We’re entering an era when the most valuable new market categories will be created by “responsible innovation” companies. And that has profound implications for category design.
I have a new book out – a collaboration with Hemant Taneja, managing partner at VC giant General Catalyst – titled Intended Consequences: How to Build Market-Leading Companies with Responsible Innovation.
We wrote it because we believe the world needs – and increasingly demands – technology products and services that improve life on this planet while avoiding harmful unintended consequences. Responsible innovation is the way to build great, mission-driven companies that can deliver such products and services. The word “responsible” here has two meanings. The first is about making sure innovations do no harm, which seems like a no-brainer, yet is something too few companies do. The second meaning is to create innovations that help solve society’s most challenging problems – maybe climate change or inequality or an individual’s ability to stay healthy.
This isn’t a kumbaya call to put aside profits and do good. Hemant is a venture capitalist. He’s after the best returns. And he and I believe this is now the path to the best returns. Going forward, responsible companies will win loyal customers, attract quality investment and recruit and retain the most talented employees. Responsible companies will beat companies that “move fast and break things” as they carelessly disrupt the livelihoods of vast swaths of the population.
On the flip side, it’s increasingly clear that being irresponsible is high-risk. Irresponsible companies get punished – by regulators, consumers, customers, and even their own employees. Just look at what Robinhood Financial has had to endure. In 2020, the U.S. Securities and Exchange Commission fined Robinhood $65 million, essentially for turning stock trading into an addictive game, leading to many users getting into severe financial distress. In 2021, the company was fined another $70 million by the Financial Industry Regulatory Authority – the largest fine the self-regulating body ever imposed. Robinhood went public last summer and since has lost about two-thirds of its value.
Many of the world’s biggest investors see these trends and believe they will impact the valuation of companies. Larry Fink, CEO of BlackRock, the world’s largest financial asset manager, wrote in a letter to CEOs of companies in the firm’s portfolio: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
What does this mean for category design and creation?
Well, some of the most important and valuable companies of the next 20 years will succeed because they are being built to solve systemic, societal problems – big problems such as climate change, inequality, divisiveness, disease, hunger, obesity, addiction and extremism. AI and other technologies we’ve developed over the past decade (cloud, mobile, blockchain, genomics) are making it possible to solve such problems in new ways.
The hardest problems are often the most explosive opportunities. Founders who crack those problems will get rewarded much the way Elon Musk is getting rewarded for Tesla’s leadership in reducing carbon emissions.
In category design, we always start with the problem: what unique problem are you going to solve, and why are you the one to solve it? Too many companies of the 2010s solved prosaic problems like how to get food delivered or watch short videos. (TikTok may be enormous, but it ain’t solving any pressing problems.) In the 2020s, the great category opportunities are in the unsolved big problems that burden our lives.
We featured a number of these companies in our book. Spring Discovery is working on ways to slow aging and keep people healthier longer, and is dedicated to serving all of society, not just the wealthy. Cityblock is bringing better healthcare to populations, such as the homeless, that typically get terrible healthcare. If you think that’s just a do-good business, Cityblock is now valued at $5.7 billion.
Intended Consequences features one of our category design clients, Guidewheel, which built inexpensive technology that can help millions of small manufacturers save energy, helping ease carbon emissions. Another of our clients, noodle.ai, is using AI to try to e
nd waste in the supply chain, also helping with climate change. Both companies are set up so that a good business idea is good for society.
To all aspiring category creators out there, our message is that the best category opportunities of the next decade will fall under the responsible innovation umbrella. And, of course, if you are such a CEO and want help thinking that through, give us a shout or check out our category design book list.