Profit with a Purpose - The Story of Vestergaard Frandsen

How to change the world and make money.

Struggle and the First Generation

In 1957, frustrated with the difficulties of farming in Southern Denmark, Kaj Vestergaard Frandsen launched a start-up with a partner to make garments for industrial workers. Building the firm was gruelling. He had no funding and his partner soon exited the business. Industrial work clothing was already a competitive industry, and almost as soon as he had begun producing, new entrants arrived from low cost countries such as Poland and China. But on sheer determination the firm managed to survive and even expand, exporting goods outside Denmark.

Chance and the Second Generation

Kaj's son Torben took over the business and the battle with low cost producers in 1970. Chance took its time, but knocked on the door in 1992. The Swedish civil defence authority had decided its stockpile of a million meters of olive grey wool fabric no longer represented a critical national security asset, and Torben could buy the lot at a very attractive price.

Choice and the Third Generation

Mikkel Vestergaard Frandsen, grandson of the founder, inherited the family gene for challenge. While his father was running the family firm in Denmark, Mikkel (then just 19 years old) launched a business importing used cars, truck engines and buses from Europe to Nigeria. So when Torben suggested Mikkel leave politically unstable Nigeria (there had been an unsuccessful military coup in 1992) to return to Denmark and help figure out what to do with a million meters of Swedish wool, Mikkel was torn. Continue his work in Lagos and have social impact enabling an emerging country to develop infrastructure? Or help Vestergaard Frandsen, the family firm, turn chance into profit?

A False Choice

At the ripe old age of 21, Mikkel Vestergaard Frandsen took control of half the family's firm. The business would operate two divisions. Father Torben would manage the existing business, selling industrial workwear. Son Mikkel would manage an operation to take the Swedish wool and manufacture blankets that could be sold to the Red Cross. For the second time, Mikkel found himself running a business that could deliver social good (most of the blankets ultimately went to refugees in Rwanda and Kurdistan) as well as turn a healthy profit. Perhaps the choice was actually not an either/or.

A Big Step

Four years later, Mikkel got the keys to the whole family firm. His strategy, both unorthodox and clear, was that Vestergaard Frandsen could achieve stronger growth by pursuing businesses with positive social impact. From that platform, the firm took off. In 1999, he launched PermaNetŒ¬, an insecticidal mosquito net that won recommendation from the World Health Organization (WHO) and broad adoption. In 2008, he launched LifeStrawŒ¬, an instant microbiological water purifier, recognized with the Well-Tech Innovation Technology Award before it was even available. Further developments are working on malaria protection and AIDS testing. The financial results have mirrored the public acclaim the firm has received for its innovations. After years of stagnant revenues of about US$5million to the turn of the century, selling social impact increased sales in 2007. The firm now employs 240 people and, while profits are private, there is sufficient surplus that Mikkel can afford to invest profits into research and development as well as grow further by acquiring Prime Water International (in 2008), a water filtration firm based in Belgium.

A Big Idea

There is a historic repulsion between the idea of creating positive social change and the idea of making money. The story of Mikkel Vestergaard Frandsen challenges our perceptions about that. He shows us that it isn't just possible to do good and make money, but that it's possible to do good and actually do better financially. He also shows us how. The principles behind creating an enterprise that delivers both societal and financial results are the same ones behind any entrepreneurial venture. Starting with things you already have (a family business and a social mission), taking advantage of surprise (stockpiled Swedish wool) and building an enterprise with and through partnerships (the Red Cross and the WHO). The question to you is simple. Change the world? Make money? Why choose?

This entrepreneur case was written by Stuart Read, professor of marketing at IMD and Nick Dew, assistant professor at the Naval Postgraduate School. It originally appeared in Business Life Magazine.

Publication:
British Airways Business Life
Author(s):
Stuart Read
Nick Dew
Relevant Principles:
Bird-in-Hand (Means)