracize each other as they are to help with cries for democratic freedom and social justice or creating great digital art – they track and drive their business based on total active users and revenue, not the net societal value of the usage. If they had tried to do otherwise then they probably would not have succeeded at such a scale. There is nothing wrong with that, but it is fundamentally different from creating a company that is explicitly focused on solving social problems while being careful not to create any new ones. As a result, any attempt those companies make to enhance their net societal impact is laudable but much more akin to my understanding of Porter’s Creating Shared Value concept than Max’s Transformational Entrepreneurship idea.