Looking for ways to be successful? Look at nature!

I had a super interesting discussion earlier this morning with a good friend to discuss the concept of value, among other things (like his son’s tonsil infection). We sat in the middle of Balinese jungle surrounded by majestic nature of the place. His background: finance and venture debt (US), my background: private equity (UE).

We agreed that frequently, when we are considering an investment, or whether to back the right entrepreneur (or a wider team) or pick the right momentum, we frequently forget that businesses are created to provide a wider concept of value.

So, what is that “value”? Is this the amount of profit or cash flows a company produces, i.e. economic value? Not really. If that would be the case, companies that press their suppliers and overcharge their customers and squeeze the last juice of their employees should prevail. But they don’t, they launch, fly, tumble and then fall. If you give them enough time.

So, what is it?

The closest we got to the genuine understanding of value was a company’s (or a person’s) purpose. Why does it exist, why does it do what it does?

Most truly successful companies have their purpose rarely explained in economic terms.

To give just a few examples:

Nike: “Bring inspiration and innovation to every athlete in the world”

American Express: “Become essential to our customers by providing differentiated products and services to help them achieve their aspirations”

Tesla: “To accelerate the world’s transition to sustainable energy”

Once you understand your purpose and the holistic concept of value that you provide, something magical happens. The entire organization is becoming focused on giving (or providing) value and not extracting (profit) from its network. This may seem as a very subtle shift but it has profound effects.

Firstly, your team starts to have a real mission in their work. It’s no longer a quid pro quo to feed themselves and their families and get kids to college (or whatever their goals and struggles might be), but people contribute their genuine talents in that (purpose driven) quest. And that makes them not 1% or 2% more efficient but sometimes 50% or 100% more efficient!

At the same time, your purpose becomes a much better recruitment tool. After almost 20 years in investing and hiring probably over a 100 people, you know that the best CV and experience and a hefty ESOP (carrot) package does not guarantee success nor consistently high levels of motivation. The best hires are always the ones aligned with the purpose and not your economic goals.

Secondly, once you nail down you purpose, your core of existence (as a business) – starts to build a gravity center. Your customers are no longer upsold with fancy marketing techniques, but they start to buy and use your products or services because they understand their value and they know that you exist to maximize that (holistic) value. Also, you can invite you suppliers to cooperate it this value creation and your relationship magically turns from annual negotiations to annual inspirations and co-creating.

See that? With a powerful enough purpose this ecosystem conspires to make it happen. Together. Till now, there was no mentioning of revenues, profit, cost base, and operating efficiency. And don’t get me wrong, each company requires profits, planning, financing, budgeting and proper processes, but what good is it if does not have a heart? How long will it last?

Our analysis at Regenate, after reviewing over 5.5 thousand publicly listed companies, shows that companies that are conscious about their business are statistically more valuable (by EV multiple), more profitable (better margins) and are more resilient (go through turbulence much safer and faster). I will elaborate on methodologies in the following posts.

So consequently, our role as an investor is helping companies and teams to find and then perfect and live their purpose to create genuine value. Solve acute problems that we face. And I think this part (next to really respecting human potential) is what’s missing in private equity and wider investment space. I will get to that soon too.?

Finally, we discussed about long term inspirations. What could be our north star, a benchmark, for building and structuring businesses and wider ecosystems of co-relationships. Unfortunately, the modern western civilization does not provide any good inspiration. Roman Empire fell after c. 1,000 years, and economic system is about 300 years old – and not working remotely well.

So, our discussion went towards nature (it was quite easy with that view). Natural ecosystems are nothing else that systems metabolizing energy in a circular process, and they are around for over 500 million years. Much better proof of concept, I believe. If you look close enough you could see a lot of similarities with how businesses and their relationships work. Therefore, seeing your business as an ecosystem that requires care in all remote aspects of its ripple effect, is what really inspires be truly efficient and build businesses (and systems) that will last.

In other words, the final thought of this is: look around, look deep to the sense of what you are doing. Are you really creating something or is this just a mirage that looks good in numbers? Look at our planet, it provides an abundance of inspirations.?

If you have a brief moment to stop and think and reflect and share here with the community, please do so. Perspective is the most valuable gift we can share as human beings.?

Om Swastyastu!

PS. Another inspiration that I am still very curious to dive into with my anthropologist friends, are inspirations from indigenous cultures that have coexisted with natural environments for 50 or 60 THOUSAND years. And they still can thrive (if we allow them).

#valuecreation #impact #privateequity #newparadigm #nature #biomimicry