Technology executives are urged constantly to learn about business dynamics, and accused rarely of creativity in meeting business goals. Thus the forthcoming book The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, by consultant John Elkington and foundation director Pamela Hartigan, makes for useful reading. It’s built around anecdotes in which "unreasonable people"–the term used by George Bernard Shaw to describe individuals capable of effecting genuine progress–accomplish big things in business and philanthropy.
This excerpt deals with a challenge that affects every successful venture: handling growth.
One key factor in managing growth is whether an enterprise has a strong theory of change, which uses systems thinking to map cause and effect among different parts of the system it is attempting to change. Other important success factors are the growth model that the company adopts, the market opportunity it targets, the sources of funding available to it, and the extent to which the broader business culture and operating environment catalyzes and supports entrepreneurial activity. Picking the right problems to attack is critical, too: Choose the wrong market or field, and scaling is much harder to accomplish.
Mitchell Kapor is perhaps still best known for founding Lotus Development Corp. in 1982. Later acquired by IBM, Lotus developed an early killer app: Lotus 1-2-3. Today, Kapor chairs the Open Source Applications Foundation; the Mozilla Foundation, which is evolving the Firefox Web browser; and Linden Lab, the company that came up with Second Life, a 3-D virtual world built and owned by its residents (since opening to the public in 2003, Second Life’s "digital continent" has attracted millions of users from around the globe).
"Scaling an organization puts stress on it," Kapor notes. "Rapid scaling of companies undergoing explosive growth–for example, Lotus, Netscape or Google–creates damaging stress. The same is true for more recent ventures like Second Life, Mozilla and Wikipedia . . . The latter two are nonprofits, so scaling problems are not limited to for-profit organizations. Explosive growth can happen to either a for-profit or a nonprofit in the Internet era."
When asked about the challenges of scaling, other than fundraising, Kapor explains: Every new employee who is hired has to be integrated into the organization. There are certain values, styles of behavior and practices characteristic of the entity. Until a new employee learns to operate within those norms, he or she is like a foreign body introduced into an organism. The body system recognizes an alien invader and mobilizes its immune system to neutralize it. Newcomers are rendered impotent and, worse, start counterproductive efforts (infections) that have to be extinguished. The extremely rapid hiring that characterizes high-growth startups can ultimately overwhelm the corporate immune system, leading to breakdowns in function.
Kapor notes: "Companies can help smooth the rapid hiring and integration process in a variety of ways, but …there is a natural limit to the rate at which people can be added without damaging adverse effects. [And] when there is pressure to hire to meet the numbers, there is a tendency to lower standards and hire less qualifi ed people who would otherwise not be brought into the organization. When the fi lters are too loose, it in turn introduces a new set of problems into the company by adding people whose capabilities lower the overall standard of performance."
What about companies that already operate on a large global scale, like BP, GE, Toyota and Wal-Mart? Kapor is skeptical about their potential to progress toward anything like sustainability, though he says that "change is always possible, and there is nothing dishonorable about beginning with baby steps. In fact, it takes a lot of courage. But it’s not an accident that most businesses only get serious about social responsibility after some sort of crisis. "Once the crisis passes, it is incredibly easy to slip back into complacency," he adds.
Reprinted by permission of Harvard Business School Press. Excerpted from The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World. Copyright © 2008 John Elkington and Pamela Hartigan; all rights reserved.
