Natural EnterpriseIn last week’s post on Assembling the Team for Natural Enterprise* I promised that I would present an Elevator Pitch for such enterprises. Although this post is too long to deliver in an elevator ride, it does explain what Natural Enterprise is and why you might want to set one up or join one.

What is Natural Enterprise?
A form of self-organized, self-managed, community-based business partnership in which two or more people agree to make a living together as collaborators and peers, to strive to attain what each member needs to achieve for his or her personal well-being, to accept substantial responsibility for each other, and to respect and help the community or communities in which the enterprise operates. It is ‘natural’ because this form of socio-economic activity occurs ubiquitously in hunter-gatherer cultures and in non-human animal cultures.

Why is it different?

Modern Corporation Natural Enterprise
Normal formation mechanism Incorporation then eventually public offering Self-organization as partnership
Source of initial capital Large capital infusion from established corporations, capitalists and lenders, in return for substantial control of the business Organic, from customers
Organizational structure Hierarchical, centralized, top-down managed Flat, networked, self-managed
Decision-making process Executive decree Unanimous consensus of members
Importance of innovation Moderate; it is often easier to buy out, or buy off innovative competitors Critical
Key strengths Political and economic power; brand presence Agility; customer proximity
Sales process Develop product in lab, mass produce, advertise Identify unmet customer need, develop customized solution, deliver to pre-qualified customers, market virally
Stakeholder priority (1) Absentee shareholder-investors; (2) executives; (3) creditors (1) Members; (2) customers; (3) community
Social & environmental responsibility Subordinate to shareholder profit Paramount; implicit and explicit
Optimal size The bigger the better Small: 5-150 members each with unique skills or knowledge
Primary objective Profitable growth Members’ well-being

What’s the catch?
Natural Enterprise could be to the modern economy what the Internet has become to modern politics and society — an anti-hierarchal mechanism that democratizes and liberates economic power and opportunity the same way the Internet has democratized and liberated social and political power and opportunity. Both innovations fundamentally threaten established power, authority, ‘wisdom’ and control, by undermining them and rendering their hierarchies vulnerable and potentially obsolete. Large corporate oligopolies will recognize Natural Enterprises as threats to their power and profitability, and, much as they have responded to labour unions, will attempt to ignore, circumvent, weaken or crush them. For at least a generation, pionering Natural Enterprises, much like the fledgling Internet of the 1980s, will have to be content to play a minor role. Charles Handy envisions this as being like the relationship of the flea to the elephant — Natural Enterprise will contract mainly with large corporations as suppliers, and will be to some extent dependent on these large corporations’ largesse and their increased proclivity for outsourcing, along with the Natural Enterprises’ own innovativeness and agility. As Handy says, such uneven contracts will at least be an improvement on the wage-slave employer-employee contracts they supersede. And eventually Natural Enterprises will become so numerous, and specialized and adept in so many industries and aspects of business, that they will start networking and contracting and associating with each other, using the power of the Internet. And much as specialty stores undermined and largely replaced the large, cumbersome, general-purpose department store, Natural Enterprises could ultimately eliminate the need for and replace large, cumbersome corporations. Just as the Internet created a socio-political and information ‘World of Ends’, where central control and authority are not needed and all value is created at the ‘ends’, so, too could Natural Enterprise create an economic ‘World of Ends’ where corporatism, oligopoly and massive size are not needed in economic entities and where all value is created at the ‘ends’ — face to face with customers. It’s a revolutionary and powerful and liberating idea, but it will take time, patience and energy to bring it about.

How do I set one up?
The Handbook is now being written. The framework is illustrated above. You can learn more about them here.


* What’s In a Name? I have used the terms New Collaborative Enterprise, Existential Enterprise (Charles Handy’s term), and New Tribal Ventures (Daniel Quinn’s term) to describe such enterprises. The ‘new’ in these terms suggests there are ‘old’ collaborative enterprises, the term ‘existential’ has been voted off the island by readers of this blog as too highfalutin’ and intimidating a term, and terms like ‘tribal’ conjure up images of war paint and noble savages. Autopoietic Enterprise (it means self-creating and self-managing) is accurate but unpronounceable and would probably be perceived as pretentious. Readers have suggested the terms ‘Natural Enterprise’ (Harold Jarche) and ‘Organic Enterprise’ (Don Dwiggins), which I like because they’re simple and descriptive. I like Natural better because its opposite (unnatural) is exactly what the modern corporation is, while the term ‘organic’ is a bit ambiguous (it means ‘related to organs’, ‘related to organisms’, ‘carbon-based’,  and ‘instrumental’, of which only the second definition is a propos). I’ almost decided to keep ‘Collaborative’ in the term for two reasons: To stress that these enterprises entail more than one person working together (a sole proprietor, to me, does not an enterprise make, even if s/he is a powerful networker — enterprises are about people making a living together), and because it would allow me to continue using the acronym NCE, which has gained some common parlance over the past year. But in the end, simpler is better, Natural Enterprise is inherently collaborative, and I was taught ‘when in doubt, leave it out’. So Natural Enterprise it is — thanks to Harold for the inspiration.

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  1. Bill Seitz says:

    How about just “Collaborative Enterprise”?”Natural” just sounds too Birkenstock-ie to me…

  2. Derek says:

    Actually, looking at the table of comparisons, this sounds like a Confederate Enterprise. Hope its not as doomed as its brethren, the confederate government.Your table is biased of course, I would be curious to see how you view the difference between the two on: access to capital, ability to make difficult changes, stability, resistance to latent personality disorders, and their ability to make long term commitments.

  3. Rob Paterson says:

    Hi Dave in talking about this model yesterday, on eof the issues that arose was how banking looks at these structures today – some do exist – the bottom line is that the banks do not know what to make of them. Our Aha was that very soon, some of the more successful NE’s will start to invest in smaller emergent ones and that just as the emergence of modern banks drove the late industrial period so NE’s will become the new financiers of the new economy.

  4. Dave Pollard says:

    Rob: Yes, in fact there’s no reason why that shouldn’t be the purpose of some NEs — the ‘natural’ successor to credit unions. But the financing should be very short-term. Debt is abhorrent to natural systems.

  5. Rob Paterson says:

    Maybe not debt at – sharing resources, clients, information

  6. Casey says:

    So basically it would be a NCE bank? Would that NCE own part of other NCEs or would they instead gain some kind of fee for their services of lending capital or advise etc.?

  7. Dave Pollard says:

    Casey: There are many creative ways of funding assets. Leasing instead of buying allows you to amortize the costs and the cash outflows over the same period as the revenues, so you need no capital loans. An older, cash-rich partner may choose to contribute capital assets to the enterprise in exchange for investing less hours into the business, so the cost of capital would be very low but the ROI for the investing partner better than he can get in the bank. Receivables can be ‘factored’ to a NE ‘bank’ on a revolving short-term basis. Inventories in most entrepreneurial businesses are negligable, since most such business make products to custom specs and just-in-time, so the customer essentially finances them. So with a cautious spending strategy, and reinvestment of profits (organic financing), most NEs shouldn’t need to borrow often, or give up capital at all. The NE ‘bank’ might earn as much by giving sound advice on when and why *not* to borrow as it would make by short-term lending. I see NE ‘banks’ as community-based lending institutions that would really act as intermediaries to connect people in the community who want to invest in their own community with those with short term needs and with local public utilities (e.g. community energy co-ops) with longer-term needs. Keep your money in the community where you can keep an eye on it and see the benefits that accrue from it. For more ideas, just ask any woman who manages the family finances ;-)

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