This brief essay is an effort to share my approach to building a business that raises the level of success for all stakeholders and prioritizes survival over growth or profits.
This essay is "living", meaning that I will, from time to time, update, add, and modify different sections as my understandings of building a sustainable business evolve.
After all, evolution is part of surviving.
Sustainability as my measure
There are times in any business when it is a wiser long-term decision to take action that reduces profits or growth. In these times, you may be building for a future growth expansion, or preparing for a tough external environment. My intent has always been to build businesses that are sustainable and survive over the long term as a higher priority than achieving excessive levels of growth or performance. In fact, I find that whenever performance is optimized for, survival suffers.
Beyond the survival of the firm, a sustainable business is one that ensures the survival and even thriving of all stakeholders. This includes making decisions that enhance the ability for the following parties to thrive in any and all environments:
Investors and Lenders
Industry Knowledge Base
I consider every business to exist within an ecosystem of businesses, communities, families, governments, industries, technologies, and other interacting forces. Every business should promote and contribute to the sustainability of all of these entities, and none at the cost of the survival of others.
Profit maximization as destabilizing
Profits often come at the loss of profit for other parties in the supply chain. This raises the risk for suppliers, customers, or other firms in the supply chain, and endangering your ability to operate if pushed too far. For example, as profits are taken from suppliers, they have less margin to deal with downturns, quality issues, or future unforeseen events. Unable to absorb any surprise costs and customer charge-backs, a company with extremely thin margins may be at risk of bankruptcy with just one major unforeseen event. A healthy supply chain will be able to absorb costs related to variation and quality. Without this ability, there is a decrease in the stability of various firms in the supply chain and thus the sustainability of my business.
It’s not just the ability to absorb costs. They can't innovate, invest in their process, or hire great people. They become brittle, weak, non-competitive, or at times, fraudulent.
Maximizing profits can strip others in your supply or value chain from innovating and creating a better environment for you to thrive. Ideally, you want all companies before and after you to have the ability to invest in their people, their operations, and their value propositions. This increases the total value created on the chain which you exist and will create a more sustainable market to be part of.
Sustainability means Quality
Quality and excellence
Sustainability is achieved not only by focusing on the right things but by doing the right things. Quality is to be prized over speed and cost in order to build a sustainable business.
Cost-focused businesses tend to compete in low-margin high-volume businesses and price themselves out of access to capital and resources needed to stay for the long term.
Speed tends to produce high-performance results that are tuned to the the current environment, but not usable once a regime shift occurs. A supply chain setup based on short term strategies like tax or tariff arbitrage, social media marketing based on optimizing for a Google search algorithm, or products based on hot trends are not sustainable business practices.
When cost or speed is prioritized, you end up redoing work and reforging relationships. If we can make a decision once, build a feature once, or ship a product once, that is ultimately preferred to doing a thing three or four times. That time and investment in the 2nd, 3rd, and 4th iteration could be invested into a new task or service which could build on the 1st. Rework is expensive. It is expensive because you are wasting resource redoing a thing which was already done, and it is expensive because you are not doing a thing which could compound and grow over time.
Quality is to be the focus.
Quality should permeate everything that is done.
Quality of product
Quality of decision
Quality of information
Quality of communication
Quality of operations
Quality of process
Quality of people
Quality in all things
Quality considers all stakeholders
For quality to really take hold, you will need to focus on all stakeholders. Stakeholders to consider include:
The evolution of quality
For a thing to survive over a long period of time, it must be evolutionary. It must be able to adjust to changing external factors and environments. Biology is an excellent model here. There are mechanisms built in to adjust and adapt. Your business needs the same. This is the second key aspect of building a sustainable
Most businesses are based on a specific business model, and a specific target customer, and a specific sales process. Fine-tuning these can explode your business in sales and popularity. However, this may not sustainable. Ask yourself, will this all still hold true 100 years from now?
If you want to build a sustainable business, you will slow your growth a bit. You won't be primed for 100% maximization of the current environment, but you will be around longer. You will need to divert some time, some money, and some resources to evolutionary processes. You will need to build the ability to adapt and change into every part of the business.
Survival is about doing what is right, in the right way, over the long run and with a focus on the long run. It is about adapting when you need to change, and being stubborn when you need to hold fast. Optimizing for longevity requires letting go of optimizing, and instead embracing deep thought, hard things, and focusing on what it timeless.