| ||||
HBS classmates John Sage and Christopher Dearnley (HBS MBA '89) founded Pura Vida, a coffee company with a conscience, in 1997. Prior to starting Pura Vida, Dearnley was running a church mission providing services to Costa Rica's poor. Sage, on the other hand, was enmeshed in the world of Microsoft. Today, both partners are involved in the day-to-day aspects of running Pura Vida—a company with a mission: "to combine the efforts of business and ministry to help the lives of at-risk children." HBS Working Knowledge's managing editor, Carla Tishler, corresponded with John Sage, co-founder and president of Pura Vida, about balancing business with social enterprise, and what it takes to leave the traditional business world for a job with less tangible benefits.
Tishler: You worked at Microsoft before turning your hand to Pura Vida. What was the most transferable skill you brought when you made the move?
Sage: A passion for products and an insane commitment to succeeding. Perhaps this sounds a bit jarring when applied to an enterprise that exists to fund Christian ministry but it is at the core of who I am and what I think was reinforced or 'hardcoded' into me through five years at Microsoft (and later three years of working for Microsoft co-founder Paul Allen). It is a lot easier, more fun, and ultimately much more personally rewarding to channel this passion into coffee and Pura Vida. After contemplating a move into full-time ministry, and quickly determining that I wouldn't make it as a minister, I concluded that God had wired me as someone who is passionate about commerce and capitalism and blessed me with some ability to run a business. Thus, my desire to try and integrate these two seemingly disparate parts of my being.
| …I have been amazed by the impact our simple mission of 'great coffee—great cause' has on consumers. |
| —John Sage |
Some related thoughts: In five years of marketing such products as MS Works and MS Office, I learned how to think critically and creatively about what it would take to make my product the absolute best and ultimately the category leader. Hard to believe today, but when I was at MS my products were not in the number one spot...Works was number two (to First Choice) and Office was clearly number two to Lotus's Smartsuite. Thinking critically meant asking hard questions of ourselves and of our developers, challenging conventional wisdom, and being open to reinventing or changing the assumptions underlying our product, then rallying the resources internally and motivating the team to get the job done.
Q: Can you describe the difference in management style between you and your business partner Christopher Dearnley? Are your strengths reflective of lessons learned in the business world, or in other areas of your life?
A: We are a good complement to one another I think. Chris tends to be more mellow, reflective, and introspective. He is very sensitive and perceptive, often able to spot personnel difficulties or needs long before they surface or become apparent. Chris is also able and willing to be blunt and direct, capable of delivering bad news or a "salty word" to someone with little reservation or reticence. I tend to be a bit more impulsive and prone to quick action...often "leaping before looking" and getting out in front of the crowd to push something without always having set the strategy first. I am probably more extroverted and gregarious; often the cheerleader type, while Chris is provides a certain depth and "rootedness" that is critical to our business culture.
I am definitely more hardcore about work and schedule, in part a holdover from my days at Microsoft and in the technology industry. It is a bit of a joke that when I set the schedule for Chris's visits, there is barely time for bathroom breaks! As a pastor, Chris naturally brings a spiritual depth and maturity that is a real cornerstone to our company and mission. He is able to relate images and stories from his work in Costa Rica that bring alive God's presence and purpose for our employees. He is a very gifted pastoral counselor, able to discern needs and provide uncommon wisdom and insight.
Q: What is the most surprising insight you've gained in your current role? Have you had any major surprises or revelations on the job?
A: The most pleasant surprise has been to discover the intensity, passion, and loyalty of most of our customers. It sounds a bit corny but it's really true. Although I might have suspected that we would have a strong affinity with our customers—given our cause orientation and commitment to ministry—I have been amazed by the impact our simple mission of "great coffee—great cause" has on consumers. Customers have stuck with us through the early years when we were regularly messing up about one in three orders and now their support manifests itself in several tangible ways.
First, we have many customers who regularly tack on donations to their coffee purchases. Many have said "we can't drink any more coffee but would like to help" so we are seeing about 10% of our retail customers (i.e. personal orders and not our commercial customers) make contributions on top of their purchases. We regularly take in between $1,000 to $3,000 per month from these customer/donors.
Second, we have done very little to curry favor or develop loyalty among our customers. We spend virtually no money on marketing or advertising...people find us truly by word of mouth. Then, they often do the rest, passing out our brochures, telling their churches about Pura Vida, and creating new commercial accounts, and so on.
Finally, many of our customers pray for our ministry and for specific kids with whom Chris is working. We did some customer research calls about two and a half months ago. At the end of one survey conversation, our staffer asked if the customer had any more questions. She said, "Yes, how is Jordan? I've been praying for him since his mother died this summer and I just really want to know how he is doing." Jordan is one of the boys Chris has written about in his regular monthly "ministry updates" that are posted to the site. This is just one example but there are many others. Last year alone, we had at least seven teams of volunteers come down from the U.S. to volunteer and do work with Chris.
I guess the insight from this is pretty basic but it confirms a central assumption upon which our entire enterprise is based. Namely, that a good product—competing on the normal axis of quality and value—when combined with a strong social purpose/cause, can assume very powerful properties and be used as an engine of social transformation. Sounds grand and maybe like a stretch for coffee, I admit, but it is what fuels me…I want to try and demonstrate that business and faith—commerce and social enterprise—can not only co-exist but actually be leveraged for greater return than most now think possible.
Related to this, I suppose, is to say how surprised and grateful I am to see that our mission focus has attracted top quality, highly qualified employees. All (and I mean all) are working at a steep discount to what they could normally command in the marketplace.
On the negative side, I guess I would have to say that there are still pockets of people and organizations who simply refuse to believe that you can (or should) be able to simultaneously enjoy a great product and be doing something good for the world at the same time. These people seem to have a very binary view of business and philanthropy and don't show signs of wanting to fuse the two. Very true in the church!
Q: How does the future look for Pura Vida?
A: After almost four years since we had the vision for Pura Vida and about three years since we launched the company, I can honestly say that I think we finally have things figured out! It has taken this long to get our infrastructure in place and our relationships with large partners (e.g. Habitat for Humanity) in place and functioning. Now comes the fun part—getting out and telling the story to a much broader audience. Our business has grown rapidly, even more so in the past few months as we've introduced new fair trade coffees and coffee-related merchandise. Our immediate goal is to continue our pace of growth and to use our resources to help other nonprofits develop incremental revenue streams by offering coffee to their donors, supporters, and constituencies.
Q: Probably many people working in the "traditional" business world want to make a difference and give back to the community. Without picking up and starting a Pura Vida-like nonprofit, what can businesspeople do on a smaller scale?
A: Buy our coffee! Actually, I get this question a lot and you'd think I'd have a better response. While I encourage companies and business leaders to make a visible commitment (i.e. $$$ and employee volunteer time) to at least one community cause, I don't feel this is too original or too compelling. What really strikes me is the vast number of people I talk to who have lost touch with their passion or lack meaning and purpose in their day to day work. I still talk to people in high tech who are tired of what they do, yearning for something "more" and yet they feel paralyzed to make a change. Either the money is too much to leave behind or, more commonly, they are afraid of the unknown or the 'void' that often accompanies a departure from the conventional work world. So, I am a big believer in making decisions—wherever possible—out of freedom and not fear. In looking for and demanding passion and purpose in the job...even if that means a radical shift in lifestyle. Not always an easy message to deliver (or hear) but it's where I'm coming from.
Philanthropy in a New Key
John Sage and Christopher Dearnley weren't like most of their peers at Harvard Business School. Neither had financial training before enrolling and both are religious, in the God-is-behind-all-I-do sort of way. They became fast friends. When they worried about failing their classes, they'd meet for breakfast and pray for each other. After graduation, however—both earned MBAs in 1989—their lives diverged. Six years out of school, Dearnley decided to forgo his business life, and he and his wife started a church in Costa Rica, where he had been involved in business years before. The church is part of the international Association of Vineyard Churches; their mission, among other things, is to teach people about Jesus and train them to help the less fortunate members of the community.
Sage, meanwhile, was getting rich. He moved to Seattle and took a job with Microsoft, where he led marketing teams for products like Microsoft Office. After five years he left to join the start-up company Starwave, which was later acquired by Disney and Infoseek. "I was fortunate to be in high tech at the right time," he says. He had become a multimillionaire.
In 1997, Dearnley and Sage met for their annual golfing reunion. Sitting by a pool after the game, Sage, now forty, told his friend that he was "long on cash but short on vision." "For as long as I can remember," Sage says, "I wanted to be in business, but also have a direct impact on community work and ministry—realms that don't often coincide." Dearnley had the opposite problem. He had been funding his ministry—which brings food, medicine, drug rehabilitation, shelter, and job training to Costa Rican children at risk and to adults—with a family inheritance that was running out. When he gave his friend a bag of coffee from Costa Rica, "in an instant, it all became clear," says Sage, who had been consulting for Starbucks and so had the coffee business on his mind. On the back of a napkin, the two men jotted down a business plan for Pura Vida—which means "pure life" in Spanish, but in Costa Rican slang translates as "way cool."
Within six months, a Web site was up and handpicked Central American coffee was for sale. Sage runs the business from a two-story building in south Seattle. The space looks like other dot-com start-ups: an exposed-brick warehouse crowded with computers, servers, coffee, an industrial-strength espresso machine, and eight busy employees. But on the walls there are pictures from Dearnley's ministry in Costa Rica, a reminder that the coffee sold here provides food or other support not readily available there. (The Pura Vida business model is novel, although a non-Web version has been done before: Paul Newman's "Newman's Own" food business gives all of its profits to charity.) The office sits directly across the street from Starbucks headquarters, a fact that Sage calls "highly motivating." He says he's grateful to Starbucks, mostly because it introduced a lot of people to good coffee. But, he adds, "We provide a very different Seattle coffee story."
Money from sales, customer donations, and grants (from companies like Microsoft) is given to people who desperately need it. Most proceeds help children and adults in San José, Costa Rica, though some money has gone to hurricane and flood relief in parts of Nicaragua. Dearnley and volunteers from his church work with local social-service organizations, like a drug rehabilitation center, in poor neighborhoods around the city. They regularly go into dangerous parts of town, where, Dearnley says, even police officers are wary of venturing, to visit children who see violence and drugs daily on the streets and are often underfed. Pura Vida funds have helped pay for a soup kitchen and four computer centers (funded by a cash grant from Microsoft) in areas where men smoke crack on the street corners and the neighborhood river reeks because it doubles as a sewer.
In Dearnley's monthly ministry updates, posted on the Pura Vida Web site, he tells customers and potential donors how the company helps aid recipients. He writes about the children and adults in town who are elated about new shoes or a Christmas party, or are learning to use a computer for the first time. Of a six-year-old deaf girl who recently received a hearing aid with Pura Vida's help, Dearnley wrote, "To hear sounds for the first time frightened little Karina, yet terror soon faded into amazement. Now she's wearing the aid an hour a day until she adjusts to a world filled with sound. Karina's doctors believe she can learn to speak as well." Mocking business-school jargon, Sage says of the gift: "I'm not sure if that's strategic or leveraged or whatever, but it makes a difference."
So far, word of mouth has generated much of the company's sales revenue, though Sage plans to market the coffee, and solicit donations, more aggressively. Pura Vida now has customers in almost every state and several countries, and has put more than $100,000 into Dearnley's ministry. Sage doesn't necessarily target Christians, though he notes there may be upwards of 50 million Christian coffee drinkers in America. But he says it makes sense to sell the coffee to churches, whose parishioners may be inclined to support a Christian cause. He estimates that there are 400,000 churches in the United States, and "the only thing they can agree on is that they have to have coffee on Sundays. There's no reason we shouldn't be able to take a piece of that." He and his wife have financed Pura Vida for three years, but he expects the company to be profitable by the end of 2001. And even though he doesn't need to take a paycheck, he says it "would be nice not to be cash-flow negative every month."
Last fall, Pura Vida became the first on-line case taught in a course as part of the Harvard Business School's Initiative on Social Enterprise. The way Sage chose to give appealed to McLean professor of business administration James Austin, who taught the course with Allen Grossman, Bloomberg Professor of Management Practice in Philanthropy. Rather than donate to a nonprofit, Sage created a credible business. Rather than contributing only his money, he supplies his marketing skills. "Chris and I are very much business people," says Sage. "We're aggressive, competitive, we want to win, we want to put out a good product. But we define our shareholders—the kids—differently than any other gourmet-coffee company. Business can be about something more than what's classically defined by business schools."
"Sage is deploying core talents, which is oftentimes more valuable in terms of social value than writing a check," Austin comments. "Anybody can write a check."