In your opinion, how does a business designed to contribute positively to the world differ from a more traditional business model?
In two ways – founding vision and operating focus.
Impact can come from the way you operate or the product you sell – or increasingly both. Making a difference is more important than profit, but good business sense is what will make your business flourish.
A positive innovative business defines a need and a way to help a particular cause that leads to only positive outputs. More traditional businesses also define a given need but whilst that may help people, their sole purpose isn’t to make the company an overall positive benefit. The traditional business model has a single point of focus to their everyday operations – profit – whilst social impact entrepreneurs have to combine their twin focuses of purpose with profit. It’s a constant balancing act that old school businesses haven’t needed to make.
Old school businesses look to maximise profit margins by simultaneously increasing prices whilst minimising costs. A positive impact business, like in the case of the entrepreneurs New Energy Nexus works with, who are focused very specifically on clean energy – they hope to make their product as accessibly priced as possible whilst maintaining an operational profit margin whilst also ensuring the ethical sourcing of suppliers. It might be a generalisation but most businesses look to a supplier for reliability, quality and cost-efficiency. These are all important to an ethical business, but a truly innovative, ethical business also looks to align their own values with those of their suppliers – an equation which might not always mean going with the cheapest option.
How can innovative startups best navigate these operating hurdles?
Acknowledge it’s not always easy! What’s “easy” is to beat ourselves up for not making the best/most ethical/most sustainable decisions every time, but the critical thing is to try.
As a practical suggestion, the most important thing to have is a mission statement – you need to have a defined “destination” otherwise it’s very difficult to make decisions as to where you’re going. Once you have your “north star” in place, many decisions are made naturally because you know what’s acceptable and what’s not. Empower your teams to make the right decisions for them – they are subject matter experts in their field and will know what touchpoints along their value chain need prioritising and what work needs doing around that. Some of the bigger decisions might need to be fed up the line of command but make agreements around this and, for the most part, let your colleagues and employees get on with their good work. I also strongly suggest making your mission statement a public pledge – it reinforces your reputation as a credible and transparent business and means potential investors/clients/customers/suppliers understand straight away what your ‘operating system’ is allowing you to stick to your principals without having to constantly explain them.
What do you find yourself discussing time and again?
Three things – attracting investment, remaining motivated as a start-up CEO and pricing. As a coach, I’m technically not supposed to give advice but these come up often enough for me to have some pretty good pointers.
- Securing investment is a constant business challenge when you’re at a startup or scaling stage; so it’s something that I frequently discuss in client conversations. Unless you’re very lucky, angel investors don’t just pop up from nowhere. Selecting who to pitch to and how is critical – do your homework. Really make sure that you’re targeting investors who are interested in your area – it might sound obvious but you’d be surprised how many people use a very scattergun approach to connect with investors who ‘might’ be interested. In targeting everyone, you target no-one. Know the key players in your field and tailor your proposal to their very specific interests. Snazzy pitch-decks and aggressive projected growth are prerequisites; don’t assume that you will get funding on the strength of your great idea. It’s competitive out there. What will make you really stand out is the quality and talent of your team. Investors want to see that you have the talent to see you through the scaling process and put you at the technical/operational edge of what you are doing both now and in the future. Also, remember that the team is likely your largest expense – an expense covered by someone else’s invested capital and someone else’s risk. So, show that investor that you’re using their money to maximum strategic benefit and efficiency by building the savviest, most future-fit team, you possibly can.
- Remaining motivated as you bring your idea to market can be tough and surprisingly lonely when you’re the founder/CEO – even if you have a team around you, the pressure of expectation can be an isolating experience. The way to counter isolation is to have community. Keep your team close. Make sure you have people around who can act as sounding boards. Not only does it make you feel less alone but also keeps you grounded. Friends and family are central to this of course, but try to build a network of like-minded peers – New Energy Nexus being the perfect example, you can join their Slack community and chat with like-minded innovative clean energy entrepreneurs. Talking to your best friend/family will give you the emotional support you might need but speaking to someone with the same challenges as you, will spark new ideas and solutions and give you a feeling of solidarity and a genuine understanding of what you are facing rather than the warm fuzzy feeling you get from loved ones. Make sure your support is practical as well as emotional. I’d also say briefly that if you’re an ideas person, you probably have 1,001 things running through your head at any one time but working in a commercial environment means keeping to deadline and ensuring you get your deliverables out to market. If you can put your ideas to one side in order to focus on priorities then do, and if you genuinely can’t make sure you build a team around you who can stick to the deadline needed to keep your business timely.
- Pricing. Clients I speak to are often grappling with costing strategy. Cleantech solutions need to be as accessibly priced as possible, as scale is the only way to make inroads into the climate crisis we’ve manufactured. Costs in clean energy are shrinking but new technology remains inherently pricier than older models because design, innovation, R&D etc etc need funds – and funds can only come either from investment or from sales. Pricing your product according to what it is worth, the investment behind it whilst keeping that cost in line with market expectations can be a tricky balance to strike. My main advice on this front is to weave your pricing into your marketing – given the society we are in, people have come to expect low prices as a standard. There is increasing public awareness around how those prices are achieved and the damage it causes but there is still so much more to be done in terms of expanding this message. How are you speaking to potential customers, explaining your value system and educating them that real value for money lies in buying services that positively impact the environment around us?
You’ve spent 4 years mentoring energy entrepreneurs in rural Uganda. What have you learnt in that time that is applicable to New Energy Nexus entrepreneurs worldwide?
- Be humble. Having a game changing idea. Moving fast and breaking things. These are real entrepreneurs’ cliches. What social impact entrepreneurs need to do is have an amazing idea and then check that it solves a need. If it doesn’t then you’re unlikely to do much social good. Ask around, do surveys, market research and testing – once you have a product that truly helps the market you’re working in, then you can start to be a little proud. Basically, don’t fall in love with your idea until other people have fallen in love with it too.
- Profit is key to innovation. I can’t stress this one enough. Although it can be a challenge pricing your product to make it as accessible as possible, never fall into the trap of underpricing. Without a robust operating margin, you can’t invest in improvements to your existing business, can’t upgrade your technology and can’t attract talent. It’s the fast train to mediocrity which is a place few businesses want to be.
- Everyone counts. We so often get bogged down by stats and the size of the challenges we face, but there is an individual and a family behind every one of those metrics. Don’t lose sight of the real life humans you’re trying to help!
What do you see as some of the major stumbling blocks in the development of clean energy?
Until very recently, I would have said lack of governmental belief in the project – basically put, a lack of funding. In the years I spent working in this area, I’ve found it astonishing that solving one of the world’s most pressing needs – the transition to clean energy technology – has been left almost entirely to private companies and entrepreneurs. What a burden of responsibility! With Biden’s promised focus on making the US power sector carbon-free by 2035, there will be a huge uptick in interest, action and investment – which, actually removes by far the biggest roadblock we’ve been working with! The only thing I would say is that his promised $2 trillion will be spread pretty thin across his 9 agenda points. Securing private investment whilst focussing on talent, development, and research need to remain top priorities.
COVID-19 – although covid itself will soon be a “vaccineable”/curable disease, the damage it has done to our progress towards the SDGs is disastrous. We were already projected to be 43 years behind the original timeframe and some estimates now put us a further 10 years beyond that as COVID has not only stalled but actually reversed progress across all 17 of the goals, including #7 (affordable and clean energy). So, we now have to redo the work we’ve already done just to get us back to parity with 2019. I’ve seen this for myself as all the work, I and my partner at ENVenture have been doing, has been severely compromised as we can no longer do the outreach work and education so critical to working with rural communities.
And finally – what do you see as the major opportunities ahead?
I’m a complete optimist so I think there are an overwhelming number of amazing bright spots ahead.
In the past couple of years, we’ve seen a real shift in investing patterns and returns on green stock – in fact, sustainable investments are now outperforming non-green portfolios, in some cases, annual returns are at 20% which is almost double what a venture capital firm typically manages. You’ll all know the name NextEra Energy – their shareholder returns over the past 3 years have jumped 112% vs a decline of 52% for ExxonMobil. It’s a virtuous circle whereby forward thinking investors are making decisions based both on their personal values and the potential financial value returns, stock markets are rewarding them which encourages further investment. I don’t mean to reduce everything back to money but – sadly – you can’t make progress in innovation without it and given the speed and scale at which we need to roll out green energy platforms, the more money we can get, the faster we can move.
We should also try – easier said than done!! – to view COVID as an opportunity. It has upended so many of our assumptions about everything and forced the world to innovate at an unprecedented scale. The COVID vaccine is the fastest vaccine ever produced, taking less than 10 months from completely novel to disease to tested and implemented vaccine rollout. That’s pretty extraordinary. How do we capture that spirit of speed and innovation and turn it to our advantage?? For many of us, the commute and office-based career were just the norm. Not any more. We thought mass financial relief from the government and some form of a Universal Basic Income were all but impossible. Also, not anymore. What I’m trying to show is that when the sh*t hits the fan, we can really pull it together. I don’t know what this means concretely but it’s a wake-up call to the world that cooperation in the face of adversity, and meaningful change when required, are well within our capabilities.
I also think it’s amazing that in the US, most states now mandate by law that a portion of electricity now has to come from renewable sources – that portion will only go up as time goes on. There’s a great report done by Morgan Stanley which says: “Ignore the President’s rhetoric for a moment; Donald Trump is the greenest President in U.S. history measured by the pace at which the nation’s electricity grid has de-carbonized during his first term in office”. Demand is increasingly coming from federal and state level, rather than it being left as a personal choice by particularly well-informed/wealthy consumers. The need to scale in response to legally required clean energy quotas will be assisted by the huge amounts of private investment I just mentioned.
Finally, the Biden presidency – the US will rejoin the Paris Climate Accord. More and more businesses will look to integrate the SDGs into their business model. What this might mean in terms of potential investors, supplier demand, educational outreach, etc. is enormous. Not only will it be encouraging to have leadership from the very highest level, but that will take awareness of what we work on day in and day out, to entirely new audiences whilst galvanizing into further action those citizens who are already interested in these issues. It’s huge.
Julia has 15 years’ experience working for corporate international companies along with 4+ years mentoring clean energy entrepreneurs in Uganda. Combining her passions for business, ethical leadership and sustainable development at a grassroots level, she founded 4leaf to help positive impact entrepreneurs and small businesses stay true to their roots whilst remaining profitable.