For The Principled Entrepreneur, Focus Is On People Not Product – ForbesRelationship
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In our changing and uncertain market, companies are looking to reduce their costs, and leaders are reconsidering their investment in people. This is an abrupt pivot from the approach of only a few months ago, when companies tried to attract talent and maintain a positive work culture. Yet, the recent layoffs and their juxtaposition with earlier attempts to stall the Great Resignation show that business leaders are still thinking of employees as company resources, even if they may be their greatest asset. Andreas Widmer critiques this view of business leadership in his new book, The Art of Principled Entrepreneurship: Creating Enduring Value.
According to Widmer, principled entrepreneurs connect people to their purpose and passion by forming teams that create value for customers. They do this by seeing the market as existing for people’s sake and not the other way around. For the principled entrepreneur, business is other-directed even when it is fueled by self-interest.
Self-interest is not selfishness. Selfishness occurs when one cares only about oneself, even at the expense of others. Transactions become a zero-sum game, where one’s gain is another’s loss. Selfishness may lead to potential short-term profits, but not to successful value creation. Self-interest, on the other hand, allows others to benefit as well, since—as with any relationship, market or otherwise—providing for others may also be in one’s own interest. Through economic self-interest, supplying a valuable product at a mutually agreed upon price can create a positive sum where everybody wins. It can also lead to continued business.
This distinction between self-interest and selfishness fits better both with Adam Smith’s writings overall and with the recognition that people can have more than one motivation for acting. Those who quote Smith’s Wealth of Nations to support market capitalism would do well to remember that before his economic magnum opus, he wrote A Theory of Moral Sentiments, which lays out the foundations and psychological assumptions for his later work as well. In both works, Smith describes social coordination through the metaphor of the invisible hand, yet the motivations of individual actors always have the other in mind even when the actor is self-interested. Through both the economic and moral lenses of motivation, interest leads to a both/and, not an either/or.
In other words, even if market transactions are supposed to be mutually beneficial, the mantra of the principled entrepreneur is not, “What can I get from you?” It is “How can I help you?” Moreover, the question is directed both to potential customers and to employees. The two questions do not lead to the same results, and the priority of intentions is important. The selfishness of the former question will lead in the long run to a loss of a company’s customer and employee base. The latter question can lead to innovation and value creation.
As Widmer states, “This is the art of Principled Entrepreneurship, and it always starts with and ends with a human person—the customer on the one hand and the worker on the other.” Of course, the principled entrepreneur profits from his actions, yet his intention and purpose is to create value for all stakeholders by serving a need or filling a gap that exists in the market.
The perspective of focusing on the person and not the product has two major ramifications—one that impacts company strategy and the other that influences company culture. With respect to company strategy, when leaders focus on customers’ needs, they will be able to develop and market their products more successfully. To demonstrate this, Widmer recounts an experience from when he worked at Dragon Systems and was unable to convince Dixons Retail (at one point one of the largest consumer electronics retailers in Europe) to carry its speech-recognition product. Their refusal was simple—Dragon Systems was selling a “superior, highly accurate speech recognition” tool but did not explain who would need such a tool and how it would make their lives easier. They focused on the product and not the people. This was not simply a marketing faux pas; it was a misunderstanding of the purpose of the product—and the company itself.
He writes, “We are tempted to think up a product and only then try to find a market for it. Or we are so focused on profitability that we are guided by it rather than the idea of adding value for the customer. Many successful innovations arise as a response to a problem or desire that a customer already has.”
When it comes to culture, a focus on people can make all the difference, because it can turn the reason for work on its head. Rather than see the purpose of work in terms of financialization—turning employees into assets and reducing all measures of success to a monetary value—work becomes a means through which employees can pursue excellence and become the best versions of themselves. When companies provide employees with guidance and direction for them to hone their skills, and room to explore which skills they have to develop, both the employee and the company ultimately benefit.
This is one of the principles behind upskilling, and it is also one of the factors that keep people from looking for other jobs. Yet, here, motivation is key. Even if the consequences of upskilling is employee retention and company resilience in the face of changing technology, the intention for upskilling is to provide employees opportunities for growth and self-development within the goals and values of the company. Professional development is, therefore, not akin to a computer upgrade. Employees can tell the difference between being treated as a commodity versus being treated as a human being.
Companies should not only focus on people as part of a retention policy but as part of the hiring process as well. When looking to fill a new position, selection should gauge not only how people’s skills and knowledge match the need but also how their interests and attitude fit with what they will be doing. Widmer gives the following example of a “job description” for a help desk technician to make his point:
Regardless of whether the details are apropos, when comparing these components to a standard job description for a help desk technician, it becomes readily apparent that Widmer’s description considers more than what the job entails. It also focuses on whether a person would be happy at such a job. It demonstrates that the company is not only interested in filling a role, but that it is also interested in the person who will be filling that role.
Of course, there are times when leaders must lay off employees or change their product strategy in the face of changing demands. The principled entrepreneur runs a for-profit business and not a charity. Financial success is essential. Yet, these leaders recognize that there is a big distinction between cutting their workforce and selling off assets. They also see a difference in selling a product and building a company. Ultimately, appreciating these differences have practical ramifications when it comes to how principled entrepreneurs make decisions and how they create value in the marketplace.