What sector do GOOGLE or TWITTER belong to after all?
The late Peter Druker once commented that most of the interesting work would be in the social sector, as that is where the unresolved problems rest. I wonder if he fully anticipated how non-profits are not the only enterprises focused on social issues. Many for-profit companies are headed there as well.
Google is enabling educational advances in very poor areas and we all witnessed how Twitter gave voice to Iranian protesters. Donna Fenn, best selling author of Alpha Dogs and Upstarts and contributing writer for Inc. comments that business start-ups among young leaders is at all time high with Generation Y. And most of these, she shared at the recent Wisconsin Early Stage Symposium, are involved in social entrepreneurship in some way. HP and P&G are among the many Fortune 500 companies that are also finding market opportunities in social issues in developing nations.
We used to divide the world easily into two parts: for-profits who generated wealth and income by creating value for their customers and non-profits who addressed social issues through donations, grants and to a far lesser extent earned income. Today, there is a blurring between the segments in all but the tax code.
I’d argue that for-profits have always been for social benefit–a strong economy has been the best anti-poverty strategy to date. It is only with the maturing of so many categories that product innovation because increasingly about “frills” and less about social need. The need for greater energy efficiency finally enables more products to solve important unresolved problems e.g., airline engines that use less fuel, not just save us time getting to the UK.
We don’t have enough volunteers or grant money to take on the many challenges facing our communities–so let’s innovate to find entirely new approaches, as entrepreneurs do. In a recent talk I gave at University of Wisconsin Madison’s Communiversity (a coming together of non-profits and UW students and faculty through the UW Madison School of Human Ecology), I challenge non-profits to find earned income approaches to generating needed resources. I also encourage them to find entirely new ways to solve social problems. One example I give is to stop trying to fix the poor school performance of low-income children solely through classroom volunteers. Team up with gaming companies, University experts and cell-phone companies to identify technology-based solutions to close learning gaps. The solutions would be more scalable and exportable to other communities (for a profit) than our current use of volunteers in the classroom who increasingly look they are holding their fingers in the growing cracks of a dam to prevent flooding.
For profits should remember that Generation X and Y want to work for companies doing meaningful work and that consumers across all ages prefer buying from the company that supports important causes when everything else is equal. Committing to causes is therefore vital if there is at least one other company out after your customers or talent. Figuring out how you bring your competencies to bear in solving social and environmental problems in ways that also generate great income is the win-win approach you should aim for. The anesthesia systems company I worked for made anesthesia dramatically safer for patients—we made the world better and we grew our market share and market size dramatically. Shareholders, hospital and physician customers, patients and their families, and employees all benefited.
The biggest mistake all too many leaders make is leaving their business model strategy decisions to history, patterns set by others in your industry or serendipity. Resources in the “new normal” economy will fall short of need in either sector if you and your leadership team ignore business model innovation.
What is your for-profit company doing to make the world a better place? What is your non-profit enterprise doing to break through the constraints of donations to find new resources for your worthy aim?
© Plantes, 2009
Alexander Osterwalder says
Kay, you point out a very important issue: the blurring between for- and not-for-profit and the need to find innovative business models to solve some of the most important issues facing our societies and the world.
This is a fascinating field in which very much is happening. I am convinced that we will increasingly see business models in which for-purpose will be woven into the company DNA.
A great example is Grameen Phone, which aimed to connect rural areas in Bangladesh to the mobile phone network in order to increase productivity in poor rural India. They achieved that with an innovative business model and are now the biggest tax payer in the country. That is for-profit and for-profit with a huge societal and economic impact. Through their business model they generated income opportunities for 250’000+ women in rural Bangladesh and also improved their social status – that is simply impressive…
Fred H Schlegel says
Hi Kay, I really like the thinking you’ve expressed here. So often social needs are opportunities waiting to be discovered. When an organization moves from paying lip service to a cause and actually implementing change that directly improves conditions on the ground there can be a real shift in employee and customer attitudes. I think this thinking goes beyond simply donating cash. Bring your unique talents to the problem. Like when Walmart delivered water during Katrina or in the Rackspace example you gave in the comment at my blog. But I think the real power of this really must go beyond the company looking for a marketing angle. It becomes a mission in and of itself.
.-= Fred H Schlegel´s last blog ..Being and Entrepreneurship =-.