Enterpreneur (E). How did the concept of LRN come about with Dov Seidman? What foundation is your business based on?
Dov Seidman (DS): Well, I founded my company back in 1994 on one idea—principles and processes are not at odds with each other. Rather, they can come together and reinforce each other. I am of the belief that if these two come together efficiently, they can not only help a business scale but also make it sustainable over the long term.
When we founded the company, back in the 90s, the U.S. was in its ‘Just Do It’ era when people were awarded for speed and efficiency. The underlying theme at that time was getting things done in any which way possible. The larger aim for the businesses at that time was to become ‘too big to fail.’
But here we are now, and the world has been reshaped and restructured a fair bit. It has certainly become more flat. Everything is so intertwined. More importantly, the notion of a competitive advantage has shifted from ‘what we do’ to ‘how we do it.’ And that is where we come in for companies.
E: So what LRN does is help companies understand that the paradigm has changed? How does it do so?
DS: We have a presence all over the world, including Mumbai. And we consider ourselves entrepreneurs because we are really in the business of helping ‘principled performance.’
Further, we have a view on how things should be and not just on how they are now. We have a view on how leaders can be more inspirational for their teams.
How companies can forge deeper connections with their employees and customers… and how these various aspects affect the overall sustainability of the business.
E: From the time you started in ‘94, a lot has changed. Would you say there is a slow shift towards better social responsibility, ethics and compliance?
DS: There has been an enormous change since the 90s. The fundamental difference is that we have gone from the era of ‘Just To Do It’ to the era of ‘Just Do It Right.’ From ‘Greed is Good’ to ‘Good is Good.’ We have gone from ‘Too Big to Fail’ to let’s become ‘Too principled to fail.’ We have gone from profits and shareholder returns to a deeper moral responsibility to community and society.
Companies in the US used to stick to the idea that man is rational and all they have to do to motivate employees is use carrots and sticks. But now they have realized that what people really want is a sense of purpose, dignity, and happiness. It is a very different world now.
Compliance is something that I have a lot of thoughts about. The act of complying is about following rules and regulations and policies. Our opinion is that if we first have the right rules and right policies, then we can easily motivate people to not cross the line but play by the rules. But what we notice is that many times, the systems of compliance choke the business when an attempt is made to scale up. And at the same time, they are not very effective. Rules have their limitations when it comes to their behaviors.
E: Could you elaborate on that? If rules and regulations can indeed choke a business, then where is the workaround for entrepreneurs?
DS: We are realizing that every business must first have core values, to which all the people must adhere, but not a thousand rules and regulations. If you give me a thousand rules, as an employee, I would not be able to adhere to all of them and they will choke me. The reason for that is that business today is about differentiating to win. It was about doing something better, cheaper and faster back in the 90s. But the world evolved, and indeed India did too. To use a metaphor, companies that strived to answer the phone in two rings were great businesses. But when everyone started answering the phone in two rings, which is what is going on now, businesses had to quickly find a way to stand out and be unique. And this uniqueness comes from how we do things, how we treat others, how we add value to the community, etc. It is an evolutionary shift of the highest dimension in terms of creating an advantage.
Let me put this in a clearer way. You would agree that business is about progress. Progress could be in terms of growth, revenue, and innovation. But to have progress, you need innovation. Innovation proceeds progress. But to have innovation you need risk capital. You need new ideas. You need new people speaking about new things in meetings. But when do people take risk? They take risk when they are in a high trust environment. And that is what entrepreneurs must create. That is the goal.
E: Creating a high trust environment sounds easier said than done when you are in a very competitive, emerging economy…
DS: We at LRN call it going on a TRIP, which stands for a Trust Risk Innovation Progress. Trust is a ‘how’ question actually. How do we intend to treat our people and do our things? This is an important question that, if answered at an early stage, helps entrepreneurs build a sustainable business.
Most people think that trust is all about who we trust. And we scale that idea in to rules and regulations and approvals. So before you spend $8 you need to ask three different people. This is because we mistakenly believe that trust is about whom can we trust.
The virtual value of trust, however, is actually in giving it away. The entrepreneurs who give trust away are the ones who are creating sustainable organizations. I want to give you an example of this donut guy who trusted customers with what they would like to pay for his donuts. The donuts were equally fresh and the same price as those across the road. He just put an open try-out there on his stand. And he started outselling his competition 3 to 1 because of how he behaved. That is what entrepreneurs must do. Give trust away.
E: Is that too romantic a notion for somewhere like India, which is a growing economy with the same sort of competitiveness that you saw in the U.S. in the 80s and the 90s?
DS: I know in India there is a lot of attention on corruption and I am aware of the work of Anna Hazare in recent times. But the fact that it is a growing economy should not be an excuse for not creating an environment of trust. I want to give you an example of another fast-growing economy here.
In Indonesia, they have now 10,000 honesty cafes where schoolboys and girls can take fruit off the shelf and, instead of going to a cashier, pay their own in a jar. So, instead of putting more controls in place, there are trying to inspire young people with the principles of honesty and integrity.
Entrepreneurs who build companies from scratch have a choice to make. They can put all these controls in place. Or they can create a high trust environment based on shared values and they can then see the business scale to a level they would not have imagined.
Just because the U.S. was just doing it in the 80s and 90s, before it decided to change, should not be the reason India does the same. They cannot say that they will all be just doing it for a couple of decades and they will then get back to being socially responsible when a crisis hits. There is no time. We are now not having a crisis every 10 years, but sometimes every 10 hours. Your own stock exchange plummets when there is a bond crisis in Greece. The world is too flat for that thinking now.
E: Is a rethink of values what is needed then? How can entrepreneurs and the people around them introduce changes to become sustainable in this era of crisis after crisis?
DS: We have to rethink business leadership and think beyond situational values. To explain situational values, the most basic example is an entrepreneur thinking that he will pay whatever it takes to get something done, hire somebody, market something etc. This is called being situational and this makes you think in terms of what you can and cannot do.
These were the values in the 80s and the 90s, where our institutions thought of carrots and sticks for every situation we can think of. But now we need sustainable values and not situational values. These are integrity, honesty and dignity. These are the ones that build long-term relationships.
Earlier, you would buy from a company on price. If one company undercut the other on price, the customer would go with the cheaper one. This allowed companies to capture people. There was a lot more distance between companies. But now, this is no longer valid.
Today, there is some much more room to move around and companies are forced to find deeper ways to connect with their clients. And the sustainable values we talk about are the game changers here.
Secondly, entrepreneurs must ask internally why do people work for them? If it is only for the money, then they have a problem. The reason today why an employee is working for an entrepreneur must be based on these sustainable values. That reason cannot be based on situational values such as money.
You know what gets me? That when an entrepreneur approaches a mentor or an investor, the first question he is asked is how would you scale your business? How would you bring more customers and revenue?
What if we ask from every entrepreneur how would you scale your values? How do you scale what do you stand for? These are the questions entrepreneurs need to be asked.
And the ones who have answers to these questions are the ones who would build sustainable long-term businesses.
Source: Entrepreneur Magazine