One of the internal areas I focus on at Primary is what we call the ‘founder journey.’ This is the end-to-end experience that a founder has with Primary. It includes everything from the initial intro email all the way through post investment support. As a startup, we strive to be thoughtful about every touchpoint and interaction. We’re far from perfect and refined but working hard to improve every single day.
At the firm’s annual offsite this summer, I presented an update on our ‘founder journey’ progress and the strategy for the next twelve months. I kicked off the presentation with a quote from Danny Meyer.
“Business, like life, is all about how you make people feel. It’s that simple, and it’s that hard.”
For those who know me well, know that I’m a huge fan of Danny and his company Union Square Hospitality. Danny has created some of the best restaurants in New York including Union Square Cafe, Gramercy Tavern, Eleven Madison Park and Shake Shack.
For many reasons, I believe venture firms are in the hospitality business. This is something that I try to preach internally. In a hyper competitive, cash flush environment, entrepreneurs are likely to go with the firm that gives them the best shot to succeed and the partners they would like to work with over many years. At the end of the day, we’re in a people driven services business.
On the way back from our offsite with hospitality on my mind, I pulled out my Kindle and re-downloaded ‘Setting the Table’, Danny’s memoir and philosophy on business. This is one of the best books on leadership and hospitality that has ever been written. I’m not kidding. It’s so good that I’ve read it multiple times over the years.
Danny’s central philosophy is ‘enlightened hospitality,’ which is how the delivery of a product or service makes its recipient feel. He makes a compelling argument that hospitality is the key differentiating factor for success in a service-driven economy.
Because we now live in an information rich world, the knowledge and barriers required to launch a product and service have collapsed. This is why we’re seeing multiple competitors emerge in just about every category from CPG to SaaS. It feels like every product or service is being commoditized including the venture capital business. In this kind of environment, the difference maker is the internal culture of the organization and end-to-end customer experience.
So how does an organization move from just shipping a product or service to fully embracing enlightened hospitality? It begins by defining, understanding and prioritizing your core stakeholders.
Who do you exist to serve? Who directly benefits from your organization? Which relationships do you prioritize? Why? What implications do these choices have on your strategy and decision making? How do you satisfy and balance the interests of each group? What can you do differently to serve each of them more effectively?
Stakeholders should be different for just about every organization. An obvious example: our stakeholders at Primary are certainly different than those of The City of New York. And for good reason. This is driven by leadership, strategy, sector, values, purpose, culture, philosophy and so on.
In the case of Union Square Hospitality, the organization has five primary stakeholders “to whom we express our most caring hospitality, and in whom we take the greatest interest.” How the organization prioritizes these stakeholders is the guiding principle for every decision they make. According to Danny, this approach has “made the single greatest contribution to ongoing success of our company”
Their stakeholders in order of importance are:
- Guests (a.k.a. diners)
Danny fundamentally believes that unless he prioritizes and takes care of his top four stakeholders then he won’t be able to take care of his investors and provide them with a strong and long-term return on their capital:
“To prioritize differently breaks the virtuous cycle of enlightened hospitality and seriously compromises the chances that your business will achieve excellence, success, good will and soul. Prioritizing our way has enabled us to offer investors an opportunity to affiliate with a business known for outstanding employees, warm hospitality, strong ties with exceptional supplies and a solid commitment to playing an active, valuable role in its community.”
When you deliver value to each of your stakeholders, it creates a flywheel effect (or virtuous cycle) and positions your organization for long term success and sustainability. Getting this flywheel humming is much easier said than done. For starters, every stakeholder group is different and has unique interests. Additionally, the world is always changing so you have to adapt your approach over time. Finally, these decisions and tradeoffs permeate throughout every function of an organization.
If you’re a founder or leader within an organization, I challenge you to think about your key stakeholders and how you’re delivering both short-and-long-term value to them. Who are you serving? What is the value exchange? Where can you improve? What needs to change?
I’m asking these questions internally at Primary and to some of our portfolio companies. It’s a fun and important thought exercise.
In closing, delivering true value to all of your stakeholders requires a huge amount of buy in, effort, intention, time and money. It’s certainly complicated but it can be achieved as Union Square Hospitality and other great organizations have proven. Doing this well might very well be the difference between building an enduring market leader rather than just an average company.