Gen X Entrepreneurship: Designing a new business model

In the first article in this three article series we identified the fact that generation X entrepreneurs are put off by the perception that a consequence of entrepreneurship is being alone. In this article we will examine the concept of co-operatives as a possible business model for Gen X entrepreneurs.

In the first article we met Candy and were introduced to some of the pains she felt as an entrepreneur and why she eventually went back to the corporate world. At its heart the concept of a co-operative unlocks the value that is inherent in a group of individuals (like Candy) who share aspirations, skills, risks, and the desire to be ‘out there’. At the same time the co-operative model is highly network orientated and allows its members to begin deriving commercial benefit from relationships and networks that they already enjoy on an informal level.

History & Background

The International Co-Operative Centre provides the following definition: ‚A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise‛. As a formal business model co-ops trace their roots back to a mill in the town of Rochdale in Lancashire in 1844. The principles that drove the creation of this first co-op are called the ‘Rochdale Principles’ and they are still the principles that govern the global co-operative movement. They are:

1. Open membership.
2. Democratic control.
3. Distribution of surplus in proportion to trade.
4. Payment of limited interest on capital.
5. Political and religious neutrality.
6. Cash trading (no credit extended).
7. Promotion of education.

Philosophically, co-ops trace their roots to the writings of William King. The central tenet of King’s philosophy is rooted in the exploitative dynamics of the early industrial age. ‚King sees it as ironic that the worker, who produces ‘all the wealth of the world that ever did exist, or ever will exist’, has to take whatever wages the [owner] is prepared to pay, wages that are determined not by the value of the product but by ruthless competition between masters, who have no choice but to compete. Trapped by the logic of the market, workers become mere hands working a machine, which, by overproducing goods, eventually puts them out of work‛ (Johnstone Birchall, www.cds.coop). Three decades later Marx in his motivation for communism as a socio-economic model reflected similar thoughts to what King did in motivating for socio-economic ‘co-operation’.

Many reading this article will question a 1995 United Nations statistic on social development that said that 800 million people worldwide are ‘co-operators’ with an additional 100 million who are directly employed by co-operatives. However, anyone in South Africa who lives in an apartment or townhouse complex that is run as a ‘sectional title’ development is effectively living in a housing co-operative. When we start seeing co-ops in this light we realize that as a business model many of us are already engaged in them, and consequently we are aware of the dynamics and processes that drive them. The extension of these principles to the creation of an entrepreneurial business venture, in any field, can now be investigated.

Corporate Co-Operatives

Co-ops allow groups of complimentarily skilled and equipped individuals to come together and build an enterprise that supplies many of the benefits of formal partnership will fewer of the pitfalls.

In Candy’s case a co-op would probably include people who have graphic design skills, others who are copywriters, web-designers, desktop publishers, or even communication consultants. The key to success would be that the people in the co-op don’t all offer the same skills or products, and that there is a degree of ‘fit’ between their respective offerings. The members of the co-op could jointly lease premises out of which to operate, and share the rent proportionally. Through the payment of a levy, members can fund certain common functions like admin, book-keeping, cleaning services, printing & copying, etc. Similarly the co-op can recruit sales specialist who market the complete skills set represented in the group. A basic salary can be funded centrally [if at all] and commission can be paid when deals are closed. It will also be possible to brand the co-operative with a central image. This will allow members to be seen as individuals when desired, and seen as part of a larger structure if required.

The bottom line with this type of model is that generation X entrepreneurs will have their need for companionship met, without compromising the desire to be the sole beneficiary of the revenue they generate. The co-operative model, that has worked so well in other sectors, when applied in the corporate world assists the modern entrepreneur in achieving their dreams without compromising who they are and what they need.

As more corporate co-ops populate our landscape we will see the ‘Connection Economy’ becoming increasingly real. Because co-ops facilitate and support the freedom of their members, there is no reason why one person cannot belong to several co-operative groups [this is anathema in current business structures]. In doing so we will see economic value generated not only by the products we produce, but also by the networks we occupy.

Conclusion

At TomorrowToday we have never applied the co-operative label to our organisational structure, but the reality is that we are far closer to being a co-op than we will ever be to being a traditional corporate. In the final article of this series we will examine how the principles of innovation can be applied to the co-operative structure to build a sustainable and profitable entrepreneurial enterprise. The final article will reflect on our experiences and our learning at TomorrowToday.biz. Based on these factors we will propose a conceptual model and structure for Candy and her network. Finally we will consider some practical things like banking, liability, and winding up and moving on.

We can say that with some ‘re-tooling’, co-operation as a business model of the past may well be the ideal business model for the future.

Raymond De Villiers is a consulting futurist, with professional studies in subjects ranging from Mechanical Engineering to Theology. He is currently completing a Masters in Philosophy in Futures Studies at the Institute of Futures Research at the Stellenbosch University Business School. He is recognised as a creative and lateral thinker, able to combine wide-ranging resources to craft unique solutions. He has worked with many of South Africa’s large corporates, assisting them to develop their people strategies and futures planning. He is currently the Head of Organisational Alchemy at TomorrowToday.biz.

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