Purposeful Organisations

An Abundance of Capital for Purposeful Startups

By March 13, 2018 One Comment

I gave a keynote recently, to a corporate audience, where I highlighted that exponential technologies allowed startups to quickly become significant and sometimes even existential threats to legacy incumbents.

There was I admit some degree of scepticism.

When I suggested that large organisations need to treat startups with renewed respect, because capital is now readily available, all eyebrows where raised.

The Light Phone 2 is an excellent example of why I stand by this statement. Capital is available, especially for anyone who is developing a product or service that was build around a purpose beyond profit.

In their 2015 Kickstarter campaign, founders Joe Hollier and Kaiwei Tang managed to raise $415,000 to create The Light Phone. Despite what seems to be a reasonably large percentage of their initial backers appearing unhappy with this first product, they then switched to Indiegogo to fund the build of The Light Phone 2.

Funds raised 01st March ~ $399,000

Not bad for a company that is creating a product that is marketed to be used, as ‘little as possible’!

So how have they done this and what can large mature organisations learn from them?

Well, firstly they have not just built a product that makes phone calls.

They have in fact created an experience that helps you to find more time to “appreciate life and find more meaning and purpose”.  

They are therefore not a ‘phone’ company per se; they are a ‘lifestyle’ company, and it is this difference that gives them an advantage over every other phone manufacturer.

Their goal isn’t to compete with features, but rather to provide a solution to the 24/7 bombardment of data that you face every day, and at least for now, they are offering this solution via the medium of a phone.

They have therefore set a purpose that goes beyond profit; This is their advantage.

Funds raised 04th March ~ $619,000

The Light Phone team are not the first, the last or the biggest organisation that understands this. In his book ‘Start with Why‘, Simon Sinek explains why Apple’s iPod took the spoils over the arguably more advanced Creative Zen.

“the Creative Zen advertised their product as a 5GB mp3 player, whereas Apple gave you 1,000 songs in your pocket.  The difference is Creative told us WHAT their product was and Apple told us WHY we needed it.”

More recently in ‘The Four‘, Scott Galloway argues that Apple is a luxury brand in the same vein as Louis Vuitton.  This makes perfect sense if you ask yourself, why would anyone pay substantially more for a laptop from Apple, than the cheaper, lighter and better-performing options from numerous competitors?

Scott explains that the

“Apple logo, which graces the most coveted laptops and mobile devices, is the global badge of wealth, education, and Western values. At its core, Apple fills two instinctual needs; to feel closer to God and be more attractive to the opposite sex.”

I’ll let you make your mind up whether you agree with his view that your decision to buy a MacBook Pro or Louis Vuitton handbag is driven by primal instincts of superiority and sexual prowess, but one thing is clear, and that is buying decisions are emotional, not as we like to think analytically logical.

And if that’s true, it’s not surprising that companies that build themselves around a purpose higher than profit (their ‘why’ using Simon Sinek’s vernacular) have significant advantages to those that organise around solving practical issues such as costs, features and distribution channels.

So when I say capital is more freely available for startups, no matter whether they are at the idea, prototype or production stage, the argument is undoubtedly strengthened when the company in need is clear about their ‘why’ to the investment community.

Funds Raised 5th March ~ $700,000

The Light Phone founders are crystal clear about their ‘ why’. They have designed a phone which should be used ‘as little as possible’ to allow us to have more time to ‘appreciate life and find more meaning and purpose.’

The Light Phone 2 offers something entirely different and emotionally more permanent. It gives you the freedom to appreciate life, which is analogous to how using an Apple product makes many feel cool and hip and brings confidence. It’s offering you a new identity in your social interactions in the same way you determine who you are by what you wear.

They have found a purpose (or why) that emotionally resonates and therefore finding capital, cannot be the determinant of whether they succeed or fail because deciding whether to invest money is as much an emotional decision as choosing whether to buy a product or service.

(I’d recommend you read Ray Dalio’s, Principles to understand how Bridgewater Finance goes to extreme lengths to remove emotional bias from their investment decision making.)

So, is the Light Phone 2 merely a costlier version of the retro release of Nokia’s iconic 3310, as some of my friends and family have suggested?

I don’t think so as HMD Global, who currently own the Nokia brand licence, have generated interest because of the nostalgia many when they remember the experience they had with their first 3310.

I’m not convinced that helping us relive the feelings we had for what was a remarkable phone in the 2000’s, can, however, create sustainable, long-term interest. It is undoubtedly a gimmick, in the same way, there was a spike in interest for the Rubik’s Cube a year or two back.

Secondly, looking at their marketing, the 3110 feels’s more like Creative’s Zen than the Apple’s iPod. If they are to generated interest beyond the community who have fond memories of Nokia, they need to go beyond merely selling a relatively expensive phone with limited functionality.

Consider if you’d never heard of Nokia. Would you feel emotionally connected to something that has a ‘custom-designed user interface which brings a fresh look to a classic,’ and has a ‘2.4 polarised and curved screen window which makes for better readability in sunlight.’?

Gosh, that would look great next to my Dell Inspiron 7370 Intel Core I7-8550U 13.3 inch Notebook, wouldn’t it?

Perhaps HMD can do for the Nokia brand, what BMW did for the Mini’s, but they’ll need to find a stronger, more authentic purpose than what appears to be marketing window dressing;

Nokia is shaping the technologies at the heart of our connected world, to transform the human experience

Assuming the Light Phone 2 goes into production and works as described, I’d think carefully before taking a bet against them surpassing the sales of the Nokia 3110. After all, they actually are creating a product that transforms the human experience.

Funds Raised 6th March ~ $716,000 (07:00 AM CAT)

So, The Light Phone team have nailed the why. This has allowed them to create a concept, that resonates emotionally with investors and buyers alike, meaning that capital constraints should not be a factor in their success or failure. Indeed, in many instances, access to capital becomes cheaper, than for an incumbent as they are not committed to quarterly earnings reports and annual dividend payments.

Incumbents can learn much from the startup community, but perhaps the most significant learning is how organisations that are driven by ideology can do things that those who are motivated by profit cannot.

So rather than creating a warm fuzzy feeling by investing in a 3110, perhaps leaders of today’s large institutions should spend time rediscovering the purposeful, ideological goals that existed when their organisations were born.

Finally, I now hope the Light Phone team succeed with the ‘what’ and the ‘how’, not only to see how they fair against Nokia and other phone manufacturers but because they currently have $250 of what used to be my money.

What makes this even more remarkable, at least to me, is I can’t imagine living a minute without my smartphone.

With that, I’m off to Starbucks with my Mac to see if Scott Galloway is right.

Funds Raised 6th March $$721,568(08:58 AM CAT)

Colin is CEO at The Equinox, Africa’s premier destination for leadership teams that want to develop strategies for an exponential world.Find out more information about booking The Equinox on their facebook pagewww.facebook.com/exponentialthinking 

Colin

Author Colin

The business models that made organisations successful are now becoming their biggest threat in an exponential world. I help incumbents understand these threats and more importantly the changes they need to take to survive and thrive the 4th industrial revolution.

More posts by Colin

Join the discussion One Comment

  • Henning du Preez says:

    Hi Colin,

    I like the way you think. I am a scientist, and yes we tend to not always appreciate the power of the softer side of live. We are always driven by first principles and an absolute belief that the world is very simple and that we will find the few laws governing the universe. On your point of companies selling the product features and benefits rather than the WHY – My mother is now 83 years old and she lived a life limited to fixed land line telephones. She developed over those years very interesting rules of how she would cope with the limitation of the land line (location specific). One of the rules was that she would call her 4 sons around 7pm on a Sunday on your home phone. There was good reason behind this rule and it worked for her. The mobile phone arrived and overcame the location specific limitation. We then decided to buy her a smart phone and to disconnect the land line. She wasn’t so convinced but accepted it. For the next year she kept calling us at 7pm on Sundays, with one added question – Are you back home? Nobody bothered to explain to her the new rule and why she could let go of the old rule. I even asked the top cellphone manufactures what they would suggest to her as the new rule – with no clear answers. We must explain to her WHY she needs to adopt a new way of live by helping her to understand the new rule that becomes possible through the mobile phone. Unless we explain the WHY (the new way of life and the new rule) she will make the smart phone look like a land line.

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