Tough Talk About Social Enterprise

John Bird, founder of Big Issue magazine, had some tough talk for social entrepreneurs reported in The Telegraph.

"I have lots of people coming to me with ideas for new cars, trains, types of soap, and I always say look at the bottom line. Where is the revenue stream? I am a person that has started things with dodgy revenue streams and you learn from getting a good kick in the head," he said.

Toughness should be welcomed by social entrepreneurs -- if their efforts are dependent on foundations and others being "charitable," they aren't really enterprises, are they? But there must be fair ground rules for arriving at the expectations for the return, the timeline for achieving it, etc. Many ventures today are started with the idea of harvesting value through an IPO or sale of the business yet many social enterprises are started to be run for the long haul.

Many also are disruptive innovations -- new approaches serving new markets. These are opportunities that are hard to quantify and forecasts are guesswork at best. Yes, the business plan should represent a reasonable approach to the enterprise -- but there may be a leap of faith involved. The trick is to ensure that the plan allows for fast failure and adaptation when the original assumptions prove less than 100% correct.

It's not that it isn't about return but it is about return over the long term rather than the short.

What Would it Take?

I heard a report on WBUR in Boston this morning about a Catholic elementary school that is likely to be closed by the archdiocese as part of a consolidation plan. It serves a largely immigrant population, runs a successful after school teen drop in center that is one of the few neighborhood alternatives for kids who don't want to be on the street, and is a real oasis in an area heavy with violent crime. Parents claim that the education outpaces that available in the public schools although the school has a tough time attracting more students because of the rough area in which it sits.

This came amid the endless reports on the mainstream media about Black Friday and Cyber-Monday shopping -- including the craziness of 4 a.m. store openings and people waiting all night for bargains.

It got me thinking: what would it take to get people to come out at 4 a.m. to save a neighborhood school? What would it take to get everyone who stood in line to get into a store to give just $10 or $20 to make the world a little bit better? What a difference it would make if we could each forego another sweater or belt in order to help a kid get a better education.

If the Archdiocese acts to close the school the principal has said that she'll try to keep it open as an independent school. I'm going to try to organize a group to help. Want to join?

Social Enterprise, Enterprise Social

Argggggghh! Company-centric Web environments are taking on the moniker "enterprise social networks." As if it wasn't hard enough explaining social enterprise those not familiar with it, we now have a similar sounding name that are far more about enterprise -- corporate messaging, connecting the Kool-Aid drinkers, etc. -- than social missions and positive impact.

And just this morning I heard that "triple bottom line" was passe. We haven't even gotten there yet.

Couldn't the corporate flaks call theirs something else? Can we take back the terminology?

If the enterprise social networks can be used to tell truth to power, it might be worth it. But otherwise, I want my words back!

Fairwell to Motto

The magazine Motto has ceased publication. Started as Worthwhile, the magazine espoused a mission of "purpose, passion, and profit" and had a strong subtext of sustainability and social responsibility. I was a blogger for the magazine in its early days and am sorry to see it go.

I am curious about its demise given my own interest in both publishing and social enterprise. Though I can only speculate from afar, I see three reasons that Motto failed:
1) It was principally a print publication at a time when off-line media is having a tough time. A glossy magazine is an expensive proposition in the best of times; given the current climate, it would be tough to make a new entry fly even with deep pockets and an editorial focus on celebrity gossip never mind a niche focus like finding deeper purpose through business;
2) It was an advertising-driven business model. The magazine never had very many ad pages and ad dollars are shifting on-line (see item above). It is enormously expensive to get up to the circulation numbers that attract national advertisers. Given the niche market, I would have at least experimented with a higher subscription price to make the publication less dependent on space advertising;
3) They were under capitalized. The publication ceased operations after four years. It typically takes seven years for a magazine to reach profitability. Unless you have deep, deep pockets, it is difficult to survive that long. I would have started on-line and only gone to paper when I could demonstrate market demand for it.

Founders Anita Sharpe and Kevin Salwen may have been ahead of their time. Social enterprise is much hotter now than it was four years ago. They may also have cast their net too wide: they were about finding purpose in work no matter the type of organization for which one worked although they featured a lot of what one would call social enterprises. A tighter bead on being the journal for the movement might have helped.

I'll miss Motto and wish Anita and Kevin the best of luck in their next adventure.

United Way On Board

There are days when one wonders if social enterprise is getting as much traction as it is hype. Then one reads an item like this one from the Worcester (MA) Business Journal: United Way and the Institute for Non-Profit Development are making grants to help non-profits to start for-profit arms to help increase impact on mission and organization stability.

I've worked with non-profits for more almost twenty years and among the things that I've learned in that time is that United Way is a conservative organization. They are rarely a first mover -- they have plenty of good places to put their money. This effort is supported by only $80,000 in grants but, given that we are talking about United Way of North Central Massachusetts and an Institute headquartered at a community college it is significant.

So on those days when you aren't quite sure about the future, remember that there is news like this that can reassure us that we are heading in the right direction.

Six Earths is All it Takes

Great story on Marketplace on NPR tonight: it looked at how much capacity the world would need if everyone consumed as much as does the average American. It turns out that it is equivalent of six Earths. Count 'em, six.

It's part of a special report, Consumed, that examines whether current consumption patterns are sustainable. (D'oh, they're not). This story was followed by another on "overshoot" -- the consumption of natural resources faster than they can be reproduced. It was equally frightening: right now we are overshooting on trees, fish, and fossil fuels by 30%.

In the interview, UCLA geography professor Jared Diamond predicts that a first world lifestyle will not be possible anywhere on Earth in 30 - 50 years unless things change.

This is a clarion call for a conversion of traditional grow-at-any-cost capitalism to social enterprise. Unless we trade our short term focus on quarterly earnings for a longer view that values sustainabilty and social responsibility, we are going to grow ourselves into oblivion.

The current system provided a materially great life for many people (especially the few at the top) but it is like having a diet of all candy and ice cream -- eventually you get sick and the body stops functioning. We have to acknoledge that we are part of a larger ecosystem and are, in part, responsible for its survival if we are to survive ourselves.

What do you think? Can we reverse our patterns of overconsumption?

Will recalls boost SE?

This has been the year of recalls. Lead-paint tainted toys (multiple times), toothpaste, tires, pet food, spinach, and most recently a million pounds of ground beef. I would think that all of this has to add up to a lack of trust in those businesses that strive for shareholder value without social value.

If that's true -- and the holiday season will be the true test of whether consumer behavior changes at all based on these safety scares -- shareholder value will also be compromised. That, in turn, should be a boost for socially aware enterprises that take extra steps to measure and manage their processes and products.

I doubt that any of the people running the traditional corporations is a bad person. But they are likely converts to the pursuit of ever lower prices. A certain amount of fat-cutting in the supply chain is both healthy and necessary but eventually the lower costs come with a price --compromises in safety and oversight among them.

Social enterprises aren't perfect. No organization is. But I trust them to be more vigilant about everything from worker safety and compensation to manufacturing standards.

Consumers have short memories. I, for one, am hoping that concern for our own safety and that of our families keeps the memories of the recalls fresh and inspires people to make more socially aware choices when they shop.

Vikings and Farmers

I was listening to Don Sull of London Business School at a conference last week and he explained that he would take entrepreneurs over innovators any day of the week when a company is looking for new ideas. Innovation is over-rated, he said. It is a matter of Vikings vs. Farmers.

Vikings head off into unknown territory looking for opportunity. They probe to find a place where defenses are weak (or non-existent) and move aggressively to seize opportunities. Farmers, on the other hand, are tied to their land. They can become better and better farmers but they don't go out and discover new farms.

Sull was careful to say that Vikings are not inherently better than farmers. They are just less afraid to take risks and set out for undiscovered shores. In fact according to Sull, businesses need to find the right balance of Vikings and Farmers. Vikings, after all, aren't particularly good at hanging around to cultivate the long-term value of what they've discovered.

The "Vikings and Farmers" metaphor carried over to the rest of the conference and seemed to resonate with people from a wide range of companies and geographies.

We entrepreneurs are natural Vikings. However our ventures, if successful, eventually reach a stage where we need a few farmers to help us keep them going and this can be one of the most difficult transitions for any enterprise. Farmers want to introduce structure and process; Vikings hate structure and process. Farmers are patient; Vikings are restless. But in the end, Vikings need Farmers and Farmers need Vikings. It just isn't always easy to live together.

Keys to Innovation Leadership

I've just finished moderating a two day conference on innovation. While the participating were generally traditional companies, sustainability and social responsibility were themes throughout and I took away four lessons that I can think would benefit social enterprises:

1. Innovate across your entire value chain. Too many organizations get focused on product/service innovation or process innovation. The key is really to think holistically from the people you bring into your organizations as workers right through to your suppliers, collaborators, funders, and final users or consumers. Using this approach you will uncover new opportunities and resources.
2. For global organizations you must think of emerging and non-traditional markets as more than places to make things or in which to deliver goods/services. Those markets are also great sources for talent, ideas, and new business models that you can use globally. There is a lot to be learned if you engage with the right outlook.
3. Ask the right question. What "job" is your end user "hiring" your product or service to do? Often this isn't the one that the designer had in mind originally. A simple example: someone going to a coffee shop may be looking for a cup of coffee, a place to hang out, to purchase Free Trade beans, or check out home brew espresso machines. Think about how differently Starbucks and Dunkin' Donuts have answered this. Starbucks invites you to hang out, has comfortable chairs, and cool music; Dunkin' Donuts has signs saying "20 minute limit," basic furniture, and no music. You get coffee fast at Dunkin' while at Starbucks your beverage is crafted by a barista. Either can be the right answer in the right context but neither is the right answer in the wrong context. This concept was first put forth by Professor Theodore Leavitt of Harvard Business School back in the '70s but it is completely relevant today.
4. Innovation requires leadership. Throughout the conference the difficult questions, the "messy stuff," all came back to organizational and behavioral issues. Solving those means making tough choices, communicating a clear vision, instilling commitment and building trust. If you can't get these things right, your great ideas will never become reality.

Why Social Enterprise Now?

I know that I am not alone in my excitement for social enterprise; the topic seems to be everywhere look. From magazines like Motto to activity at schools like Harvard Business School to stories in the paper. But I'm curious to know why now.

One thought is that there are so many large social problems to be addressed now. Global warming, recovery from Katrina, preparation for the water shortage (if you didn't read the eye-opening and compelling story about water in the West in last Sunday's New York Times Magazine, do so) -- these are all problems to be solved and sources of opportunity that are not best addressed through either traditional private sector or non-profit means. Entrepreneurial drive with a social heart is clearly part of the solution. People want to do something to address these challenges.

Another is that it is fallout from the new employer/employee contract. Traditional employers don't provide the benefits they once did, aren't interested in employees for life, layoff workers regularly, demand longer hours, and have kept wages for the average worker flat while executive pay has risen. I think that a fair number of people look at that prospect and say, "The hell with that. If I'm going to give that much of myself it is going to be for something I'm passionate about. The next 'new and improved' paper towel just isn't it." Social enterprise gives people the prospect of making a decent living and feeling good about what they are doing.

A third is a new generation of philanthropists. Google started a for-profit philanthropy. Capitalist stalwarts like HBS professor Michael Porter have gotten involved. Social venturing is hip. Social enterprise is simply more possible than it was five years ago.

What do you think? What do you see as driving the social enterprise movement?

Wind Powered School Wins Prize

The Cassop Primary School in Durham, UK has won an award as the country's greenest school after installing a wind turbine on the school's grounds. The school has also campaigned successfully to turn a local quarry into a nature preserve and has long had solar panels on its roof. Students are organized into a "green team" to ensure that energy saving measures are followed and there is a device that monitors the school's carbon dioxide output.

Congratulations to the enterprising students, teachers, and administrators at Cassop.

UK Innovation Advantage?

In the U.S., we rely on market mechanisms to drive innovation. In the UK, they are taking a more directed approach as I learned over lunch with David Kester, Chief Executive of the Design Council.

He told me that in the UK where most schools are publicly funded, a decision has been made to create six “innovation centres” that will bring together academic institutions in design, engineering, and business. Many interesting things happen at the seams, or intersections, of disciplines and this program is an interesting way to create those intersections where they might not otherwise occur.

One of these “innovation triangles” is being created by the Royal College of Art and Imperial College. Imperial brings engineering and technology expertise through its Faculty of Engineering as well as business knowledge through its Tanaka School of Business. The £5.8 million dollar investment is designed “to create world-beating products and services.”

Academia in the U.S. has pursued increasing specialization with interdisciplinary programs being more the exception than the norm. Achieving tenure still depends on publishing in highly focused academic journals that reward research more than practice. A recent review of articles in the International Journal of Applied Management and Technology revealed articles entitled “A New Hybrid Algorithm for Multi Objective Permutation Flowshop Scheduling Problem” and “Pedagogy for Determining Alternate Solutions to Integer Resource Allocation Problems.” There is certainly value in this research but one wonders how often it leads to world-beating products and services.

The “bump and connect” model of innovation – creating environments where people can have semi-random but productive encounters – has become popular among urban planners. This experiment in the UK is a more deliberate attempt to foster these interactions in campus settings.

Innovation is increasingly seen as the key to global competitiveness. China and India both push out more technical and engineering graduates than the U.S. or other developed nations. The Innovation Centres, the result of the government-funded Cox Review of Creativity in Business, are themselves an interesting innovation that may enable a relatively small nation to outpace larger rivals.

Do you agree that these multi-disciplinary programs will spur innovation? Can public policy do what market mechanisms cannot?

Social Enterprise Tastes Good!

Divine Chocolate took top honors at the UK's Enterprising Solutions awards. The Fairtrade chocolate company is co-owned by a Ghanaian cocoa farmer’s cooperative. The Kuapa Kokoo co-op receives a share of the profits as well as payment for their cocoa crop. Their products are available at Tesco and other major retailers in the UK.

I'm flying to London on Sunday and will make a point of taste testing the winner at the earliest opportunity (one can't neglect one's duty after all!).

Congratulations to Divine Chocolate.

I've been studying global innovation for much of the past few months and have consistently been impressed with what's happening in the UK. From private enterprise to public policy and everything in between, exciting things are happening in the UK.

For example, alliances are being created between business schools, engineering schools, and design schools to give students the chance to acquire cross-disciplinary skills that help expand horizons (more about that tomorrow). The Enterprising Solutions awards are another example of creatively inspiring the future.

For Profit or Non-Profit

One of the biggest questions for any social enterprise is whether to be for profit or not-for-profit. The former gives you access to venture money as well as a lot of flexibility in what you comprises your enterprise; the latter provides the opportunity for grant money and provides tax benefits.

The larger questions, however, are what you see as the force that empowers your social mission and where you want to take the business. I think that The Body Shop qualifies as a social enterprise -- particularly before it was sold to L'Oreal -- and Anita Roddick made no bones about using the power of the marketplace to have the greatest impact on the beauty business. She had clear and consistent social goals and built a large following by engaging with customers.

But when you decide to go that route, you ultimately are beholden to the demands of shareholders. If you go public or are acquired by a public company, your shareholders are likely to pay more attention to your quarterly financial returns than your return on mission. You are fine so long as you make money but as soon as you make a decision to do something that serves your mission but does not increase your financial performance, you are going to get serious grief from those same shareholders.

Non-profits are taken seriously for their pursuit of their missions but don't have a great track record in revenue generating activities. A social enterprise can be non-profit, for profit, or some combination of the two so long as it serves a social mission and there is no clear consensus on the best model to follow.

I think that if you are going to make business activities integral to the pursuit of your mission, for profit is the way to go. But plan to stay private. Get your money from angel investors or venture capitalists who are committed to your mission as well and who will be satisfied with the returns the enterprise can spin off without a sale or an IPO. It's not an easy choice.

What do you think?

Congrats, Al and Panel

We have to congratulate Al Gore and the Intergovernmental Panel on Climate Change for the Nobel Peace Prize they were awarded yesterday. The need for continued attention to the challenges of climate change continues and, more important, action is needed. Awarding the Nobel Peace Prize for work in this area can only help stimulate that action.

Innovation and entrepreneurship through social enterprise will be critical in these efforts. The energy, ideas, and enthusiasm that we can bring will be critical. Governments move slowly; entrepreneurs can inject speed and agility into the race to find solutions to climate change.

What do you think of the Nobel Foundations' choice?

How Green is Green?

The enviro-buzz started a few years back when Cameron Diaz and Leonardo DiCaprio were spotted driving Prius hybrids rather than Escalades or Ferraris. Then, when Al Gore’s film/PowerPoint extravaganza An Inconvenient Truth captured the Oscar® for Best Documentary this past March, green hipness went truly mainstream.

Now saving the planet is big business. We recently heard from an executive at Philips Lighting that the company was working its way out of the incandescent light bulb business. Wal-Mart is also basking in the fluorescent glow hoping to sell 100 million of the energy saving bulbs. Home Depot is creating an eco-friendly endorsement label for a growing number of its products. I even saw an eco-themed window display at luxury retailer Hermes when walking through Knightsbridge this week. For those of us who have been environmentalists long enough to remember the first Earth Day, it seemed we might actually have reached a tipping point. Green is turning to gold and real change is in the air.

That, of course, attracts people looking more to cash in on the trend than actually make a difference. I recently read about new green media enterprises hoping to capitalize on resurgent environmentalism. Included in this write up was Sprig, a Web site for women who want to make their lives more Earth-friendly. But not that Earth-friendly.

“We’re targeting this to the 95 percent of people who want to be 5 percent green,” said Jeanie Pyun, Sprig’s editor in chief in a New York Times article. “Not the 5 percent of people who want to be 95 percent green.” Well, at least she’s honest about her cynicism.

Five percent green. Does one need a whole Web site for that? How else would I find out about the $160 Chanel eye cream with a key ingredient that’s “organic and sustainably harvested on Madagascar, where Chanel provides the local employees with education and health care.” It’s good to know we can look great while shopping our way to a sustainable future. (And I do applaud sustainable harvesting and healthcare for the locals.)

As a recovering marketer, I can see the temptation to get on the bandwagon quickly. And perhaps the demand is for eco-super light. But I also have seen the greater insistence on authenticity from consumers. I don’t think that the majority is looking the equivalent of the fat-free food craze a couple of year’s back when consumers gorged on jillions of calories of low-fat and fat-free food – only to be surprised when they gained weight.

Maybe it is just unfounded optimism but I get the feeling that most people want to be more than five percent green.

Foundations Gone Wrong

The New York Times reported on September 29 about "orphan trusts" -- charitable trusts whose sole trustees after the creators pass are either banks or lawyers. In many cases, the trusts have increased assets, decreased giving, and -- surprise, surprise -- are providing greater benefits to the trustees. More assets means more fees to the trustee and, in some cases, these foundations gave grants to organizations with which the trustees are affiliated.

The report states that many of these foundations were initially in the hands of local banks with roots in the same communities as the creators of the foundations. However after significant consolidation in the financial services industry these banks are now part of multinational corporations with no direct connection to the mission of the foundation. They tend to give the minimum required by law and bulk up fee-generating assets under management.

I'm on the board of a local non-profit in the Boston area and I know how hard it has been to find funds as industries consolidate. Large corporations tend to favor large charities. It's more efficient to give fewer, larger grants and name brands like name brands. Unfortunately, it is difficult to police the activities of these small trusts

There is a lot of great work done by smaller organizations that deserves to be funded. The $5.4 billion controlled by these orphan trusts could do a lot of good if deployed more in accordance with the way their founders acted when they were alive.

I'm not sure exactly what should be done about this. More thoughtful trust documents that give greater guidance and ensure a larger number of trustees would be a start. Sunset provisions that steer money to the organizations originally supported a certain number of years after the founders pass would be another possibility. Ideas are welcome.

Support the Green Jobs Act

The Green Jobs Act (H.R. 2847) would "invest $125 million a year for five years to guide 35,000 workers toward promising, environmentally sound careers," according to the Boston Globe.

The U.S. should be working toward leading in the technology, products, and services that save energy, reduce carbon output, slow global warming, and sustain the environment. A well-trained workforce is critical in this effort and H.R. 2847 is a great step in the right direction. Some of those trained will become entrepreneurs; others will take jobs in established firms. In either case, they will help economic and social development.

Private enterprise seems (finally) to be moving aggressively in the direction of "clean and green" and policy makers need to keep pace. If we are going to retrain workers -- everyone from returning veterans to the unemployed and non-violent ex-offenders -- we should be looking to help build economic growth in this area. Private and public efforts can be complementary and create a win for business, workers, and the public at large.

Let your Representative know that you support The Green Jobs Act of 2007.

Where is the city bike?

Each time I visit a bike-centric European city like Copenhagen, Munich, or Amsterdam I am jealous of the many basic city bikes I see: no frills, meant for everyday transportation (with chain guards, fenders, etc.). Since so many of those cities are flat they have the advantage of being able to ride one-speeders as well.

In the U.S. we are so performance focused that our bikes are made for recreation not transportation -- no chain guards, no fenders, 21-gears. They say "I am an athelete," not "I have to get to the office." Don't get me wrong, I love my road bike which I take for long recreational rides. But it isn't practical for commuting and it is hard to find a bike that is.

We also lack the extensive urban bike lanes that are found in the cities named above. One rides a bike through Boston at one's peril. It's a jungle out there. There isn't much I can do about that in the short-term, but I sure would like to find the right bike with which to enter the jungle.

Have you found a great city bike?