Unilever’s goodwill (or brand value) was valued 12.6 billion euro in 2009, up with about 900 million from 2008.
Let’s say we, you and me as Unilever execs, create a major sustainable smallholder inclusion program, that provides underprivileged farmers with access to a modern buyer like Unilever (say fully Rainforest Alliance standards compliant). We do this because our sustainability policy (The Sustainable Living Plan) will contribute to 200 million euro of our 900 million in goodwill growth due to strengthening of the overall sustainability and reputation of our company (metrics anyone ??).
Now say we want to provide farmers with a substantial incentive to stick to our sustainability policy, and improve each year, thereby maintaining the value and growing it. Corporate as we are, we decide to share 30% of this 200 million with our farmers in the form of derivatives of our company value to provide the incentive. That would create an amount of 60 million euro in equity to be distributed. This equity creates an average dividend yield of 2.5%, producing 1.5 million euro cash in hand for farmers per year.
Now look at this from the perspective of the supplying smallholder farmer who makes an income of about 300 euro a year. Materiality of the incentive could imply increasing the farmers’ current income with 25% (75 euro). Our dividend yield would thus allow us to create a substantial income impact, increasing by 20.000 farmers each year based on dividend alone (farmers also own the equity). And we are just one of the publicly listed food companies they supply to!
So what if? What if we could create such a value distribution mechanism?
– We would provide an entrepreneurial incentive to farmers for sustainability performance that corrects a current major design flaw
– This sustainability performance would look good on our track records and would make our pay checks shine
– Our competitors might be interested in copying our behavior
– We would share the risk with farmers in the endeavor: no performance, no value creation, no value sharing
Entrepreneurship is attracting attention from a lot of people. Many are choosing or thinking to pursue the entrepreneurship function. It is part of what Steve Blank calls the democratization of entrepreneurship. Building a company has become more openly accessible because of the falling cost of technology, access to information, and capital. On top of that entrepreneurship methods like customer development are revealing the blue print of entrepreneurial discovery and business development. The field of entrepreneurship itself is accelerating.
While the environment is becoming more conducive to entrepreneurship, it should not be overlooked that there is also a pivotal personal side to the entrepreneurial conduit. If you don’t have an anchored personal foundation to pursuing entrepreneurship, you could end up becoming the constraint to your own ambition. You could be costing yourself and anyone you approach for support in your pursuit a lot of time and effort in vain. You stand to lose a lot.
In the name of saving yourself and others around you from the adversity of making a half-baked decision to become an entrepreneur, I have reflected a bit on my own experience (failure rather). I took a look back at the friction that I have caused by wasting other people’s time with half-bakedness, and discussions that followed on what this “anchoring” would be.
I have come up with the several topics , or a set of metrics if you will, to frame a discussion between founder, friends, family, and mentors, to help determine whether you are still a wish-be entrepreneur -in need of a bit more foundation- or that you are definitely a shall-be. I call this assessment “the plunge” because it is a discussion you should have, before taking it.
To my understanding, a plunging assessment would contain the following elements:
Taking a decision Naturally there is a line of thinking underlying the choice to become an entrepreneur. It is a balanced assessment between history of a person, their current situation, and a logic to why entrepreneurship would be a potentially fruitful option. This is not only a decision based on “do you have what it takes”. Equally so you need to consider whether your life (health, kids, state of mind, debt, etc) is currently ordered in such a way that you can scrape together the time to pursue your dream. – Can you take the decision in the first place?
Irreversibility The decision must contain an element of irreversibility. One of the hard aspects of going for “it” is that “it” doesn’t easily allow for a way back. When you intentionally leave a window open to return, you suppress your pursuit. But most importantly you will also most likely back down from your initial decision, because, well, you can. When you make an irreversible decision, you create room to focus on your goals, and give your external support the confidence that you are really putting your skin in the game. Choosing for something irreversible doesn’t mean burning your bridges. Rather it means actively taking a step in a new direction and accepting that the path you choose will never bring you back to the situation you leave behind. – Are you ready to stop looking back?
Pursuing an ambiguous opportunity The opportunity is something that lies external to yourself. Entrepreneurship is not a structured opportunity like a job opportunity; it is a decision you’re making here, a journey you begin at, not a choice where you select according to preference. Entrepreneurship is deep ambiguity which can only be cleared up by embarking on the journey. So the question here is if the value you can create is worth the effort of battling ambiguity: – do you have enough understanding of your opportunity to determine the known-unknowns and whether they, at least, are worth the pursuit?
Ultimate responsibility Taking the entrepreneurship journey entails picking up a huge responsibility. This responsibility is not only for yourself, but also for your family, friends and their well-being. If you get caught in a rut, there is no one else to turn to but yourself. When facing a choice for a job-offer, then the risk for the opportunity is spread over at least 2 people: yourself, and the person who hired you. When you become an entrepreneur it’s just you. So regardless of the ambiguity, the difficulties it will create, the failures you will encounter, the ultimate responsibility for the consequences will always lie with yourself. This is unlike any job responsibility. So if that sort of pressure would cloud your judgment and cause inertia you should ask yourself: – can you take the responsibility?
Take-away
In this post I have attempted to highlight some of the topics that could be addressed in a discussion between someone who is thinking of becoming an entrepreneur and their close circle of personal and business supporters. I have gradually learned about the value of this discussion from my plunges in the past, and will use it for those to come. Regardless of whether the questions above are of use to you, please take some time and determine whether you are ready to take the plunge. Prevent adversity as much as possible, save yourself and others time and effort. And, if you find the questions useful do tell me:
Are you ready to take ultimate responsibility for an irreversible decision to pursue an ambiguous opportunity?
Let me know your thoughts. And… good luck!
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This post is dedicated to my wife, and life venture partner, Anne, whom I’ve fought with much to come to truly understand what’s at stake. I thank you for sticking with me through hardship, never giving up on me, and still allowing me to pursue my dreams
Partnership Design 