Richard Steel of ‘Elevated Economics’: “Asking the right questions, not having the right answers”

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 […]

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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.

As part of my series about the “How To Take Your Company From Good To Great”, I had the pleasure of interviewing Richard Steel, an American entrepreneur, investor, and alumnus of Harvard Business School where he serves on the Alumni Board. He has run private and public companies, served on nonprofit boards, and advised the White House Business Council. He is the CEO of an investment firm, chairs a philanthropic fund, and is the author of the book Elevated Economics.

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?

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.

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?

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.

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?

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.

What do you think makes your company stand out? Can you share a story?

I answered this question in a pitch meeting one time (we won the pitch). What I said to the client was this:

Nothing. Nothing makes us stand out. There isn’t one singular thing that makes us stand out. Our tech is as good as our competitors’ tech. Our people, while superb, loyal, and hard-working, are as good as our competitors’ people. Our client list, while very impressive, was just as impressive as our competitors’.

They were shocked, but here’s the thing — it was true, and everyone knew it. This client was being constantly pitched by companies with only slightly different technology — maybe a firm had patented a process or trademarked a name, but essentially, we were all selling the same commodity, and the client knew it. Being radically honest with them made the difference that day.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

Find purpose. If your work has purpose and meaning, you won’t feel like you are slogging through your day. If you are working long hours, at least it will feel meaningful if there is a purpose to your work. We all want to work for companies that have a clear, authentic purpose that inspires us every day. Currently, it is a competitive advantage to become a purpose-driven corporation because both employee retention and morale increase at purpose-driven companies.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

So many. One of the ones who stands out is David Yoffie, a professor at Harvard Business School. He was generous and gracious enough to sit with me in his office and help me think through strategy for my business. It was there, in his office, that I made the decision to sell my company. He took the time and care to understand the nuances of the situation and was generous with his time, questions, and intellect. I am forever grateful for his grace.

Ok thank you for all that. Now let’s shift to the main focus of this interview. The title of this series is “How to take your company from good to great”. Let’s start with defining our terms. How would you define a “good” company, what does that look like? How would you define a “great” company, what does that look like?

Good is an interesting concept — good for whom? The definition of “good” can be divided into five components:

  1. Being a good employer
  2. Operating in a way that protects and benefits society and the environment
  3. Creating products and services that ensure individual well-being
  4. Investing in causes in local communities and around the globe
  5. Standing up for important social justice issues

All of those components are good for someone (employees, management, and society) or for something (the environment, social issues). The difference between good and great is achieved by including not only the who and the what, but also the why. The “why” is what gives a business its power, its raison d’etre. This goes back to the concept of purpose. If leaders can connect their vision about why the firm does what it does, why they are in business, that is where the magic is. A vision that is communicated well, imbued with purpose can be the difference between having employees that trudge through their day, versus ones that will run through walls for the company.

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.

  1. 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.
  2. 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.

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?

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?

  1. 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.
  2. 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 dollars to the climate crisis.
  3. 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.”
  4. Investors pouring a record amount of wealth into ESG financial products: Roughly 40 billion dollars 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 dollars in inflows.
  5. The Great Wealth Migration is going to increase all these trends: 68 trillion dollars 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 dollars of that 68 trillion dollars 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.

What would you advise to a business leader who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?

This is where diversity comes into play. When most people hear the word “diversity” they think of people who look different than themselves. What can really help a business leader who has reached a standstill is diversity of thought. You need people around you who come from different backgrounds, who think differently about problems, challenges, markets, opportunities, threats, headwinds, established practices, and the company’s historic strengths. Cultivating a culture where employees and management can question the status quo is a strategic advantage.

One of our portfolio companies was led by a military veteran, and we had a team of veterans in the company focused on our client’s goals, but we never communicated that we were a veteran-led, 100% veteran-powered company. Making a small change in the messaging of who we were as a company, made all the difference — the work stayed the same, the employees stayed the same. But when we changed all of our messaging to reflect who we were as a company, and the support we were giving to our returning veterans, client retention increased, willingness to pay increased, and we received more attention from the market as well — more earned media. All we had to do was to embrace a different way of thinking about the company’s identity, and that made all the difference.

Generating new business, increasing your profits, or at least maintaining your financial stability can be challenging during good times, even more so during turbulent times. Can you share some of the strategies you use to keep forging ahead and not lose growth traction during a difficult economy?

Some business clichés exist for a reason. Working with “A players” is perhaps one of the most well-known, but often underappreciated. The effects of working with smart, talented, charismatic, motivated people have exponential benefits across the organization; employee morale, productivity, talent retention, and the list goes on. Conversely, a recent survey showed three quarters of respondents said the reason for leaving their job voluntarily was because of their direct supervisor and not the job itself.

Also, sell through a slump. If you’ve played baseball or softball, you know what it’s like to go through a slump when you just can’t seem to hit anything the pitcher throws at you. There is only one way to power through a slump — keep getting up to bat. Get yourself in the mental position that you will eventually get a hit, and all will be well.

In your experience, which aspect of running a company tends to be most underestimated? Can you explain or give an example?

Felda Hardymon was a professor of mine at HBS — he always said that “governance creates value” and more specifically, that good governance creates value. Diversity of thought at the board level is definitely underestimated. A cognitively diverse board allows a firm to avoid groupthink, and can get the CEO out of the echo-chamber of like-minded yes-men.

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?

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!

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?

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 dollars and 17 dollars 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.

Great customer service and great customer experience are essential to build a beloved brand and essential to be successful in general. In your experience what are a few of the most important things a business leader should know in order to create a Wow! Customer Experience?

A Wow! customer experience starts well before a customer actually interacts with your product or service in-person. It all starts with bringing the market to your brand. A “go-to-market” strategy is the plan for how a firm brings a product to market. In the Elevated Economy, this is still the name of the game, but the focus has shifted to include the company itself.

An example of this comes from my friend Christina Stembel, CEO of Farmgirl Flowers. This rapidly growing online florist delivers flowers all over the United States every day. The company describes itself online by saying: Our goal is to provide the best flowers and customer experience every single time. We promise to do what’s right, and to do our very best, in everything we do. We’re proud to design each bouquet by hand and with heart, source our flowers from farms that live up to our high ethical standards, and to create good jobs. We’re committed to living our values, and to do our very best for our customers, team, vendors, and environment.9

Ninety percent of that paragraph has nothing to do with flowers. The new brands of today are being built on values, not value.

What are your thoughts about how a company should be engaged on Social Media? For example, the advisory firm EisnerAmper conducted 6 yearly surveys of United States corporate boards, and directors reported that one of their most pressing concerns was reputational risk as a result of social media. Do you share this concern? We’d love to hear your thoughts about this.

Confucius once said,“Life is very simple, but we insist on making it complicated.” The same is true for online reputation, it’s not complicated; do the right thing. Companies — big companies, world-changing companies — are incorporating the good of the planet, humanity, and posterity into their businesses from the very beginning. This is the essence of marketing and advertising in the Elevated Economy.

In the past, telling the story of your business meant doing a ton of research to try and figure out what customers want and then telling them all the ways your product or service will solve that problem. But in the Elevated Economy, things have changed. Now the attention has shifted from the product or service and onto the corporation itself. Today, companies have to prove themselves. You can’t just think about how the world will be with your business in it anymore. You have to think instead of how the world will be without you in it at all.

Elevated business leaders are not attempting to build monuments to their own success, they are trying to provide value to the human race long after they are gone.

In the Elevated Economy, consumers don’t just want to know what you sell, they want to know who you are. This is a massive shift in the core philosophies that have governed the creation and distribution of assets for generations. The goal of marketing for businesses is no longer to answer what you sell, how much it costs, or where to find it. In fact, the primary concern of every marketing department in the Elevated Economy should be just a single question: Why?

What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?

Not having a clearly stated vision is a problem early stage founders have. They are, understandably, so focused on the product, service, technology, team, or a myriad other issues, that they don’t take the time to set a clear vision for the company, and list the three priorities that the company must focus on to achieve their vision. If this is done early, many other decisions can be made by referring back to the vision and priorities.

It is important to drive home the optimistic side of the beginning of what I call the Elevated Economy that we find ourselves in now. Profit margins and revenue predictions aside, we are approaching a truly thrilling age for businesses and those who lead them. We no longer have to lead our companies at society’s expense. Whether it’s providing safer, healthier working conditions, or making decisions that are in the best interest of the environment, the choice between doing well or doing good no longer has to be made.

The Elevated Economy is here.

Thank you for all of that. We are nearly done. You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

Vote with your dollars!

Pundits and analysts are always saying how “this is going to change everything” — and I suppose that now I must include myself in that list. But I truly believe it. I believe that consumers are the kings of capitalism. As they go, so, too, do business leaders — and consumers are on the move in much larger numbers, and at a much more aggressive pace, than we have seen in a long time. They are voting with their dollars, and with their investments. At the end of their journey is an economic landscape where the businesses that perform best can also be the businesses that do the best. And for me, nothing could be more inspiring or exciting. What about you?

How can our readers further follow you online?

You can connect with me via Twitter or LinkedIn. You can also visit my website

This was very inspiring. Thank you so much for the time you spent with this!

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