Blockchain for sustainable business: new technology & culture in sustainable enterprise management

This post was written by Henry Vogt ’19

As corporations have begun to understand the necessity of embedding sustainability into their core strategy and competencies it has become apparent that holistic management of operations must be done in an intentional and transparent way. It’s increasingly clear that all aspects of an organization – from product design, operations, marketing, HR & more – must collaborate transparently to effectively manage a sustainable enterprise and realize ROI from their initiatives. Companies can promote growth, reduce risk and increase returns though processes that provide clear, concise and trusted information across all departments.  

Photo by Clint Adair on Unsplash

There is no doubt that a robust technological management system is the backbone for implementing a holistic sustainability management program – a system which allows for transparency and trust across all departments. Many organizations are positioned to take advantage of cutting-edge technological systems to give them a sustainable competitive advantage – as long as there is a strong aligned company culture.

Enter Blockchain. Often when Blockchain is mentioned a reaction is one of eyes glazing over, a chuckle and some skepticism due to the mysterious, undoubtably complex connotations that surround this technology. This is understandable. Yet, the reality is that the concept of blockchain is relatively simple. Instead of a central authority verifying a transaction or data set, the verification is distributed and decentralized across a network. The verifications are on a ledger (think accounting), where changes and additions are append only – you can’t go back and change it. Therefore, the transactions become transparent, immutable and tamper proof. Implemented correctly, the potential applications spanning public and private sectors are almost categorically endless.

Has this created a hype bubble around blockchain? Undoubtably, yes. However, as the technology progresses and use cases and applications evolve, the hype around blockchain seems to be looking less like a bubble and more like a paradigm shift. With the possibility to make blockchains customizable – private, permissioned or public – companies can choose from an ever-growing panacea of platforms that can meet their needs. Additionally, companies must approach blockchain by first understanding the problem – then assessing why blockchain could be an effective solution. Just like any technology, blockchain is not a silver bullet solution. It must be asked – “Can this be solved by a traditional database, and does the need for transparency, decentralization, trust and immutability warrant a blockchain solution?”

While blockchain can incentivize effective management through transparency of operations, it is also essential that it be complimented by continuing to invest in human capital – the culture – of the company. Transparency can create accountability, competition and innovation – but the technology itself must not be the crutch. The culture and the affective commitment of the people in the organization will always be at the heart of a profitable, sustainable organization. While technology can be a powerful tool to implement solutions, the investment in human capital cannot be lost.

New technologies hold vast potential to disrupt and improve business and society – but without a mutually inclusive investment in culture any initiative will not reach its potential or may even cause inverse, negative externalities. When culture and values are complemented with decentralized, transparent technologies such blockchain, the future of managing successful sustainable enterprises holds immense potential.

A Very Special “Innovator-in-Residence:” Stuart Hart

This post was written by Esteban Echeverria ’19

It is May 8 — the last day of classes, and just like every three weeks or so, we have a speaker come to our class and talk to us for the whole morning. This time it is the one and only Professor Stuart Hart, and by now we should know him and his teachings pretty well.

Professor Stu Hart

For the ones who do not know, Dr. Hart is the backbone of The Sustainable Innovation MBA program. His research, in conjunction with other experts in the field, such as C.K. Prahalad, and Dean Sanjay Sharma, provide much of the material we study in our classes.

As we know Dr. Hart quite well by now, he decided to base his lecture on where we are now as a society, and where we are headed in the future, as well as some of his current research. After some 500 years of history, he explained the many phases of the most important economic systems the world has been going through— feudalism, mercantilism, industrial capitalism, institutional capitalism, financial capitalism. He finally mentioned the next phase that we are transitioning to— what he called the new sustainable capitalism. Each of phases have been going through a cycle of power and economic distribution that repeats itself, were we keep making the same mistakes, falling on the same bumps, and ending up in the same place, which is not exactly a good one.

We are now in a moment in history haunted by a severe climate crisis, as well as a social one, where inequality is hitting major milestones that are getting close to the point of no return. It is a point where the Milton Freedman’s “increase of shareholder value” corporate objectives, as well as the concept of tying the payment of chief executives and senior leaders to performance, are to be reviewed and thought over. 

It not only has led to multinational corporations practicing stock buyback and cut R&D spending as well as operational spending including employee pay, among other strategies to raise the prices of their own stocks, but also focus on quarterly earnings reports and quick fixes to their unsustainable models. The pressure of investors, analysts, and high frequency traders has let these companies forget about the long-term strategies required to sustain their operations, as well as promote the wellbeing of their stakeholders. Shareholder primacy, as noted in the past, is not a legal obligation, but the system as of now is fixed for this purpose. 

One of the objectives of The Sustainable Innovation MBA program is to create the new generation of businessmen and businesswomen determined to go about their decision making process taking not only financial, but also environmental and social aspects into account. As a student of this program, and part of this community, I would also like to act as a sustainability enabler, by attempting to contribute to corporate transformation from the inside out. Many of these public multinational corporations need to recognize their identity, strengths, and reason of existence, and use it as a tool to transform and modernize their operations and value propositions to ones that contribute to the wellbeing of the environment and society. By doing so, they secure their long term operations for the future.

Now that we have finished the lecture portion of this program, I am a step closer to become part of The Sustainable Innovation MBA alumni community, the one that is building the business leaders that the world needs. I recommend this experience to anyone that is trying to make an impact, and be part of the transformation we are going through.

From the Lab to the Marketplace: Using Sustainable Innovation MBA Classes to Advance UVM Tech Development

This post was written by Steven Micetic ‘19

From solar power to vitamin D fortification, universities are a fundamental source of innovation that advances humanity’s ability to live healthy, sustainable lives. And yet research funding, though it often translates into exciting, new intellectual property, typically doesn’t result in innovations that make it to market and drive impact.

Many of UVM’s 13 colleges and schools are at the forefront in their respective fields of research. In 2016, UVM received $138m in outside research funding alone. Much of this funding goes to efforts that align with the ethos of the Grossman School’s Sustainable Innovation MBA program: mitigate agricultural runoff, improve the efficiency of renewable energy generation, and advance access to care and treatment of chronic diseases.

It is within this context that The Sustainable Innovation MBA offers a unique opportunity to young professionals seeking to translate innovation into impact. In the initial weeks of our classes, I reached out to Associate Professor and Steven Grossman Endowed Chair in Entrepreneurship Erik Monsen because I wanted to learn more about the technologies under development at UVM. Within days, Erik and I were meeting with Assistant Professor of Civil and Environmental Engineering Dr. Appala Raju Badireddy. Dr. Badireddy and his team are developing a filter technology that can extract elements from wastewater previously thought impossible or cost-prohibitive to extract.

Initial conversations with Dr. Badireddy led to a group of Sustainable Innovation MBA students addressing one of the key questions in the technology’s underlying business model. Integrating this work into the Entrepreneurial Business Model class, the team spent eight weeks evaluating markets for captured phosphorous. Beyond making for a rich classroom experience, our work may have real-world application as Dr. Badireddy takes this work from the university to the marketplace.

As we move into the latter half of the program and acquire new skills through the our courses, the prospect of continuing to support the success of green technologies like Dr. Badireddy’s filter technology is an exciting one. Perhaps the next great green technology may come from the laboratories of UVM, and perhaps its success may be supported by one of my fellow students.

Photo by Louis Reed on Unsplash

In The News: Our Class in Entrepreneurial Business Models

“Across the Fence,” a long-running news program on WCAX here in Vermont, recently profiled The Sustainable Innovation MBA program.

The focus was on Professor Erik Monsen’s “Crafting the Entrepreneurial Business Model” course, the highlight of which is a business trade show featuring the students’ ideas for new, disruptive business models.

How Business Can Support Refugees

This post was written by Ryan Forman ’19

All around the world, refugees are being demonized for various political reasons. There is overwhelming academic and professional research into how much value refugees are to society. Therefore, civil society cannot help them adjust to their new country alone, but business plays a role in supporting them as well. There are multiple ways in which business can help the current refugee situation, but this article is going to focus on two key methods.

The first way that business can help refugees is by investing in refugee-owned/founded businesses. Research shows that refugees are more likely to hire fellow refugees. Because of this investment, businesses can support more than just one refugee; they can help many others get hired as well. One example of an impact investment organization that specializes in investing in refugee-founded businesses is the Refugee Investment Network (RIN). The RIN works to help move private capital to investment in financing of companies that benefit both refugees and their host communities.

An additional way that business can help refugees is by advocating for them in the workforce. Advocating for refugees could be businesses partnering with both governmental and non-governmental organizations that will help individuals get the skills that they need to be more competitive in their local job market. Ernst & Young (EY) in Germany have gone above and beyond in how to support refugees. EY Germany states, “Through EY Cares, the team got funding for a language-learning app, developed by an employee of EY Germany. The team has also supported Kiron, a social start-up providing higher education to refugees, and it has launched a pilot internship program for 10 refugees across EY Germany.” There aren’t many examples of this in the United States, but there is a similar situation here in Burlington at Rhino Foods. Advocating for refugees could be looking at leveraging their past skills to hire them for similar roles in a business that they did in their former country. According to Rhino Foods, “The cultural diversity at Rhino exposes us to each other’s favorite foods, traditions, and life experiences.” Currently, refugees make up 37% of Rhino Food’s workforce.

In our Entrepreneurship class, my group has proposed creating an incubator that would help address both of these methods to help refugees. We think that an incubator, that supports both investment in refugee-owned businesses and partnerships to help refugees get the skills they need to become competitive in their local markets, is a needed organization. I would certainly like to see more organizations place such an emphasis on, as RIN has described, “the greatest social challenge of our time.” Refugees are a boon to the local economy, and it is time for business to empower them.

Photo by Perry Grone on Unsplash

The Role of Business in Combatting Homelessness

This post was written by Chris Hynes ’19

Homelessness is a topic that is rarely talked about as a major issue in the realm of business, but in the light of sustainable innovators, there is a major opportunity to make a difference in improving the homeless issue that is rising in America.

With the increasing gap in the distribution of economic wealth in the United State along with the increased cost of living, the poverty line is growing, which is putting the former lower middle-class families in extreme risk of becoming impoverished and economically unstable. If intervention is not taken soon, then there is a huge likelihood that the homeless population in America will increase.

Business has a unique opportunity to aid families and individuals that are suffering from homelessness and empower them in so many ways to move out of their current situation and into a more stable environment. In order to do this, businesses need to take a more social approach and become more socially conscious.

There needs to be more than simply non-profits helping marginalized individuals and families. Non-profits combat homelessness as much as they can, but finding employment opportunities for individuals whose barriers to entry into the workforce are much more skewed than the “normal person” who is applying for a job, is not only difficult, but in most areas, almost impossible. This is due to the fact that a lot of businesses are focused on economic success (which is needed), but lack a genuine social mission.

People generally think that public policy can fix this, but in reality, most government aid is focused on getting people suffering from homelessness off the streets and into housing as fast as possible. Think about it for a second — once a person leaves a homeless shelter and is gifted an apartment, bills begin to pile up. Without a job that is constant enough to provide economic stability, the individual has an extreme risk of falling right back out onto the street. This, in short, is an example of how cruel the poverty cycle is in America.

Now, if there were businesses that were focused on social well-being and provided an empowering job opportunity, then this cycle could be closer to being broken. Having a core competency around inclusive hiring will engage new stakeholders, as well as boost the overall impact that a business can have on a community.  I challenge everyone who is reading this to think more critically about the true impact that their business could be having on a social impact level.

The Cost of Disruption — Loss of Community?

This post was written by Travis Smith ’19

Improving efficiency for consumers through digitization is one of the main sources of disruption and innovation within the marketplace. The goal – reduce the amount of time waiting for something or reduce the need to go somewhere for something. I believe this is rooted in a positive notion of improving the convenience of people’s’ lives so they can go about their day in a fashion they so choose. However, it may be time to look at what we are streamlining in order to make life more convenient – community. Losing those small conversations with strangers at the store might make life more streamlined, but the loss may also have the unintended consequence of chipping away at community.

It’s never been easier to order goods, food/groceries and socialize without ever leaving one’s home. As a society, we are moving more towards a world where we don’t have to do anything or go anywhere that we do not want to. Yet, according to the Washington Post, the US has consistently fallen in world happiness rankings and currently sits at 18th place. Furthermore, Americans are losing touch with their communities. Pew Research found that only 24% of urban residents know all or most of their neighbors; this is alarming as our society becomes more urbanized. Here we find a paradox. We are more connected and life is more convenient than ever, but somehow, we know less people directly around us and our happiness levels are falling.

The question should be asked, are there diminishing returns on efficiency as there are with wealth? What will we do with the extra time gained? Yes, our society went through a similar transition with the rise of big box retailers, but at least we were still going to a physical place to interact with physical people. Now there is no store with people, but a website with a chatbot.

One surprising example of a community oriented disruptive technology is Pokemon Go. The technology of augmented reality has upended the mobile gaming industry. Yet, Pokemon Go uses the augmented reality tech to bring gamers together in a physical space as users must make friends and interact with others in order to advance in the game – thus, building community. The game even has a once a month “community day” where users are encouraged to meet up at public parks for several hours and play together.

There doesn’t need to be a binary choice between technology and community, but As entrepreneurs and future business leaders we should ask ourselves – will my product or service help build community or chip away at it? As consumers, will we replace our time spent at a post office, grocery store, or restaurant with other time spent building community?

The Cap Raise: Valuation

EDITOR’S NOTE: This article is a collaboration between Cairn Cross of FreshTracks Capital and Diane Abruzzini ’17 of VENTURE.co Holdings, Inc. It is one of a series we will be publishing concurrently with FreshTracks Capital.  Cairn Cross co-founded FreshTracks in 2000, and has worked as Managing Partner of the firm since that time. Notable FreshTracks VC investments include SunCommon, Mamava, and Eating Well. Cairn has helped to build a true Vermont entrepreneurial ecosystem by hosting pitch events, accelerator programs, workshops, and teaching at multiple Vermont universities and colleges. He is a former co-chair of The Sustainable Innovation MBA Advisory Board.  Diane Abruzzini has built her career as a food and agriculture entrepreneur and business consultant. She was a student of Cairn Cross during her time at UVM’s Sustainable Innovation MBA program. After completing her degree, she spent time working for FreshTracks partners as an analyst. She currently works in marketing and communications at VENTURE.co Holdings Inc, who’s wholly owned subsidiary VENTURE.co Brokerage Services LLC is a FINRA-licensed broker-dealer.

The valuation process can be murky for both entrepreneurs and investors. Private company stock is typically a “Level III” asset under ASC Topic 820 and its value “cannot be determined by using observable inputs of measures such as market prices or models.” Fair value is estimated rather than observed through readily observable market prices.

Entrepreneurs and investors often disagree on the valuation approach that should be used in a particular transaction. Should one base a private company’s valuation on the comparable metrics for publicly traded companies operating in the same industries, or should one base valuation on the estimated present value of a projected stream of cash flow? If you use public market comparables, which metric is most important to valuation? Revenue? EBITDA? Users? Growth Rate? If estimating the net present value of a stream of cash flow, which discount rate do you choose and are you being too aggressive or conservative in cash flow estimates? Do you arbitrarily choose the mid-growth position? Every entrepreneur, venture capitalist (VC), broker-dealer (BD), and investment bank will use a variety of criteria in order to determine valuation. None of the approaches are perfect–there is no secret sauce–but there are important differences to how VCs and BDs tackle company valuations.

First, we must consider to whom VCs and BDs have responsibilities. VCs are trying to create strong investment returns for the Limited Partners (LPs) who are the investors in the VC fund. Valuation and other terms such as dividends will be negotiated to give the venture investors an investment return commensurate with perceived risk. Before making an investment, VCs rely on the business plan and financial projections supported by company documentation as well as prior investment experience among the VC partners and external due diligence efforts to determine a reasonable company valuation. Continue reading “The Cap Raise: Valuation”