THE FOUNDER'S
DILEMMA

There is an intense debate about the role of business in society namely delivering shareholder value versus being purpose led. Both have fundamentally different versions which have a ring of authenticity about them and both are highly valuable but stand in opposition to each other.

Shareholder value maximization states that the primary goal of a company is to generate the highest possible returns for its investors for their invested capital. However, today the shareholder value paradigm is under unprecedented attack, especially since the global financial crisis of 2008. As a result, influential voices now advocate abandoning shareholder value maximization to adopt a social purpose based on forms of altruism, social responsibility and CSR as the key focus of the organisation.

Supported by public opinion in many countries, the pendulum is swinging to the other extreme.

“Many founders and owners are caught in this dichotomy between profits and purpose which we refer to as 'the founder’s dilemma'”

Many founders and owners are caught in this dichotomy between profits and purpose which we refer to as “the founder’s dilemma“.

There is no framework for leadership teams and owners, to strategically and systematically manage this dichotomy.

How can leaders bridge this gap?

THE RESOLUTION

We believe founders and owners must consciously avoid the trap of overbalancing to on one of the extremes (i.e. only focusing on shareholder value or only focussing on purpose).

Instead, we advocate they adopt a fusion of the two paradigms to harness the best of both intellectual constructs. Doing this well, leads to more of both: stronger financial results as well as higher emotional fulfilment from achieving these results in a morally outstanding way.

“LongWealth has developed a unique framework that fuses purpose and value creation.”

LongWealth has developed a unique framework that fuses purpose and value creation.

Our approach centres on the definition of a practical philosophy of value creation that is unique to the company which goes beyond limitations of best practice benchmarks.

We help define the company’s purpose in a way which strengthens brand, culture and innovation to serve the needs of customers, employees and society as well as produce returns in excess of the cost of capital for investors. On the other hand, we ensure that the expressed philosophy interacts directly with the discounted cashflow (DCF) model that is at the heart of any value creation approach in business.We build a line of sight brand trust, culture and innovation (which are driven by the purpose) to the “perpetuity” component in the DCF model, which represents the firm’s journey over time.

“Implementing the LongWealth Integrative framework enables founders to remain deeply rooted in meaning and purpose and simultaneously deliver lasting returns to shareholders.”

Implementing the LongWealth Integrative framework enables founders to remain deeply rooted in meaning and purpose and simultaneously deliver lasting returns to shareholders.

This is a path less trodden for problem solving and decision making and it avoids the pitfalls of narrow, linear, either-or trade-offs which lie at the core of conventional models.



SOLVING THE FOUNDER'S
DILEMMA

Our framework enables founders to align the company management to the long-term vision. We help maximise the chances of aligning the organisation with building a stable and respected institution that creates value for all stakeholders - also for further generations.

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HOW WE HELP OWNERS

I. ‘Is my business displaying symptoms of deep seated problems?

Collective Introspection:

  • Top team beliefs, assumptions and biases
  • Extent of Disintegration & Complexity
  • Commoditization of Scarce Capital (Brand, Culture Innovation)
  • Inflection Points in Value Creation

II. How does Purpose translate to Value?’

Purposed led Design:

  • Philosophy, Principles ,Purpose
  • Purpose led Scarce Capital ( Brand, Culture, innovation)
  • Scarce Capital Value Drivers
  • The Economic logic of Purpose led Value
  • Internal and external Communication

III. ‘What is the Breakthrough Potential
of my Enterprise?’

Purpose led Value Creation

  • Non-Linear Value Creation Upside/Risk Scenarios
  • Cognitive & behavioural sensitized DCF model (time machine)
  • Financial Ratios (ROI, ROCE) tied to Scarce Capital Drivers
  • Leading Metrics that tie Purpose to Value

IV. ‘How can I institutionalize Purpose led Value?’

Institution Building :

  • Fitness of Leadership Mindset
  • Quality of Choices, Decision Making of top team
  • Integrity of Purposed led Design
  • Tracking Leading Metrics