Successful Businesses with “Why” and some cautionary tales
In my last blog, I discussed why veterinarians should care about who owns and runs veterinary hospitals. The “why” of your existence determines your business priorities and your spending.
Many people think that it is not possible to both run a successful business and to live your values. However, there are great businesses that have been incredibly focused on their “why.” When these businesses stay focused on the importance of “why”, they can have long term success. If the why is lost, the business can lose its competitive advantage.
Living the WHY successfully over 40 years: The Patagonia Story
If you hike or enjoy outdoor activities, it is likely that you own at least one Patagonia item. This outdoor clothing company was founded in 1973 and generates over $1 billion a year. Patagonia is interesting because its values are built into the DNA of the organization. They provide clothes so that people can enjoy the outdoors. Because their real purpose is helping people be outside, they realized that they had to play a part in protecting what they value most. Thus, they early on opted to be one of the first companies to commit to 1% for the planet. They specifically make clothes to last as long as possible because new consumption fuels climate change. Much of their marketing in recent years has been related to their willingness to take a stand and advocate for protecting natural spaces. Most recently, they publicly announced that they would donate their entire tax cut to fighting climate change.
What is interesting about Patagonia, is the more it leans into its purpose and values, the more its revenue grows.
One of my favorite business books is written by Patagonia founder, Yvon Chouinard. Let My People Go Surfing is a great read about how you can be successful while truly living your values.
Solve more problems than you create: Warby Parker
Warby Parker was started when a first semester graduate student lost his glasses on a hiking trip. A new pair was so expensive that he squinted through a semester in order to save enough to buy a new pair. At the time, eyeglasses were made almost entirely by a single company who kept prices artificially high. By creating a new sales channel and designing glasses in house, Warby Parker was able to start a business based on providing affordable eyeglasses. They also wanted to run a business that overall solved more problems than it created. Through a partnership with Vision Springs, they provide free eyeglasses to local entrepreneurs in the developing world. This helps provide life changing vision while helping the development of local businesses in poor communities. They also specifically built a carbon neutral business. h
The Toms Shoe Story – A cautionary tale
TOMS Founder Blake Mycoskie’s “why” came about when he visited Argentina in 2006 and saw the hardship of children growing up without shoes. He created TOMS Shoes with the business model of providing a pair of shoes to a needy child for every pair purchased. This one for one program led to a successful business and donation of over 86 million shoes to children in need.
The Why was so powerful that the company continued with a similar program for eyewear and drinking water. Warby Parker developed its eyeglass donation program based on this successful Toms model.
In 2014, TOMS Shoes was valued at $600 million. Blake Mycoskie felt like it was still being run as a start-up and that both additional capital and also additional expertise would help them grow. The decision was made to sell 50% to private equity investor, Bain Capital. By 2018, the company was swimming in debt.
As reported by Bloomberg,
“The deal that landed Bain its stake in Toms was part venture capital, part leveraged buyout. The private equity firm financed its 50 percent share purchase with a combination of new equity . . .and debt issued through Toms. The investment was supposed to help Toms grow up by lending corporate expertise and resources to a company still operating like a startup. Instead, it followed a model that’s become all too familiar to struggling retailers: Buy the company with its own debt, ideally while taking generous fees for the transaction and then operate it on a budget”
As discussed in my blog on competitive advantage, if you are operating like Whole Foods but someone comes in and tries to cut costs to make you Walmart, you are probably going to suffer. Because Bain Capital either does not fully understand or believe in the model, its ownership has diluted the power and implementation of Toms why.
The Body Shop – Lessons with a sale
Anita Roddick founded The Body Shop in 1976 to provide ethical beauty products. The company made a commitment from the beginning to avoid animal testing and to use sustainable products. It campaigned to protect workers and to set up transparent supply chains. Like Patagonia, much of their marketing was taking stands and supporting environmental, human rights, and animal protection values. This purpose driven business grew from a single shop in England to over 3000 locations in 66 countries.
Anita Roddick was a dynamic leader with a strong sense of purpose. Sadly, she developed Hepatitis C and by 2006, was very ill. The Body Shop made the hard decision to sell to L’Oreal. Roddick’s hope was that The Body Shop would serve as a “Trojan Horse” and bring her values to the larger company. Sadly, she passed away a year after the sale. However, she donated her entire estate to the causes she believed in.
The Body Shop has faltered as part of the larger corporate brand. As an article in Forbes noted:
“The Body Shop might be an example of what happens when a brand’s core values are lost due to being absorbed by a larger corporate identity. Recently, both L’Oreal and Estee Lauder have acquired a number of brands that are known for their niche values. These brands click with the target clientele because of the values they promote. It is essential that the authenticity of these brands remains intact following acquisitions, as this is generally a unique selling point for the brands. The moment that appeal is lost, the brand becomes just another name in a sea of similar brands and loses customer loyalty.“
What does this mean for Veterinary Hospitals?
Living your values can be a successful business strategy for veterinarians. Jane Harrell is a researcher from ‘cause Digital Marketing, a marketing firm working in the pet industry. Last summer, they surveyed 469 pet owners. One in five pet owners reported concern that their practice was only in it for the money. 82% of pet owners said they would be more likely to refer others to a practice doing good works.
This result parallels that from a 2010 survey of consumers which found that over 80% of consumers would switch brands between those similar in price and quality if one brand supported causes they believed in.
However, we know from the Body Shop story that consumers can tell when you are truly living your values and when your stated”why” is just lip service. Thus if you sell a veterinary hospital with a strong why, the business may falter if the purchaser isn’t authentically in support.
What is Your Why?
Your why for existence might be a lot of different things. For our hospital, it was all about education and quality improvement. Thus, our efforts were CE for local veterinarians and free first aid classes for pet owners in the community. We were always available for news stories and provided clients with lots of resources for understanding what was going on with their pets.
Maybe your why is community building. If so, do you participate in local events? Do you volunteer in your child’s school? Do you work with your local humane society? If you advertise, do you make sure it is in local publications? Do you support a little league team?
There are lots of different “whys.” Understanding and living your why can help you create both an authentic business that is fun to run and one that is financially successful.
