Richard Steel is steeped in the world of economics and business. He is an entrepreneur, an active investor, and business consultant. He has also written the book “Elevated Economics: How Conscious Consumers Will Fuel the Future of Business,” where he details how the future of business will be decided by what he terms “conscious consumers.”
In the book, Richard Steel “decisively outlines the business case for embracing ESG,” or “environmental, social, and governance” as key factors for success. He shows that these “key success factors,” along with “socially responsible investing (SRI),” will give you the blueprint for taking your own enterprise to the next level. When businesses don’t pay attention to ESG and SRI, they’ll face adverse consequences.
Richard Steel “understands that every successful business leader in the next ten years” will devote much attention and resources to “embracing conscious consumers.” With his book, he shows why businesses will need to do this, while delivering a “positive, hopeful, and helpful playbook of innovative and profitable changes for businesses,” so that they can take the lead in their respective industries in the next ten years and beyond.
If you’re a senior business leader, Richard Steel also helps you find “objective support” that will enable you to grow your company and allow it to survive in a “rapidly changing economy.”
Check out more interviews with business thought leaders here. You can also check out Richard Steel’s book on Amazon here.
Jerome Knyszewski: Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Richard Steel: I started my first business in 2000 as a sole proprietor. Being on my own gave me immense freedom to establish the corporate culture I wanted. Although, I admit, the office happy hours were a little lonely.
Soon enough, though, my fledgling dreams began to take flight. Suddenly, I was incorporated. I had employees. And then more employees. And then even more employees. Recognizing the demand for digital media — and experts who could create and manage it — the company became so large it needed to move to a bigger building. A building with its own zip code: 10118, to be exact. The Empire State Building.
Owning a business headquartered in the Empire State Building felt like the culmination of a lifelong dream since I used to stare at a framed picture of the Manhattan skyline as a kid. But I quickly realized that maintaining this incredible new reality was going to be complicated. At first, meetings consisted of me, myself, and I. Decisions were made quickly. Alignment was a breeze. And since I wasn’t about to quit, employee retention was flying high at 100 percent. As more people joined, however, leading my firm and providing for the livelihood of my employees meant making decisions, decisions that reflected the best interests of more than just myself.
Jerome Knyszewski: Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
Richard Steel: We’ve all heard it said many times; sales is a numbers game. I learned to “collect” rejections, knowing that every “no” I collected got me closer to the next “yes.” Then, a few years into operating the business with even more employees, we got an opportunity. The startups I advise these days might even call it “the” opportunity. A contract was on the table for more money than I’d ever seen. This contract would have cemented our financial future for the next year. It would have provided enough revenue to nearly double the size of my company overnight. But there was a problem: the client was a tobacco company.
Even before the rise of Socially Responsible Investing (SRI) made it appealing to start a company based on values, I was determined not to lose my soul in the big city. But the city wasn’t going to make it easy. Surely taking this contract was worth putting a few scratches on my own sense of morality, right? But then, as corny as this might sound, I thought about my kids — the kids I didn’t even have yet.
Did I want them to see this company’s logo on their dad’s company’s website? Did I want them to read a testimonial from the CEO of a tobacco company praising their dad for putting more cigarettes into the world? Did I want to take them on vacation, knowing that a tobacco company had essentially paid for it?
The situation was complicated, but the answer to those questions wasn’t. I did not want that legacy for my children, and I didn’t want it for my employees, or for their children either.
We rejected the contract, and all of the money, security, and prosperity it had to offer. And as soon as we did, those guidelines of yeses and no’s became something much bigger than a reflection of my own youthful ideals. They became the backbone of the culture of my company. And that culture became just as important as our products and services.
Jerome Knyszewski: Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘takeaways’ you learned from that?
Richard Steel: I had a chance to pitch American Express — a huge opportunity for us at the time. I was so cost-conscious in the early days, that I didn’t want to splurge on color copies of our presentation, so printed them in black and white. An intern caught this mistake and had the courage to stop me before I left. She convinced me that I should re-print the client copies in color. I look back now and laugh at how frugal I was in the beginning.
Jerome Knyszewski: Based on your experience and success, what are the five most important things one should know in order to lead a company from Good to Great? Please share a story or an example for each.
- Purpose: If you are a business leader or someone with influence over the decisions your company makes, then you probably have a sense that we are entering a brave new world, a world where consumers have begun to do the one thing that the capitalists of the last 150 years feared: care. Not just about product, price, place, and promotion, but consumers are beginning to care about the new “P” of business that is a result of today’s informed, connected, and imperiled consumer class: Purpose.
- Persistence: Persistence is everything. Some call it grit, some call it determination, but whatever you call it, the ability to stay on task, and recover from setbacks and failures is critical. Like any journey, the path will be fraught with setbacks, but the ability to push forward, to be creative when significant obstacles present themselves, and never give up.
One of my portfolio company CEO’s inexplicably quit, right in the middle of a sale process — we were selling the business to an acquirer. We thought the deal was lost, until the management team and I made up our minds to persevere and come up with a go-forward plan that the acquirer could sign off on. It was a complicated, nuanced situation, but we came through it because we made the decision to be persistent, not give up, and get creative with our solution set.
3. Asking the right questions, not having the right answers: One of the most helpful exercises when planning for a product launch, merger, or other big event is to conduct a pre-mortem. Instead of a post-mortem, in which you analyze why a subject died, a pre-mortem can be conducted. In this exercise, which assumes that in no uncertain terms that the effort has failed at some point in the future, you and your team analyze all the possible reasons that it failed. Asking the right questions in advance of taking on a major project, pivot, or M&A activity can be invaluable to a business going from good to great.
4. Leadership: Business schools certainly don’t teach you how to care about people. They teach you how to make money. But in what I call the Elevated Economy, this is no longer good enough; you have to be good too. When we rejected the tobacco company contract, and all of the money, security, and prosperity it had to offer, those guidelines of yeses and no’s became something much bigger than a reflection of my own youthful ideals. They became the backbone of the culture of my company. And that culture became just as important as our products and services. By the time I sold the company, our employee retention rate was five times the industry average. It was extremely rare for one of our employees to leave us. There are many reasons that this was true. But I think one of the biggest was that they believed in our culture, and they wanted to do well by doing good. In short, they didn’t want the Tobacco Company taking their kids on vacation either.
5. Sales: Far too often, early stage companies are measured by how much money they’ve raised rather than how much money they’ve made. Raising money is important, and necessary, as is having an engaged and active user base, but far too often, sales become an afterthought. That is a huge mistake. In one of my companies, we were selling a commodity. We had to be better at selling and retaining our clients than any of our competitors. The company was built around sales — every function on the business was there to serve the sales team. That laser focus on sales is what made all the difference.
Jerome Knyszewski: Extensive research suggests that “purpose driven businesses” are more successful in many areas. Can you help articulate for our readers a few reasons why a business should consider becoming a purpose driven business, or consider having a social impact angle?
Richard Steel: Businesses must have a purpose, and they have to take a stand — they have to adapt to changing consumer, investor, and employee attitudes towards climate change, take a stand on social justice issues, on diversity in corporate America, and a whole host of other issues — or face the consequences. BlackRock calls these changing attitudes a “tectonic shift” in investor behavior. What are those consequences of firms who refuse to change?
- Consumers shunning brands that don’t align with their values: Only 22 percent of Boomers express interest in impact investing. For Gen X, it’s 31 percent. And Millennials report a massive 71 percent interest in investing in impact-minded corporations willing to toe the ESG line. Gen Z is reported to take this percentage even higher.
- Employees refusing to work: For example; Amazon Employees for Climate Justice walked off the job in September of last year. The Amazon staffers who walked out from the company’s Seattle headquarters were said to have been joined by employees from other major companies, including Google, Microsoft, Apple and Facebook. Amazon later pledged $2 billion to the climate crisis.
- Higher employee retention: Loyalty, retention, and ease of attracting talent all score higher when firms are aligned with these issues — I recently spoke about this with Christian Sutherland-Wong, the CEO of Glassdoor, who said; “Companies with a strong sense of mission and purpose outperform their peers. Doing the right thing and shareholder returns are not in conflict. Companies that do good attract the best talent and connect more deeply with their customers, which is ultimately good for business.”
- Investors pouring a record amount of wealth into ESG financial products: Roughly $40 billion has flowed into ESG ETFs, and roughly half of that came in 2020 — a record for ESG-based exchange-traded funds. Investing around Environmental, Social and Governance factors (ESG) is now table stakes for many investors. It is not a trend, it is here to stay. To give you some idea of how consequential this is — all of last year, there was only $8 billion in inflows.
- The Great Wealth Migration is going to increase all these trends: $68 trillion of wealth is being transferred to future generations and they consume and invest completely differently than baby boomers. In the next two decades alone, $40 trillion of that $68 trillion of wealth will transfer from Baby Boomers to specifically Gen X and Millennials. These generations won’t stand for the world’s forests burning, sea level rising, racial injustice, extraction companies foisting all their negative externalities on the rest of the world. They will invest, spend, and consume differently (and better) than their parents and grandparents did. The bottom line is that the new paradigm of what I call Elevated Economics is already upon us.
Jerome Knyszewski: As you know, “conversion” means to convert a visit into a sale. In your experience what are the best strategies a business should use to increase conversion rates?
Richard Steel: Use data to inform UI and UX (User Interface and User Experience). This may sound obvious. It is.
Every customer (or abandoned shopping cart) tells a story. A trail of breadcrumbs is left after (and during) every visit. Work with a A+ UI and UX design team, and they should be able to turn dials and pull levers to increase conversions. Oh, and always A/B test. Always!
Jerome Knyszewski: Of course, the main way to increase conversion rates is to create a trusted and beloved brand. Can you share a few ways that a business can earn a reputation as a trusted and beloved brand?
Richard Steel: Trust is everything in a relationship. To garner trust, elevated companies need to put people over profits, or prioritize what I call interpersonal impact. When companies are good citizens, they reap the rewards from the new consumers who consistently search for the signs of an elevated business before they buy.
The impact of this was on full display when Wells Fargo allowed a disastrous breach of trust to happen under its watch. In 2016, Wells Fargo employees had created over 2.1 million fake accounts in an attempt by some dishonest salespeople to boost their performance statistics. The news was met with shock and outrage and yet, somewhat surprisingly, the executive team’s response was to shift more focus toward their employees instead of less.
In 2017, Wells Fargo’s former CEO Tim Sloan stopped paying branch workers based on how many products they sold and increased its minimum pay rate to between $13.50 and $17 per hour. Turnover at its retail banks became the lowest in 30 years. This is what I call the Elevated Economy in action. Firms are realizing that solely generating shareholder value doesn’t generate much value for the company itself. But those that focus on improving their communities, their supply chains, and the lives of the employees they provide for are generating shareholder value while also simultaneously building more valuable organizations altogether.
Jerome Knyszewski: How can our readers further follow you online?
Richard Steel: You can connect with me via Twitter or LinkedIn. You can also visit my website elevatedeconomics.org.
Jerome Knyszewski: This was very inspiring. Thank you so much for the time you spent with this!