Matt
Welcome back to Sound-Up Governance. Today's episode is the companion to the third edition of the Ground-Up Governance newsletter, which provides definitions for business, company and customer. I know I frequently use the words business and company as if they're interchangeable, even though they're often pretty different. That's fine. Of course, if I say business when I mean company, it doesn't hurt anybody or even confuse anyone too much. But still, I thought it'd be fun to talk to someone who could really help me to understand what makes a good business good, and how that's different from what makes a good company good. And of course, all of this is tied up with the needs, wants, hopes and fears of the customer. So I called my friend Lisa Oldridge, who describes herself as a performance strategist. She works with companies and boards of directors on governance, strategy, ESG performance, and more. Oh, and ESG stands for environmental, social, and governance and refers in general to stuff that's not directly related to money. Not only that, but she's the investment director at The 51 Ventures, which invests money in disruptive female-founded enterprises. Plus, in addition to being a corporate director, and a bonafide a governance nerd, she has also spent a big chunk of her life in institutional equity sales, portfolio management and research. So in other words, Lisa's spent a lot of time and energy being curious about what a good company or a good business looks like, and whether those companies or businesses are worth putting money into. And that's exactly where we'll start. When Lisa is on the outside, looking in, what gets her excited about a business, or maybe a small company that only sells a single product or service.
Lisa
So there's tons of problems out there. Whether or not it needs to be solved is another question. And often you see with founders, if you're talking about really teeny companies, you know, you've seen the typical entrepreneur, they're like, "Oh, my God, we got to solve this problem!" But it's really actually not a problem for that for many people, you want to see that there's a problem that exists, and they've come up with something that will solve this problem. It doesn't have to be like the optimized version of it. You've probably also heard about MVP,
Matt
MVP, or minimum viable product, or, as Lisa puts it,
Lisa
We also call it the shitty first draft of whatever it is, but you probably have a bit of traction there. IP is a big one IP or thought capital or moat
Matt
“Moat",” you know, just like a moat around the castle. It's something special about a business that makes it tricky for someone else to intrude on your territory by making it expensive or difficult to copy your technology, for example.
Lisa
And then competition, and actually it's a bad sign when you see that there's no competition, because it's usually especially if you come in and you see a founder or group that are pitching and they're like, "oh, yeah, no, we kind of, we've come up with the thing, but nobody else has!" A, it's probably not true. And B it just gives you a sense of their capacity for understanding future pivots and the market etc. Anyway, so that's more maybe a commentary on their character or their abilities or behaviors.
Matt
There's so much interesting stuff in what Lisa just said that it might be worth rewinding, 10 or 15 seconds just to hear it again. It made a huge lightbulb go off for me. To Lisa, an entrepreneur's understanding of their business can provide an important glimpse inside their character. We'll get back to that in a sec. I wanted a better understanding about this idea that creating something new with no competition might not be all it's cracked up to be. I mean, we've all heard the term first mover's advantage. Isn't that a thing? Shouldn't it be a good thing to be the first one to come up with an idea? I even said to her, "Lisa, I'm trying to do something new and fresh in governance. Am I messing up somehow?"
Lisa
Let me ask you this. Why is first mover advantage? The answer to everything? It's not! I think there's a presumption sometimes "Oh, I've seen somebody else with that. Therefore, it's not going to work. Right?" I think value proposition is the thing that you're selling or bending or creating or innovating on, it's as much where and how it lands as what it is. I had a mentor that that told me, a guy that I worked with, he was awesome. He was like, "Oldridge, the difference between being early and wrong is nothing!" Right? Even ideas that are completely original, still do have competition. And so I guess it's not a red flag to me if someone hasn't figured out who the person who's also doing... I don't know. lavender striped pogo sticks, but who's doing pogo sticks and who's painting toys, lavender. And so what does that look like? Because it also tells you about the customer! One thing that we one thing that I do see is novelty, almost taking precedence over will this actually be used by more than a few people, right? I would rather see a concept or like somebody innovating on a proven thing or direction or widget, but doing it in such a way that's original in the sense that it's adding more value to the end customer.
Matt
So even for someone like Lisa, who studies companies at their earliest stages, looking for the coolest new ideas, the biggest opportunities for innovation and investment, there might not be a difference between being first and being wrong? It made me think of the songs or books or art that I love the most. Sure, there's something fresh and original about them, but they also, you know, give a sense of familiarity. Building on what came before them. Sorry, I'm getting a bit abstract here. But the insight for new businesses is pretty profound. Before we go too much further, Lisa use the term "value proposition." It's one of those terms most of us have heard before, but what does it mean exactly?
Lisa
And value proposition it's business canvas, it's like the middle of it, like the jelly in the donut! It's what your product or service or widget or thing does for your customers to make things better, or to make them feel like things are better.
Matt
And this is how the customer ties into all this. A good business doesn't have to be completely new, it just needs to make the customer feel like things are better than they were without whatever product or service the business offers them. But let's get back to what Lisa said earlier about the character of the leaders involved. We know she looks at the competitive landscape, the value proposition and so on. But what else is she looking for
Lisa
The leadership and the team attributes. You know, are they dedicated? Do they have the horsepower and the grit and all that good stuff? And then I would probably single out the CEO or the founder, like the person who's in charge, as almost like a separate thing, because the earlier the stage of the company, the less actual crunchy information you have. And you're looking for leadership attributes, but then also just you know, the whole humility and brains.
Matt
All of this started to make so much sense. Sometimes from the outside, we can't really see the nuts and bolts that show us the potential of the business itself. So we need to rely on what we really can judge: character, humility, brains. So I wondered if the potential of a person matters so much, could a great leader maybe offset concerns about a bad business or a bad company? In other words, to someone like Lisa, what matters more the person or the business?
Lisa
Could you have, you know, like a superstar person with a not so great company? And what's better that or the inverse? And definitely the former. And that works all the way up with a you know, with with large organizations, I think probably even moreso. A great business with someone at the helm, that's not great, will eventually run out of momentum. You could still make money. In the meantime, though.
Matt
Whoa! We'll take on A founder with a B business over the inverse. In fact, a great business with bad leadership is at best a way for an investor to make a quick buck before the business dies. And you know, what's extra cool? In some cases, emphasizing the people side can create special superpowers for the company and the business.
Lisa
If you're talking about a business inside that company, or a vertical inside a company, or product line, or some kind of an offering. More often than not these days, you're talking about a bunch of people in a company that do a thing. And it's maybe different to the rest of the things that the company does, right? One of the organizations that I sit on the board of has had the situation where, you know, they did a raise, and then they acquired this business unit. And it's really cool hearing about the first couple of days about where it was like, "Okay, you're here because we want you not the thing, but we want YOU!" And over and above that being a good acquisition on paper, can you imagine what that did to the sense of, you know, engagement, and therefore performance, of the company, etc, etc. So it's like, and it doesn't require a lot of investment. It's not like somebody had to write a big check after the fact sort of have these people come on and be super excited about coming into work the next day.
Matt
And there you have it, right from someone who's in the middle of it, studying, assessing, developing and buying businesses and companies and thinking about customers and value proposition, competition and all the other things that can influence whether an idea will succeed or fail. What excites Lisa the most? Character, humility, brains, the people who run these businesses and companies. And emphasizing the importance of those people can further supercharge the organization's performance. In the next episode of Sound-Up Governance, I'll speak with Nick Chambers about communities and stakeholders. He’s an executive search professional and governance expert who specializes in purpose-driven organizations. Thanks for listening.
Sound-Up Governance (Ep3) - Companies and Businesses with Performance Strategist Lisa Oldridge (interview)