Can tech enterprises really do well by doing good? Yes, they can!
Why Intangibles Rule The World?
Let me tell you a story of Innisfil — a little town in the middle of Canada.
It’s a quaint place in the state of Ontario — beautiful nature, terrible weather in the winter, and a peculiar urban-planning failure common to North America — a suburban sprawl.
In 2014, the city elected a new mayor, Mr. Gord Wauchope. And what the mayor soon discovered is that he had a serious public transport problem on his hands. Getting around town without a car for his 40,000 people community was no easy feat.
There were two solutions: procure a bunch of buses, hire drivers, and have them service fixed routes. Then, given the low population density, the buses will be running mostly empty and the costs will not be justified. The other option was to have just a few buses running less frequently. That would be more cost-efficient, but it’d take hours for commuters to get from A to B.
Out of these two grim options, which one did the city choose?
They hired Uber! It was the first time a city decided that its public transport would be run by a ridesharing company. The city’s budget for transit was about $1 million. And the authorities figured they could use the allocated funds to subsidize Uber rides, so a teenager can get to his job at the mall or a grandma could get to her doctor’s appointment.
Now we get to a million-dollar question. Who is the innovator in this scenario — Uber, or Mayor Gord?
The mayor saw the opportunity where Uber Under the Hood failed to see it. Most success stories in tech trace their roots to a razor-sharp customer focus. That’s what propelled ride-sharing unicorn forward and, paradoxically, also held it back! Uber execs did not consider public stakeholders to be included in the definition.
An obsession with the customer has the potential to stifle a tech company. The customer is king. But where does it leave a mere stakeholder? Surely, to create a viable product, you have to figure out whom you are serving, understand your market fit, and identify your customer. But at a certain point, you need to expand the range of who is included.
solving societal problems doesn’t have to come at the expense of customer focus. The customer could change, but the focus must stay.
If you’re a young startup: three people bootstrapping your project and trying not to run out of money before your first prototype, you have every reason to be skeptical. But if you are a unicorn, if you are growing big, you need to start thinking where your core technology can be used to address societal issues. And this is in the case with Innisfil. The city authorities calculated that they saved $8 million a year. People were able to get places. That translated into economic dynamism. It kept the city moving and economy humming.
What did Uber learn from this experience? They understood that a partnership for the public interest had tremendous value. Both Uber and Lyft are now working with transit authorities around North America to provide similar services.
This example shows that solving societal problems doesn’t have to come at the expense of customer focus. The customer could change, but the focus must stay.
we are locked into conventional thinking that revenue-generation is what it’s all about.
The public interest is often represented by public institutions, and you probably dread the idea of working with governments. They’re often seen as slow, and their processes as too complex. The biggest problem of all is the “show me the money” problem.
Here again, we are locked into conventional thinking that revenue-generation is what it’s all about. But we forget that a business can create value through other means. Here are a few examples:
Scale. If you launch a revenue-neutral project, but you get scale, it’s often a worthwhile undertaking. Imagine that instead of 2 million subscribers you now have 10 million. That’s intrinsically valuable. Whether for raising capital or benefiting from the economies of scale.
You can also get free publicity if you’re curing social ills. That could be millions of dollars worth. Let’s imagine that Airbnb decided that its core technology could be used to address homelessness. Or they figured out how public sector stakeholders could manage idle assets via an Airbnb-like algorithm, like a school gym on the weekend. Take Google: they are looking at the search data to alert the public health authorities about potential pandemics. If a company does something remarkable, they are able to convert the data or technology they already have into a public good, it will often translate into free media attention.
What else is there besides the revenue? If your company transitions from profit-maximizing to mission-driven, you can outcompete your rivals in attracting and retaining talent. This is what the millennials are after, the meaning-making. And if you are able to offer that, you gain a serious advantage.
And last but not least. There are goodwill and intangible assets which amount to $2.6 trillion just within the S&P 500 index. Alleviating societal issues is bound to generate stakeholder goodwill. It’s not always easy to calculate but doesn’t make it any less important.
A company able to internalize those ideas and consider the non-revenue value-streams will gain a sustainable competitive advantage. While difficult, quantifying the reputational dividends or accounting for an employee morale boost isn’t impossible. It starts with a recognition that true business success is more complex than profit-and-loss and that the definition of a customer is neither static nor singular.
Where Uber didn’t see an opportunity, LinkedIn did. Their latest product is called an economic graph. The company took its existing data and turned it into a value for society. They’re sharing insights with mayors, with public education institutions to match talent to opportunities, to identify skill-gaps, to make sure the curriculum is reflective of the market need. LinkedIn repurposed its core technology and created a lot more value out of it.
Whether its public transit shortcomings or outdated curriculum at a community college, there are opportunities out there for an innovative enterprise to step in. And oftentimes, the tech has already been invited. It’s just a matter of a fresh perspective. Technology can and should be a force for good and we can all be a part of this story.