Companies on a Mission

Entrepreneurial Strategies for Growing Sustainably, Responsibly, and Profitably

Michael V. Russo

• Publisher: Stanford Business Books
• Year: 2010
• ISBN:
  9780804774284
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Estrategia empresarial

"Let your social and environmental conscience be your guide" can be a successful and durable strategy for a firm. This is the first book to explain how following a vision for the earth and for society can be a powerful route to profits for small and medium sized companies.

Companies on a Mission explains that mission-driven companies appreciate and leverage traditional strategic principles—with a twist—to win in the marketplace. By clearly and pragmatically laying out this argument, author Michael V. Russo crystallizes for enlightened businesses what Michael Porter made clear for mainstream firms years ago. The book shows that a mission-driven approach creates significant barriers to imitation by larger, established rivals. Mission-driven firms build their brands on authenticity. Only you are you. And, authenticity builds customer loyalty. Later in the book, Russo moves beyond the firm level to look at these companies in context. He finds, for instance, that just as specific industries often develop in geographic clusters, mission-driven companies also aggregate. But, they put down roots where other businesses are pursuing complementary goals. Portland and the Bay Area are two such hotbeds. This allows for cooperation, as opposed to breeding stiff competition.

The rise to prominence of mission-driven companies like Patagonia, Seventh Generation, Kettle Foods, and Calvert Group is undoubtedly the result of powerful trends in consumer markets, including the rise of conscious consumerism, the transparency movement, and fallout from global competition. Most books that address social and environmental issues are focused on large corporations, crafted as autobiographies by CEOs, or written as moral calls to action without regard for the bottom line. Companies on a Mission both chronicles a movement and provides grounded guidance to entrepreneurs and managers who wish to join the wave. For these readers, this book is a one-of-a-kind bible.

Chapter 1: Capitalizing on an Underground Consumer Movement

A Revolution in School Lunches

The second time through, it’s easier to find Revolution Foods. You simply drive west on Atlantic Avenue in Alameda, California, and make a right at the A-7 Corsair fighter jet. Odd, until you realize you’re in the section of town that used to be the Alameda Naval Air Station. So you might say that Revolution Foods is beating swords into plowshares. Founders Kristen Richmond and Kirsten Tobey have converted a couple of commercial buildings that used to serve the military into a base camp from which they are transforming school lunch programs. They are introducing nutritious organic food to schools with disproportionate numbers of disadvantaged kids and creating jobs for low and moderately skilled workers. And they’ve created a profitable, growing concern with a full plate of opportunities before them.

Revolution Foods is just one example of a movement of for-profit enterprises that are meeting financial goals, promoting social equity, and exercising environmental stewardship. Its story is the story of thousands of small and medium-size companies that have quietly begun demonstrating that business can be about more than money. But don’t think for a minute that there’s a foolproof recipe for success. Companies on a mission, which I call mission-driven, face all the challenges that their mainstream counterparts do. In addition to financial goals, they confront an additional class of issues stemming from their social and environmental commitments. Indeed, it is a balancing act for companies managing this “triple bottom line,” one that requires thoughtful planning, skillful execution, and perhaps most important, an intuitive feel for where and when financial goals and social and environmental initiatives reinforce each other.

The story of Revolution Foods begins with the personal histories of its two founders, who met while graduate students at Berkeley’s Haas School of Business. Both Richmond and Tobey had experience in the food service industry, but their passion for serving society and the planet intensified at Haas.1 The school’s leadership in those areas had made it a magnet for enlightened entrepreneurs, and its faculty featured a number of practitioners, such as Will Rosenzweig, founder of the Republic of Tea and a longtime entrepreneur who worked closely with students to develop new businesses.2 Eventually, Richmond and Tobey decided to create a business that brought healthy school lunches to kids, delivered by an organization that provided its employees with benefits and wages that exceeded industry norms.

But how does a company enter a $7 billion market dominated by such giant food producers as Tyson and Archer Daniels Midland and such large food service providers as Sodexo and Aramark?3 Not by competing directly with those companies for supersized contracts with San Francisco or Oakland Unified School Districts, that’s for sure.

But there was another point of entry.

Charter schools—public schools that receive a per-student allotment from their funding districts and that are allowed considerable autonomy in determining their governance structures, educational missions, and staffing and procurement procedures. A prime example of a new approach to purchasing was when charter schools activated their autonomy to break out of the nutritional null set that represented most school lunches. When parent committees and not administrators made decisions on food, they took the Revolution Foods value proposition seriously. It didn’t hurt that charter schools are free to make decisions that aren’t bound solely by price and are open to a company that, quite literally, caters to their wishes for better school lunch nutrition.

Still, it wasn’t easy. Food procurement at publicly funded schools is bound by federal laws that mandate caloric and vitamin content in lunches and limit fat calories and saturated fat calories to 30% and 10% of the meals, respectively. With reimbursement rates that top out at about $3.00 for the poorest students, it’s a tall order to serve a balanced meal. So providers often start with inexpensive fatty foods and then hunt for cheap high-calorie, low-fat ingredients to round them out. The usual choice: sugar, which crowds out healthier but also more expensive vegetables. When bids are based strictly on cost, truly nutritious foods lose out.

To get started, Richmond and Tobey spoke with educators, parents, school administrators . . . and children. That last group was forthright. Collectively, students were saying, “People don’t care about us. We can tell by the food they serve us.”4 Tobey recalled one physical education teacher who routinely devoted class time to nutrition, only to feel like a hypocrite when he strolled through the cafeteria and met students who wanted answers about why their lunches violated his principles.5

The partners found a school willing to pilot their program and started assembling a client base of schools. One of the first schools they approached was Monarch Academy, located in a depressed section of Oakland, California, where 95% of students were on free or reduced lunch programs. This and other initial efforts were a huge success, and Revolution Foods quickly found itself receiving so many inquiries and referrals that it no longer needed to seek out business.

The easy part was creating better meals, of course. The hard part was making them on a budget, because even when a school’s administrators agreed to go above the $3.00 federal limit, it was by only a few pennies. Keeping overhead to a minimum was a start. Think entrepreneurship: cheap rent, a meeting room with six unmatched chairs, a thermostat set at a brisk level in February. When it came to food operations, the proper depth of analysis and careful cost and waste control were absolutely critical.

The ingredients for meals, though, presented the company with classic trade-offs with which mission-driven companies invariably wrestle. Executive chef Amy Klein makes all meals from scratch, bypassing high-fructose corn syrup and trans fats and including fresh fruits and vegetables with every meal. But she has to keep an eye on costs, so although being 100% organic is a worthy goal, Revolution Foods is not there yet. Instead, the company must balance the environmental and social value of going organic with the need to be cost compet...