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Business Models
Feb 23, 2009
Models and what's missing
Hosted by Charles "Hipbone" Cameron (February 2009)
IBM Global's 2006 report (pdf version here), Business model innovation: the new route to competitive advantage included a striking graph illustrating the finding of IBM's financial analysts that "companies that put more emphasis on business model innovation experienced significantly better operating margin growth (over a five-year period) than their peers."
And business model innovation is something that lies at the very heart of social entrepreneurship.
All entrepreneurship tends to render "existing products, services, and business models obsolete", as Roger L. Martin and Sally Osberg suggest in their paper, Social Entrepreneurship: The Case for Definition, but social entrepreneurs go further -- since social entrepreneurship is itself a genre of new business models.
In their book, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, John Elkington and Pamela Hartigan describe three styles of business model used by leading social entrepreneurs: the "leveraged nonprofit", the "hybrid" nonprofit and the "social business".
The "hybrid nonprofit", they write, is where most of the experimentation in social entrepreneurial style occurs, often focusing on the production of novel forms of social and environmental value -- partly because many philanthropists favor this approach, viewing it as showing some of the same "hybrid vigor" found in biological systems. Such organizations can recover portions of their costs through sale of goods and/or services, and may innovate or use a wide variety of detailed business plans within this general approach. Aravind's business model, for instance, charges wealthier patients more for the services they offer poorer people at less cost, and by virtue of the size of their market are able to bring in economies of scale which permit this.
Also of interest is Larry Brilliant's conference presentation on Hybrid Philanthropy at Google.
The "social business" is quite simply a for-profit entity focused on a social mission -- its main difference from other businesses being that its main aim is not to maximize financial return for shareholders, but to achieve social goals. Financing and scaling opportunities can be greater for businesses running on this model, because they can more readily take on debt and equity.
And some social entrepreneurs simply run two enterprises, using the profits from one to subsidize the social activities of the other.
• What's missing in today's business models?
• What business model for social impact does your organization use?
• What innovations are involved in this approach?
• How has it turned out in terms of both short and long term success?
• Are others adopting your model?
• What do you perceive to be its drawbacks?
• What are your stories of success?
• And just as importantly, maybe more so, what are your stories of failure?
Join Charles "hipbone" Cameron as we explore business models for social entrepreneurship, what our current business models may be missing -- and what some innovative thinking might suggest...
Jun 26, 2008
Private Sector Development in Palestine
Hosted by Adam Neiman (July 2008)
The recent Palestinian Investment Conference in Bethlehem marked the beginning of a new international initiative to stimulate private sector development in the West Bank. The event was very promising- a potentially problematic quality in an over-promised land. There may not be a place in the world where private sector development is more urgently needed or more challenging. Development is no substitute for a diplomatic solution but no diplomatic solution can be sustained without a sustainable Palestinian economy. The political situation places many roadblocks to economic development – literal as well as figurative.
There are also some unique contours to the Palestinian economy that make traditional developmental models problematic.
Palestine has a narrow resource base, including limited water supplies and an unemployment rate (40%) comparable to the most disadvantaged countries of the developing world. But because of the donor countries and the linkage to the Israeli economy, the cost of living is far higher. A traditional free trade model, starting on the bottom rung and competing as a low wage producer, is not an option.
But Palestine has also a few advantages. The population is much better educated than usual for an early stage developing country. It has a market economy with a remarkably resilient and resourceful business community. There is a far-flung Diaspora, many of whose members are highly successful entrepreneurs and financiers. Because of its geopolitical importance, there are significant resources in the form of loan guarantees from the donor countries for internal investment as well as other types of developmental assistance.
My company, No Sweat Apparel, has been working on the West Bank since 2006. We produce organic cotton T-shirts at a sweatshop-free Palestinian owned factory on Virgin Mary Street in Bethlehem.
I came away from the Palestinian Investment Conference both encouraged and concerned. I have a couple of questions in particular that I thought the community of social entrepreneurs here at Social Edge might have some insight into:
2. Could “Made in Palestine” products have a competitive advantage? If so, how and where?
Join Adam Neiman, CEO of No Sweat Apparel, in the conversation.
Jan 30, 2008
Case Study: A Hybrid Model for PlayRugby
Hosted by Mark Griffin (February 2008)
Finding the right Non Profit/For Profit model for a small but rapidly growing youth development program.Play Rugby was established in 2003 by National Rugby Team Member Mark Griffin. As a non-profit corporation, the NPO’s philosophy is to “develop youth through rugby.” The NPO’s curriculum-based youth development program is branded “Play Rugby USA” and has reached 4,000 children in the last three years.
Now looking as national expansion and with the endorsement of the National Governing Body, Play Rugby is contemplating the most effective structure to provide the foundation for long-term, scaleable growth, including the launch of profit-making Play Sports.
The Program
• Mission: Strengthen youth character, conditioning and academic commitment, by integrating the values of rugby into a distinct and inclusive team sports experience.
• Vision: To become the premier youth rugby program in North America.
The Program includes
• Brand/logo/TM and associated assets (curriculum, equipment, etc)
• Physical delivery of fee-based services to schools and community based organizations (note - organizations pay, not participating students).
Funding & Investment
• The NPO’s operational budget is minimal ($170K in 2007): Fundraising 1/3 / Program Services 2/3
Expansion Plans
• Transfer of program (or rights) to Play Sports
• Play Sports to grow the program entrepreneurially through establishing network of licensed affiliates and employees
• NPO to focus on Fundraising for Program Evaluation, R&D and Promotional campaigns
Proposed Structure
• Two legally separate companies, no shared ownership, limited governance overlap (Mark Griffin only member on both Boards)
• Transfer of Program through long-term licensing of associated assets to Play Sports in return for % revenue back to NPO
• 5 New Board Members (identified) at NPO to drive forward fundraising & related activities
• Capital Campaign at Play Sports to raise capital for Program growth
Integral to the success of this structure is the Founder’s role in both Companies.
Questions
1. Can the Founder chair the non-profit board while acting as CEO for Play Sports? How should this work (salary, protections, etc.)?
2. How should the program be transferred to Play Sports -- license/purchase/other?
3. What factors should the companies consider in the sharing of certain joint resources (such as employees, office & equipment) during the initial growth stages?
4. Can the non-profit outsource delivery of grant-funded programs to Play Sports? What’s the best method?
Help Mark Griffin find the best hybrid structure. Join him in the conversation.
Dec 13, 2007
Radical Collaboration
Hosted by Jeff Hamaoui (December 2007)
The time for playing small and separate is over…We live in a crucible in which the forces of globalization, environmental degradation, poverty and emerging markets have driven companies, governments and non-profits to a new understanding of their limits. The problems that complex, interdependent systems create are beyond the scope of any one player to solve. The hidden opportunities of this moment are beyond the ability of any entity laboring in isolation to discover.
Working across the globe with social entrepreneurs, corporations and governments, we have found that the most powerful and sustainable solutions to the challenges of this new age come from ideas that transcend traditional boundaries and ways of doing business—whether your business is shareholder profit or public benefit. These things are not mutually exclusive.
Enter Radical Collaboration…
There is a need to build platforms for truly breakthrough design by creating multi-faceted partnerships aligned to explore, develop and exploit possibility. What does that look like? It’s bringing together an international finance giant, a development agency and a construction conglomerate in synchronicity to build 100,000 units of low-cost housing in Central America. Business profits, the effect of public dollars is amplified, and poor families get affordable green homes. If this dance of interdependence is splendidly done, everyone wins.
Some key concepts to keep in mind…
The first thing to keep in mind; don’t collaborate when you don’t have to; not every opportunity is collaborative; if it is more effective to go alone; go alone – as with African saying: “If you want to go fast, go alone; If you want to go far, go together…”
1. Opportunity leads, design follows
For sustainable investment from partners, the drivers for a partnership need to be correct; good collaboration begins with a mutual opportunity.
2. The three C’s – Capital, Capacity and Credibility
A recognition between partners that what is being traded goes beyond capital (which is always the focus up front); partners bring value through their different capacities and their credibility in a given field; in the case of non profits this value is often overlooked.
3. Relational collaboration: It’s not brokerage – it’s production
Complex collaborations require an investment of time and physical proximity to hammer out the details; think of radical collaboration being organized less like brokerage and more of a movie production; we need deals produced and a production methodology…
4. Space Matters; Context and creativity
WHERE people collaborate is critical to HOW they collaborate; again the world of films gives a useful parallel – the movie studio. An open collaborative space that permits creativity and flow.
5. Keep it simple
Collaborative complexity is directly related to the number of players involved – land key strategic partners first and add tactical partners as needed
6. Transactional collaboration
When what is traded is of tactical rather than strategic importance then there is real opportunity for automated market places; this includes iterative decisions, the movement of information and the trading of simple commodities – not all collaboration need be ‘radical’…
We have been exploring this delicate choreography pulling together the experience, the networks and the nuanced understanding of how to create cross-sector opportunities. Radical collaboration doesn’t deliver pat answers, it isn’t about consulting.
You have to use design thinking—a collaborative, iterative, and holistic approach to solving problems and mining opportunities—to help invent a new future for business.
Join Jeff Hamaoui in the conversation.
Nov 08, 2007
The For-profit / Non-profit Hybrid Model
Hosted by Richard Klopp (November 2007)
The For-profit/Non-profit Hybrid Model: Why and How?PharmAfrican, a Montreal-based privately owned biopharmaceutical company, was founded in 2006 to develop and commercialize health nutrition products and botanical drugs in collaboration with local African producers.
In addition to the profit-making company, the Biotechnology for Bio-sustainable Development in Africa Foundation (BDA, a Canadian and US-based non-profit), was launched to prepare the work in Africa of pedagogical and training programs for medical plant farmers, to build a quality controlled supply chain, and to build an entrepreneurial agricultural incubator to launch the trained farmers’ agri-businesses.
The foundation’s strategic relationship with the biopharmaceutical company is designed to leverage the unique value creation mechanisms of philanthropy (BDA Foundation) to create an industry in medicinal plants in the Congo. Simultaneously, the model uses the unique value creation mechanisms of business (PharmAfrican) to create the market for medicinal plants in North America and around the globe.
In this “hybrid model,” the blend between for-profit and non-profit structures came as we searched for solutions to the challenge of helping African farmers create a high quality supply of medicinal plants for the growing nutriceutical and botanical drug markets.
In the conventional model of pharmaceutical development, the risk is aggregated in the R&D phases, while in this hybrid model the risk is located in the production phases: agricultural in the Congo. Yet it is precisely this commitment to keeping the agriculture of these plants in their local habitat that allows for real social and environmental uplift.
Here are some of the challenges we have faced:
• Knowing how to position both organizations: due to their synergistic creation they tend to confound conventional investors/donors
• Manage the different organizational cultures: high energy western bio-pharma company versus methodical pace of in-country agricultural programming
• Deal with the challenges that accompany all start-ups with international scope.
Some of our questions for the Social Edge community:
• What general learning from the ideas, practices, and experience of social entrepreneurship can be applied to this sort of for-profit/non-profit hybrid model?
• What has been learned about positioning this sort of a hybrid for investment?
• What experiences can members share with us about their own successes and failures with hybrid ventures that attempt to create a “fair trade” type industry with triple bottom lines?
Questions? Comments? Join Richard Klopp in the conversation.
Jun 26, 2007
Productivity vs. creativity: Does the culture war impact social entrepreneurs?
Hosted by Charles "Hipbone" Cameron (June 2007)
a" efficiency cultures are antithetical to highly creative thinking.The story unfolds in Brian Hindo's At 3M, A Struggle Between Efficiency and Creativity, published by BusinessWeek on 11 June 2007, and was then picked up and blogged by Steve deAngelis, CEO of Enterra.
Here are Hindo's key paragraphs:
He also imported GE's vaunted Six Sigma program -- a series of management techniques designed to decrease production defects and increase efficiency. Thousands of staffers became trained as Six Sigma 'black belts.' The plan appeared to work: McNerney jolted 3M's moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish.
Now his successors face a challenging question: whether the relentless emphasis on efficiency had made 3M a less creative company.
That's a vitally important issue for a company whose very identity is built on innovation. After all, 3M is the birthplace of masking tape, Thinsulate, and the Post-it note. It is the invention machine whose methods were consecrated in the influential 1994 best-seller Built to Last by Jim Collins and Jerry I. Porras.
At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter. Those results are not coincidental.
Efficiency programs such as Six Sigma are designed to identify problems in work processes -- and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company's culture, as they did at 3M, creativity can easily get squelched.
After all, a breakthrough innovation is something that challenges existing procedures and norms. 'Invention is by its very nature a disorderly process,' says current CEO George Buckley, who has dialed back many of McNerney's initiatives. 'You can't put a Six Sigma process into that area and say, well, I'm getting behind on invention, so I'm going to schedule myself for three good ideas on Wednesday and two on Friday. That's not how creativity works.'
Let's consider productivity vs creativity as a form of culture war -- how does it impact the social-entrepreneurial world?
• Is creativity a particular strength of social entrepreneurs? Is efficiency? Can we have both? Which one do we overlook at our peril?
• Do you have any strategies or tactics for continuing creativity in the face of efficiency practices? Or for ensuring efficiency despite the creative nature of your entrepreneurial culture?
• Do you personally identify with creativity or efficiency? Do you find the "other side" frustrating -- or inspiring?
Join Charles "Hipbone" Cameron in the conversation.
Jun 01, 2007
Case Study: Gumball Capital
Hosted by Ilana Seid (June 2007)
Help a group of Stanford students launch their microfinance social venture!Gumball Capital was started by a few Stanford students during Entrepreneurship Week, where we ran a grassroots campaign and raised over $3,500 for a microfinance fund in three days.
We found that a lot of students weren’t familiar with microfinance but believed in the cause once we told them about it, and many were willing to donate a few dollars to our cause. More than half the students surveyed didn’t know what microfinance was, but once they read a brief description, 58% said they would donate on average $15 to a microfinance fund. Given the estimated 7 million full-time college students, we calculated the total available market to be US $105 million.
With our E-week proof of concept and the market analysis showing the existence of a market, we decided to start Gumball Capital.
Gumball Capital seeks to engage college students in microfinance through innovation and entrepreneurship. We plan to launch annual “Gumball Challenges” in November (International Microfinance Month) across college campuses in the United States to raise student awareness and funds for microfinance.
Strategy:
We envision the Gumball Challenge to be a competition between rival colleges (this year: Stanford vs. Berkeley, Harvard vs. Yale, MIT vs. Caltech) to see who can raise the most money for the Gumball Fund. It is a social entrepreneurship competition where we provide multiple teams at each college with “microloans” of about $20 -$50 and a box of Gumballs, and give the teams a week to create the most value.
The profits from these teams are deposited into the Gumball Fund, a revolving loan fund is lent to developing world entrepreneurs via Kiva.org. Each chapter will select their own entrepreneurs on Kiva to give them more ownership and control of their work. When the loan is repaid to the Gumball Fund, Gumball Capital re-loans it to another developing world entrepreneur, thereby creating a sustainable cycle of lending, and hopefully engaging many generations of college students in microfinance.
The national chapter of Gumball Capital will establish new chapters at other colleges and provide each chapter with gumballs, microloan funding and a Starter-Kit to launch the challenge. This Starter-Kit will contain promotional materials, checklists for organizing the challenge, sample fundraising ideas, and templates for recruiting judges, sponsors, members, and teams.
Sustainability and Metrics:
We are planning to allocate 3% of Gumball Fund revenues for overhead expenses. Based on our cost and revenue projections we would need $60,000 to cover costs before we are self-sustainable in two years. We rank our metrics of success in the following order: number of Gumball Challenge participants, number of donors, and amount raised.
Why Gumballs?
It is a metaphor for change. By placing a small amount of money in a Gumball Machine you allow a gumball to roll out. That one released gumball shifts all the remaining gumballs, moving them one step closer to the exit tunnel. This is similar to microfinance. Each developing world entrepreneur lifted out of poverty through microfinance helps other members of his or her community by providing jobs and goods and services. The entrepreneurs’ increased income also goes into increased health and education for their family, thereby breaking the intergenerational cycle of poverty. We at Gumball Capital believe that with a small amount of money, we can make a lot of change.
Questions:
1. Besides looking at student body size, classes, and existing student groups related to entrepreneurship and microfinance, how else can we identify which schools would be the best to target?
2. Based on our identity as a student-run organization, would it be best to file a 501(c)3 or get a fiscal sponsor?
3. What are the best ways to get the surrounding community and corporations involved?
4. Finally, we have a very nice pitch presentation. Where do we go to get funding?
Help Ilana Seid and her fellow Stanford students launch their microfinance social venture!
Mar 19, 2007
Nonprofits / For-profits Partnerships
Hosted by Patrick O'Heffernan (April 2007)
Non-profits and for-profits can achieve significant results together that are often impossible alone. And partnerships between the two can be smooth and mutually beneficial. Our experience has shown that they are a great tool for Social Entrepreneurship as long as the benefits to both are clearly understood and all obligations are adhered to. The benefits to for-profits organizations can range from added publicity to access to new, hard-to-reach, markets. Social benefit ventures can gain tools, resources and even skilled management assistance.
In my own case, a partnership between my non-profit advocacy website and a for-profit video website gave me online video editing tools, bandwidth and server storage I could have never afforded. The FPO (a start-up) got tens of thousands of new members, and my site was able to achieve its social objective.
How should you proceed if you work for a social benefit venture?
• Approach the FPO with a partnership arrangement that offers tangible benefits (not just "good PR"), i.e., 100,000 new web visitors or advertising in your newsletter.
• Ask the FPO to provide you with services or products that are part of its normal business. Resist the impulse to ask for cash – that is charity, not a partnership.
• Involve technical staff early in the discussions to ensure that operational problems are taken care of in the agreement, rather than fought over later.
• Write a Memorandum of Agreement (MOA) and send it back and forth for editing and changes. Make it as detailed as the project calls for. And remember, it is not the final agreement that is important, it is the communication process that creates it.
• Make sure that all stakeholders in both organizations sign off on the MOA –anyone who will be involved or impacted. Make sure you deal with non-stakeholders who may have negative opinions, so they don't sabotage the agreement.
• Stay involved and keep the relationships strong. Don't sign the MOA and then turn it over to staff to execute. Stay in touch with the project and the leadership of the for-profit organization – you may want to work with them again.
I love to work with start-ups. New companies are often easier to deal with than large established firms. They are hungry, open to new ideas, and have yet to grow a bureaucracy that throws up roadblocks to partnerships. And start-ups often have new tools and products that entrepreneurial NPOs can put to use quickly to gain publicity and new grants.
Join Patrick O'Heffernan in the discussion.
Mar 05, 2007
Social Ventures in the Competitive Business World
Hosted by Patrick O'Heffernan (March 2007)
Fellow social entrepreneurs may want to read this life-changing book, The Social Enterprise Sourcebook.Jerr Boschee (also profiled in our Peace Corps Entrepreneurs on The Edge series) has assembled a collection of case histories of social business startups – both non-profit and for-profit – in a volume that every social entrepreneur should read to answer the key question, "How do I do this?"
Founders of the featured enterprises describe their goals, operations, successes and failures. Each of them walks the reader through the mistakes made and the lessons learned. At the end of every case study is a factsheet on the enterprises with financial, labor and double or triple bottom line information.
The enterprises Jerr Boschee selected for the book include labor contractors providing jobs for disabled, a manufacturing firm that creates jobs for handicapped people, an asbestos removal company with a zero tolerance for drugs and alcohol, and even an interstate trucking firm employing ex-cons and reformed drug addicts. Each case study includes advice for social entrepreneurs starting businesses.
The most important lesson that reoccurs throughout the case studies is that competition in the for-profit world is constant, brutal, unfair and sometimes even illegal – and non-profit organizations going into business need to be prepared to compete to win, sometimes at the temporary cost of their social mission.
Many people enter social entrepreneurship to avoid the amorality of corporate scrambles for profit and market share, but the leaders in these case studies make it clear that it cannot be avoided. The real question is how you go about it.• Do you have any experience in the competitive business world?
• How do you balance the needs of cost-containment and market retention with your values?
Join Patrick O'Heffernan in the conversation below.
Feb 05, 2007
Converting from Non-profit to For-profit Status
Should you consider changing your organization's status from non-profit to for-profit? Patrick O'Heffernan lays out the five key questions to ask before you make the decision. (February 2007)
Should you consider changing your organization's status from non-profit to for-profit? This question has become a major policy issue in the health-care industry, as many hospitals are currently doing so. And social entrepreneurs in all fields are thinking about it as they see themselves harnessing the tools of the for-profit world to advance social good.
There are five key questions to ask if you are considering converting to for-profit, even before you begin exploring what form of for-profit might meet your needs:
(1) What circumstances make this conversion appropriate?
For instance, you may want to change status because you seek investment funds to smooth fluctuating cash flow so that you can offer consistent services. Or the majority of your income derives from sales, and for-profit status may enable you to expand beyond "mission-related items."
(2) How should your non-profit's assets be valued?
If your organization's assets are largely in the form of donor lists, you will be asset-poor when you convert because the donor lists may no longer be relevant. This may limit your ability to obtain loans or lines of credit despite your for-profit status.
(3) What should happen to the financial assets that remain after the conversion?
If your organization has substantial capital or real estate assets acquired with tax exempt donor funds, will the donors object to them being acquired by a for-profit entity? Will you owe back taxes on them?
(4) Will for profit status actually cost you more in taxes than you will gain in access to investment or loans?
If your organization holds significant real estate or derives significant sales or service income, you will be receiving substantial new tax bills. These may offset any advantages you gain from for-profit status.
(5) Will switching to for-profit status negatively or positively impact your image?
This will depend on the area you work in, your clientele and your donors. Often, however, the label "non-profit" invests organizations with a level of respect and trust not accorded private sector firms.
What has your experience been? Let us know. Join in the conversation!
Jan 02, 2007
Choosing a Social Franchise: Pros and Cons
Hosted by Benjamin Litalien, President & CEO of Social Franchise Ventures (January 2007)
And though not as publicized as the 'rags to riches' stories of many franchisees, there are real risks associated with choosing the franchise route. So, as the social benefit community begins to engage the franchise sector it is critical to go in with eyes wide open, realizing that a disciplined approach is vital to tapping into the value that seems so apparent.
Here are a few of the pros and cons that must be evaluated to determine if a social franchise strategy is right for your social benefit organization:
Pros
• Systems One of the key elements a franchise offers is access to proven systems, which can reduce the amount of trial and error usually associated with launching a new enterprise. Most franchise concepts provide their franchisees with a start-up/launch kit, operations manual and a marketing plan.
• Brand Depending on the type of franchise, the brand can play a significant role. The day the business opens the public is generally aware of the cost, product line and operations of the franchise which can result in a faster path to profitability. It is also important when considering an exit strategy as a recognized brand will garner more interest in a resale.
• Support The franchise will never be the ‘mission’ of the nonprofit, which means having good management and a supportive franchise company is essential. Many franchisors offer specific job descriptions for each position and have operational staff to assist with challenges along the way.
Cons
• Limited Market Research A common misunderstanding of would-be franchisees is that the franchisor knows the best site/location for the franchise. The reality is most franchise companies do little or no market research, but rely on the franchisee’s local knowledge. As some franchisees have found out, it is very difficult to overcome a ‘bad’ location.
• Limited Flexibility The strength of a franchise system is its consistency, which provides little room for any deviation. Failure to understand the parameters up front could create significant challenges later on.
• Long-term Commitment Most franchise agreements are 10 years in length with very limited opportunity for an early exit, which can be painful if the concept is losing money or otherwise is a drain on the organization.
| Social benefit organizations considering a social franchise strategy need to have good business advisors supporting their interest to help them navigate these as well as many other key elements. If done properly, it can result in a very strong source of unrestricted income and better visibility within the community. There are thousands of franchise concepts to choose from, ranging from fast food to children’s educational programs. Ask questions below if you want me to help you address the following issues (and more): • How should a nonprofit determine if they are a candidate for launching a social franchise? • How can a leadership team engage the board in considering such a new, entrepreneurial concept? • How can a nonprofit evaluate the risks inherent in a social franchise and decide what level of risk is appropriate for the organization? |
 Auntie Anne's pretzel shop in Denver International Airport owned by Platte River Industries, a local social benefit organization. |
Jeff.Mowatt - Jan 2, 2007 4:37 pm (# Total: 23) P-CED
Hi Benjamin,
Just checking out your website and unless I've completely misunderstood this, you're talking about using the revenue stream from membership of a franchise network to fund social purpose. I'd go along with that, though my approach which is pretty small scale would be to link any kind of for profit activity, given it wasn't contradictory to my social purpose, as an enabling revenue stream. For example, currently, the maintenance revenue from a software product which is my intellectual property, funds human rights advocacy and promotion of social capitalism.
Now I can relate to franchising or distributorship in having attempted to expand into other revenue streams with little success. It became very clear to me that many franchise operations just wouldn't understand the motive. So, I can take it that those such as Ben and Jerry's do and are in some way in tune with the world of social purpose.
Maybe I should franchise, or create a distributor network for my own product? Then we might have a cumulative effect which is kind of where I jumped in, promoting the idea of social purpose business seeding new social purpose business.
Anyway, it seems to me that at least you've got some socially aware franchises on board and can probably sell the concept to others where I'd failed. So good on you.
Regards,
Jeff
Gayle Hallgren Rezac - Jan 2, 2007 6:17 pm (# Total: 23) author WORK THE POND!
Can you better explain to me how--as an example--the Aunt Anne's pretzel shop functions as a local social benefit organization. Do the profits go to a social cause? If you have the capital to establish a franchise, could not that money be given to social cause without establishing a business and the risks involved in running a small business?
Appreciate your commments.
Gayle Hallgren Rezac WORK THE POND!
Patrick O'Heffernan - Jan 2, 2007 11:13 pm (# Total: 23) Does the Pretzel chain use organic ingredients, support local growers, create jobs for the unemployed? It seems that there has to be a double, iof not triple bottom line to be a social enterprise
mfidelman - Jan 3, 2007 1:21 am (# Total: 23) Center for Civic Networking
One example that comes to mind are the Ben and Jerry's ParternShops.
Short form:
"PartnerShops are Ben & Jerry’s scoop shops that are independently owned and operated by community-based nonprofit organizations. Ben & Jerry’s waives the standard franchise fees and provides additional support to help nonprofits operate strong businesses.
PartnerShops offer job and entrepreneurial training to youth and young adults that may face barriers to employment. As PartnerShop operators, nonprofits retain their business proceeds to support their programs."
Details at http://www.benjerry.com/scoop_shops/partnershops/index.cfm
mfidelman - Jan 3, 2007 1:27 am (# Total: 23) Center for Civic Networking
I was a lot more excited about this topic when I first saw the announcement, because I misread the intent.
It strikes me that what's a lot more interesting than a nonprofit owning a franchise, is franchising a local nonprofit model - i.e., taking a model that's working in one community and replicating it through a franchsing mechanism.
In a sense, this is what chapter based organizations do. Scouting comes to mind, so does little league.
I expect that the social sector can learn a lot from the franchising sector regarding ways to make it easier to replicate working models. For example, would a franchising model apply for propagating a working microfinance program?
NickTemple - Jan 3, 2007 2:27 am (# Total: 23) I like your pros and cons here, and wouldn't disagree with any of them per se, but I think you have to go deeper into it. The School for Social Entrepreneurs has replicated as a social franchise, but the key to its success has been designing a flexible system, with core quality standards built in. It is this balance between flexibility and rigour/hard management which is the key (and provides the challenges).
Another key point is that the concept/product must be tried, tested and absolutely nailed down. And your legal agreements must be watertight, and enforceable. All of which costs money, and takes time; this often results in other organisations replicating via other means (central control, open source, etc) which can be done quicker.
There are also significant risks: some organisations are (only) fit to a particular community or locality; others are yet to establish (or prove) themselves or their business model; more still have failed due to overstretch in the course of scaling up, or drifted from their initial values and principles.
The big benefit though is that the product is embedded in communities with organisations with existing local networks and links (often crucial for social enterprises), and avoids the trampling feet of an unthinking organisation from the capital/big city (known as London-centricity in the UK). It also fosters genuine partnerships, rather than short-term arrangements brought together for a particular contract/tender/application.
See more on this on our blog.
Cheers (and happy new year).
Jeff.Mowatt - Jan 3, 2007 2:30 am (# Total: 23) P-CED
MF, From what I've been reading recently about Matt Flannery and Kiva, he seems to be doing something of this nature in Eastern Europe. So, I'd say the answer to your question is yes.
With Kiva's lender infrasructure and recent surge in interest, it may be something that interests them too.
One of the things that interests me greatly at the moment is asset based funding. As an example, a nonprofit in Scotland partnerning with a nonprofit in Pakistan to fund a wind energy project which returns investment in either cash or share of electricity.
Laurinda - Jan 3, 2007 3:12 am (# Total: 23) It is with great interest that I have read all comments, as we will be embarking on both a social and a for profit franchise model (again an hybrid) ...
I have researched the "world" for examples but to no avail! ...
Any suggestions?
Regards
laurinda
Jeff.Mowatt - Jan 3, 2007 3:24 am (# Total: 23) P-CED
Laurinda, Can you elaborate. You want a profit making franchise which will operate inside Africa and return social benefit.
Where will it be located?
Regards,
Jeff
Laurinda - Jan 3, 2007 4:03 am (# Total: 23) Hi Jeff
- The franchise should be able to provide Multi-skilled and Multi-sector consulting services to paying customers (businesses) ... like any other business
- A % of profits should go to the franchisee
- A % of profits should be applied to social causes.
- A % of profits to Empowerment Gateway (brand, support ... et ...al)
Location:
Head office: South Africa
Regional offices: (maybe master frachises ???) initially in the SADC region scalling up into all 48 african countries covering North Africa, East Africa, West Africa, Central Africa and SADC.
Regards
L
Jeff.Mowatt - Jan 3, 2007 5:52 am (# Total: 23) P-CED
My business P-CED derives social purpose revenue from selling a facilities management software product to business and we have no African distributor. Here in the UK it is installed at the offices of several international corporations, government departments and quangos, hospitals and even a church community centre. We've partnered with for profit business on the basis of them getting 40% revenue share from sales and 50% support revenue. Any interest to your organisation? I can probably also point you at other tools which could expand your product portfolio.
mentor-one - Jan 3, 2007 8:44 am (# Total: 23) As the founder / chairman of the Mass. state wide taskforce on self employment and home based employment for the Mass State Vocational Rehabilitation Council [SRC], I was approached by the SRC Chairman to develop a solution to a very pervasive problem in many rural areas of our state, reliable rural transportation for our disabled citizens. As a disability consultant to small business and former franchise developer, I went about researching and developing a solution that would work well for all concerned. My solution incorporates aspects of franchising with the needs of our disability community. It offers brand identity, group buying and group core management support systems in a program without franchise fees or royalties.
If anyone is interested in solving rural transportation issues by employing disabled entrepreneurs to service local markets feel free to contact me at mentor-one@usa.net. This means of creating entrepreneurial synergies through the use of "the best parts of" franchising and divesting "the problem areas" can be replicated easily within the social entrepreneuring paradigm by engaging a bit of out of the box thinking.
Owen Doonan, Member, Mass State Rehabilitation Council, Chairman, Taskforce on home based & self employment for People with Disabilities
Benjamin Litalien - Jan 3, 2007 11:00 am (# Total: 23) President & CEO, Social Franchise Ventures, LLC
Thanks to everyone for the excellent responses, comments and questions! I appreciate the interest in this emerging field and look forward to responding.
First of all, the Auntie Anne's franchise in the picture is one of 5 owned by Platte River Industries in the Denver marketplace. They purchased the initial site from an existing franchisee using an SBA loan, then from the profits have been able to expand over the last several years to multiple sites. The Executive Director recently told me that 60 percent of the employees are his clients (mentally and/or physically challenged) so it not only generates significant unrestricted revenue for his organization, it is perfectly aligned with the mission.
To Gayle's question about use of capital, by investing capital in a franchise it can create a long-term, unrestricted revenue generation model that can be used to fund whatever is needed (social programming, operating expenses, etc). Whereas many grants, gifts and other sources of income tend to be more restrictive and non-replenishable.
Regarding Patrick's comments regarding the 'triple bottom line' to qualify as a social enterprise, I think that is the ideal, however, many nonprofits struggle to find the funding necessary to maintain their operations, let alone expand them. Consequently, using the franchise model can give them the financial foundation necessary to find new, innovative ways to expand their mission. As I mentioned above, with 60% of the employees being from Platte River Industries I would submit that it is serving society in a new and powerful way by creating meaningful employment.
Regarding Mfidelman's comments on Ben & Jerry's PartnerShops, they are the pioneers in social franchise, offering a unqiue program exclusively for qualifying nonprofit organizations. I hope that more franchise companies will consider this as we gain more traction in the sector. That being said, it is still vital to ensure that the B&J concept is right for the market and the location, and not to choose it just because they have a special program. Many nonprofit organizations that have opened the B&J Partnershops have closed or are struggling due to poor location choices and non-receptive markets.
Nick, the program you referenced looks to be on the right track in educating would-be social entreprenuers with the details necessary, but not conducive to this blog. Suffice it to say we are just scratching the surface!
Finally, Owen issues a challenging and thought-provoking offer! I wonder if anyone will respond?!
More to come! Ben
mentor-one - Jan 3, 2007 12:43 pm (# Total: 23) With experience in creating, starting, innovating, rescuing, restructuring, purchasing and selling over a hundred small to mid-market business for clients and my own account over a 40 year consulting and public service career, I have had many mountains to climb. One such mountain has dealt with evaluating those so called bad locations and coming up with resolutions that work. I have observed a goodly number of businesses in horrible locations that had customers lined up around the corner waiting to get in and I have seen case after case when first class mall locations have had businesses close due to a lack of revenue generated. In Falmouth, MA there is a great little ice cream shop in a totally obscure location that makes and sells a great high quality product. A little sub shop turned grill started in recently in Duxbury, MA also has a poor location with a solid following and has become profitable within 6 months of starting up. The food is four star quality, the price is right and the value for money is self-evident.
If I were called on to rescue a poor location, I would look at the area demographic, research what the community likes, hates, craves and tolerates. Only then would I begin building a solution that addresses what they like and crave as well as eliminate everything that they hate and enhance that which they tolerate until it attained the love level!
The secret is to give customers exactly what they want, crave and love. If you can do that, location is secondary. Because people will flock to those places that make them smile, offer great value and make everyone feel wanted.
If anyone is interested in solving systemic problems blocking profitability in local markets feel free to contact me at mentor-one@usa.net. Rarely do franchise operations attain this level of customer satisfaction. That is why, although the IFA cites low levels of failure in comparison to independent operators, they obscure the fact that certain locations and franchisors have a revolving door of franchisee failure and resale. The answer is not easy to initiate, with bottom line hungry franchisors as it requires initiating the policy of giving customers exactly what they want, crave and love and that can impact a franchisors bottom line adversely in the short term. The long term result, rarely considered is a world class business with staying power.
Owen Doonan, Member, Mass State Rehabilitation Council, Chairman, Taskforce on home based & self employment for People with Disabilities
Benjamin Litalien - Jan 3, 2007 4:05 pm (# Total: 23) President & CEO, Social Franchise Ventures, LLC
Owen,
Thanks for your insights on 'a good site' and the proper ingredients. It is not always obvious what makes a site 'good', but the ingredients are always the same: demand, timing and consistently quality service! I've negotiated hundreds of leases in malls, strip centers and for stand-alone sites and many times the economics for the concept can be won or lost based on the outcome of those negotiations. I've had franchisees so enamored with a site that they paid too much and were unable to get a good return on their investment. The emotion has to be tempered with good market research and good lease negotiations, especially a clear exit strategy. I always say, "If you get a great location and do everthing else wrong you'll probably still be successful; if you get a bad location and do everything else right it will still probably fail."
COSAD - Jan 16, 2007 11:19 pm (# Total: 23) A Minnesota based nonprofit organization devoted to enterprise development in Tanzania
Hello Mr.Benjamin Litalien. Happy New Year!
I read your article with Great interest! Thanks for sharing your expertise and Wisdom. I am a native of Tanzania currently based in Minnesota, USA. In 2001 I cofounded a nonprofit, COSAD, Inc. whose mission is to empower individuals by providing support and innovative solutions through community projects development(www.cosad.org)
As a practical interpretation of COSADs mission, this year, among other things, we are embarking on a Community Reinvestment Fund Program(CRFP) which provide micro loans for local enterprise projects in Bukoba, Tanzania. Could you please be kind to suggest to me any 'social franchisors' or 'social venture capitalists that can partner with COSAD to provide these initial funding? We working with small entrepreneurs with viable and "bankable" projects, but because of luck of access to capital they have their dreams and hope shattered! And COSAD strives to inspire them again. Any help out there? Can also contact me at: smart@cosad.org or tel: +612 227 0065
Jeff.Mowatt - Jan 16, 2007 11:37 pm (# Total: 23) P-CED
Cosad, Something which I can refer you to is the development of the <Ned> philanthropic franchise.
http://www.omidyar.net/group/ned/
Following progress of this collaborative development, though not directly involved in it, I can tell you there are plans to set up in several developing countries and link up with KIVA to offer microloans.
Hope you don't mind if I copy your message and post it on their discussion at http://www.omidyar.net/group/ned/news/23/
Jeff
COSAD - Jan 16, 2007 11:51 pm (# Total: 23) A Minnesota based nonprofit organization devoted to enterprise development in Tanzania
Jeff,
Awesome! Thank you for your very prompt response and willingness to connect/suggest some lead. Yes, please please feel free to share the idea accross your people of good will.
Please tell me more about KIVU. Did you say they are setting up Micro banking scheme in Africa?/ "developing countries?
Keep in touch please, Thanks
Smart,
Minneapolis, Minnesota
Jeff.Mowatt - Jan 17, 2007 12:04 am (# Total: 23) P-CED
Smart, Kiva.org seems to be off air at present but here's a description
http://www.nextbillion.net/activitycapsule/1547
Essentially P2P microfinance which is taking off in a big way.
Pitch in with the collaborative discussion I mentioned earlier and Chris Cook (I hope) will tell you how a nonprofit in the UK co-invests with a nonprofit in Pakistan to produce electricity.
Jeff
COSAD - Jan 17, 2007 12:22 am (# Total: 23) A Minnesota based nonprofit organization devoted to enterprise development in Tanzania
Thanks Jeff!
Please keep me posted. I am very appreciative for sharing these wonderful esources.
.../smart
Jeff.Mowatt - Jan 17, 2007 12:35 am (# Total: 23) P-CED
No, nothing to do with me. I'll communicate privately to avoid cluttering this thread, Jeff
joeherren@realtyamerica.org - Jan 22, 2007 1:52 pm (# Total: 23) I notice some of these franchises are financed by SBA. So, they must be for profit enterprises. SBA will not lend to nonprofits.
Does anyone know of any actual nonprofits franchising their nonprofit enterprises?
mentor-one - Jan 23, 2007 10:14 am (# Total: 23) Joe,
If you check my earlier posting on "rural transportation", we have developed a model for social franchise packaging that selects the best features of commercial franchising, eliminates the negative aspects and takes a page or two out of the "Brook Farm" social experiment. Granted we are focused on service to the disability community, but this cookie cutter design can be applied to other venues as well. Our plan is to develop a series of social franchise like business programs to enable people with disabilities to work and gain independence.
As to financing, we have developed several grant like programs to fund individual consumer projects. These include applying state and federal VR funds to self employment business plans much like individual employment plans and turning 22 plans are funded. With this approach, we are able to secure between $3,000 and $7,000 per case for self employment. Often this can be coupled with Social Security Administration [SSA] PASS plans to generate sufficient non-repayable funds to start micro business ventures. A further venue is the Federal Grant to States program earmarked for people with disabilities. It is the Assistive Technology [AT] Loan Program and its subset small business loan program. This is a flexible term low interest guarantee loan program for people with disabilities that has reasonable limits in the $30,000 range with very flexible repayment terms. I was one of the initiators of this program in Mass. which was issued to the Mass Rehab Commission [MRC] and is administered by Easter Seals and funds through Soverign Bank. I currently serve on the loan review committee for Easter Seals. As a former consulting investment banker, I have been considering the development of social equity funding products that can incorporate elements of low risk; equitable yield earmarked to fund further needs with success based support systems to emulate the best elements of franchising. I have developed several interesting funding vehicles that could be used to capitalize such initiatives. Vehicles like this are needed in areas like Bosnia, where international funds are scooped up by the bureaucracy and never seem to trickle down to the people in need. We have identified a large disability population over there resultant from the war that is barely hanging on by a thread and only wants to work and earn a living.
Best regards,
Owen
OWEN P.DOONAN III, Chairman of the Board
THE-Group [The Handi-CAPABLE Executive Group]
Virtual management, IT & mentor consultants to Entrepreneurs, Professionals and Executives with disabilities. Advocates for virtual access to public meetings and home based employment for the homebound and people with severe limiting disabilities.
Statutory Member, Massachusetts State Rehabilitation Council.
Chairman, Massachusetts Statewide Task force on Home Based and Self Employment for people with disabilities.
Founding member Massachusetts Statewide Task force on Acquired Brain Injury [ABI] & Traumatic Brain Injury [TBI].
Member Easter Seals - MRC Assistive Technology Loan Review Committee
E-mail: mentor-one@usa.net
Nov 01, 2006
Should your organization go "hybrid"?
Hosted by Patrick O'Heffernan (October 2006)
A hybrid organization tightly integrates a non-profit (NPO) and a for-profit (FP) unit into one organization. See all Hybrid Model discussions and advice on Social Edge HERE. (updated August 2008)
The advantages of hybrids go far beyond additional revenue streams; they can extend your mission, enhance your brand and provide those you serve with additional opportunities for success.
But they can cost time and money. So how do you decide if the work and legal expense (up to $15,000 in the US) are worth it?
John Cesario and Chris Wiltsee of Youth Movement Records (YMR) are now making that decision. (YMR trains at-risk kids to work in the music industry - and keep their integrity). They share their criteria with fundraising expert Patrick O’Heffernan.
1. The for-profit unit should extend the NPO's mission
It must add value to the services offered. In YMR's case, it provides their kids from poor neighborhoods with opportunities for success and the skill and will to go to college.
2. It should reduce the pressure to raise money
3. It shouldn't require an expensive infrastructure
As much as possible, the FP unit should share "backend" resources, space, and equipment with the NPO.
4. Failure shouldn’t undermine the NPO
If the criteria work for you, what are the next steps? Start with due diligence (a US term for careful research).
1. Talk to business executives who understand your social mission and find out if they will become customers or suppliers, or possibly venture partners. You will need to build the same kind of network in the for-profit world that you have built in the NPO world. Bringing them on will help in conversations with skeptical donors and board members.
2. Talk to your donors. Do they understand the benefits for you, do they have reservations, or will they pay the setup costs for you? Do they have expertise that can help start and run the for-profit unit?
3. Work out the operational details. How will the FP transfer resources to the NPO – through licenses, cash payments or fees? How will your staff divide their time, or should you plan to hire separate staffs? Will they be housed together? Will you have overlapping boards?
4. Research your country's laws. Some countries have restrictions on blending for-profit and non-profit organizations. Tax authorities in most countries have precise rules governing resource transfers.
5. Find a lawyer or a barrister who understands both NPO law and the licensing and tax laws of for-profit enterprises. YMR needed both a non-profit tax attorney and an entertainment attorney.
When all that is done, make your decision. As of this writing John and Chris are still doing their “due diligence.” They have built an organization whose kids have a 90% high school graduation rate in the middle of a 48% community and they don't want to jeopardize that success. But their kids are going into a profit-driven world, either before or after college, and they need the connections, internships, part time jobs and experience a for-profit unit will give them...
What's your experience? Jump in the conversation!
Laurinda - Oct 31, 2006 9:27 pm (# Total: 28) It is great to see the focus back on hybrids. We have spent the past three years structuring our organisation. It was a challenging time to say the least.
As the founder my vision was to create a self-supporting structure that would provide the funding required for social and environmental initiatives being generated within the group.
You say that For-profits can fail, it isns't a different situation for NPO's. Any initiative can fail. ... when you are running only an NPO ... our research has indicated that often the NPO compromises its vision because of "hidden or not so hidden" agendas of donors and sponsors.
In the FP case you will face the normal market barriers to entry ... but it is up to you to design strategies to overcome it.
... in our case, our integrated and blended model is working for us ...
The only factor that is critical is that you have to remain focused on your vision, and your goals ... research your external and internal environment ... take cognisense of political and socio factors that may affect your inititiative ... and most important ... remain independent as far as possible ...
When you forge alliances and partnerships be careful of who you are aligning or partnering with ... design exit strategies that you can implement ... if you see that it is moving your organisation away from its goals and vision ...
Look forward to all your comments.
Laurinda
(South Africa)
sikuluj - Oct 31, 2006 11:28 pm (# Total: 28) SIMA Community Based Org
We are willing to join our organization go "Hybrid. Please can you provide us more details and how we can involving or participate.
Please send information via this address Johnstone Sikulu Wanjala, Program Coordinator Sima Community Based Organization PO BOX 1691, Kitale 30200 Kenya or via email sikuluj@yahoo.com
Sigward von Laue - Nov 1, 2006 12:27 am (# Total: 28) SEKEM Initiative, promoting development
Could not agree more, it is good to think about hybrids, and even better to implement them. CSR goes only so far, but non-hybrid commercial entities have a mission (and share holders) that is essentially "not social" (i.e. it is not the primary focus).
One thing that is proved right in Sekem over and over again, is that the commercial entity has to think and behave in a commercial manner (looking after the bottom line), with social considerations comming (a very close) second, whereas it is the reverse for NGOs. Using this approach, Sekem has now established a number of commercial ventures (organic food, organic textiles, phytopharmaceuticals, IT solutions for farm management, plant breeding, farm supply provision)... and a number of social ventures (kindergarten, school, vocational training centre, handicapped and street children project, literacy, hygiene and adult education, research academy, medical centre)...
Regarding the issue of sharing staff; initially this is probably necessary, but as the business and the NGO grow, one has to ascertain that there is no conflict of interest...
...a strong vision and clearly defined roles of the NGO and the commercial entity are here essential.
Patrick O'Heffernan - Nov 1, 2006 9:27 am (# Total: 28) VEry interesting comment from Laurinda..the impact on NPOs due to hidden agendas of supporters, donors, etc. In my experience, the agendas have not been so hidden, but vry good point. Having a hybrid could complicate the situation because the number of agendas double. Could you give us some more history of the organization and perhaps a url? Thanks
Patrick O'Heffernan - Nov 1, 2006 9:29 am (# Total: 28) How did you make the separation between the staffs? That is a tricky process in both financial and personal terms. Can you give us some more insight into your experience. And what is your url, so we can learn mor about the organization?
Patrick O'Heffernan - Nov 1, 2006 9:33 am (# Total: 28) I will pass your email address along to John Cesario who inspired this blog and perhaps he can send you some specific advice. I also read a great book lately, called The Elements of Influence" by Alan Kelly that explains how both NPOs and FPs play similar strategic games and that understanding these games can help NPOs reap someof the advantages of FPs.
Laurinda - Nov 1, 2006 12:33 pm (# Total: 28) Hi Patrick
Regarding agendas not "being so hidden" ... I couldn't agree with you more, although our research has indicated that some are cloated and not always obvious ... and by the time the NGO people becomes aware of them, they are so deep in dependency that they can't break the ties.
You make a very valid point in that hybrids have the potential to create other scenarios regarding above subject ... again it boils down to planning and a comprehensive knowledge of your market environment, including identifying "networks" of influence (both negative and positive).
We classify ourselves as an IVO (Integrated values organisation). We are a consulting group, started by engineers that had enough of "The business as usual crap" ... and wants to see a real change ... narrowing of the gap between the 1st and 2nd economy (read below poverty line) ...
Our URK is www.empowerment-gateway.com (although we have removed most of the on-line content as we are focusing on human capital capacity building phase)
Regards
Laurinda
balar - Nov 1, 2006 6:18 pm (# Total: 28) Tamilnadu Primary School Improvment Campaign, India
The idea of becoming a hybrid organisation is the ideal move for non-profits in the present globalisation, but how to do that. Most of the business ventures started by us become failure, it is not generating any income. The donors are not willing to support Non-profits running for profit business, they ask us to help people start their own business and leave them there. Achieving quality and scale is a big problem, we do not get qualified staffs for profits because our salaries are low, nonprofit work culture is not conducive for business. May be instead of hybrid we have to evolve a new organisation which generates its own income. I am not sure but we would welcome suggestions, please also send details about successful hybrid organisations.
V.Balakrishnan
jimfruchterman - Nov 2, 2006 9:04 am (# Total: 28) Benetech
We created a wholly-owned for-profit subsidiary in 2000. The main goal was to move unrelated business income into the sub (and pay taxes), and protect the nonprofit parent's status. In 2001 we had more than $1 million in consulting revenues, and it might have been a big problem for us if that revenue stayed in our charity.
Mozilla Foundation, the nonprofit developer of the FireFox browser, did the same thing about a year ago: they were bringing in so much advertising revenue that they wanted to protect their status as well.
Patrick O'Heffernan - Nov 2, 2006 1:15 pm (# Total: 28) I checked out your website. everyone on this blog should take a look
Patrick O'Heffernan - Nov 2, 2006 1:16 pm (# Total: 28) How did you decide what income to pay taxes on at Benetech?
Aviar - Nov 2, 2006 1:28 pm (# Total: 28) I am starting a social entreprise (hybrid) as we speak. I have been consulting with accountants, professors of nonprofit management and development, attorneys, and others. Can someone experienced in developing a hybrid tell me how you began the organization/business? Can a for-profit business become a social enterprise (i.e., a corporation using surplus income to fund its social aim instead of going to stakeholders)?
Christi
Laurinda - Nov 3, 2006 10:43 am (# Total: 28) Christi
You ask can a FP became a social entreprise? Can't see why not ... start by getting your support for the change within yr organisation before you deal with other stakeholders. You can integrate values top down or down up ....
Integrate values into your control systems, policies and procedures ...
You are working with a breed of individuals that are anchored on "facts" ... manipulation of facts et ..al. ... so the first thing you need to do is ensure that they have taken a "heart-set" ownership of yr vision before they let their heads control the processes. Without a "heart-set" change ... you will not succeed.
Regards
Laurinda
Patrick O'Heffernan - Nov 6, 2006 9:09 am (# Total: 28) A social enterprise has a bottom line that includes positive social impact. Just because there is a second bottom line of profit does not mean that it is not a social enterprise. The micro-enterprises funded by the Grameen Bank, the Nameste-Direct Foundation, the micro loan window of the WB, etc. are FP's. What is important is how the business/organization conducts itself, not whether or not it is organized to make a profit. As Laurinda says, "integrate values into your control systems, polcies, and proceedures.
Can a FP become a hybrid? Sure, and some do, usually by creating a NPO unit or foundation that works on the basis of a soical bottom line. But a more intersting question is how does a NPO become a hybrid? Larinda's point about "heart-set" change is important. Many NPO's dream of developing a revenue stream that frees them from fund raising. They either transform themselvs into a LLC or a C-Corp ( in the US, other forms in other countries), or they create a FP arm. What is important is that they understand that an FP has a different set of obligations, constituents, laws, and expectations than a NPO. Thinking through these beforehand and planning on how to keep the heart-set when the mind-set changes is the most important step.
SandraDickinson - Nov 6, 2006 9:36 am (# Total: 28) Recently launched: http://selearninggames.wikispaces.com
Selearninggames is a wikispace for social entrepreneurs to make a learning game together that will solve the mystery of nonprofit earned income venture profitability.
Venture entity structure may turn out to be one of the clues to the mystery.
What’s the game? It’s making the game!
The meta-patterns that solve the mystery of profitability are hidden in our collective experience. Discovering patterns is what makes learning fun! During the collaborative process of making the game, we will explore our common problems, and common solutions will emerge. Our tacit knowledge (stuff we don’t know that we know) becomes explicit.
As we apply, test and refine together, the most effective set of solutions become the meta-patterns accelerating profitability for our own ventures. These meta-patterns become the design principles of the game we make.
Please join us for fun and profitability! It’s free. You can easily edit pages, upload files, join in our discussion.
Feel free to share this invitation with like-minded folks you know :).
Patrick O'Heffernan - Nov 8, 2006 4:06 pm (# Total: 28) What a great idea! I notice to that the site itself is a hybrid with Google Ads. I will join and "play around with it"
institute for china africa relations - Nov 9, 2006 2:58 am (# Total: 28) Our Institute for China Africa Relations will soon be online with its own website www.inchinaafrica.org. What are the essential differences between the site of an NGO with that of a hybrid?That is speaking techinically and structurally.
We conceived the idea of a wholly Not for Profit organisation, but the reality on the ground made us think otherwise. Funds are scarce and the needs are numerous.So we opted to intergrate FP and NFP from the word go. We do not intend to create a seperate entity but run both from the same office. Will it work? I agree with Patrick that some FP are impacting positively and do the services of not for profits well.
Eustace Emeka Amuka CEO/ INSTITUTE FOR CHINA AFRICA RELATIONS
Patrick O'Heffernan - Nov 9, 2006 10:14 am (# Total: 28) First, there will be some website differences. The programming and design elements are the same, although you may use them differently. If you are going to sell items on your site, you will need "shopping cart" technology and a way to receive money, either through credit cards or Pay Pal. I suggest you check with the credit card companies and your bank because there are some steps you will have to take to move credits from a credit card firm to your bank account, especially if there is currency exchange involved. This varies from country to country and bank to bank, so I can't give you details for your situation.
Secondly, you will want to do some marketing and customer contacat and relations on your site. Depending on the beusinesses you go into, think about how your site can be used to generate customers and how you will track customers and potential customers. There should be a way to capture emal addreses of people who visit, perhaps by asking them to register. Once you have email, what kind of messages do you want to send them regarding the goods or services you ofer, and how often do you want to send them. There is Customer Relationship Management software for this, although you may wnat to start with just a spreasheet and see if you will need CRM software. Perhaps someone on the site can suggest free CRM software NPOs can use.
One business dea you might consider is, if you work with local artisans, arrange to sell items on your site and keep a perscentage. If you do this, you will also have to put in place what is called "fullfillment" - that is, a way to "ullfill" orders. This means recording the order, responding to the customer to let him/her know the order has been recieved and providing a way to track the order, maintaining an inventory so you have the items on hand to ship, packing for international shipping (a artform in itself!) , shipping through customs in the countries you will deal with, and paying for shipping.
A hint on charging for shipping - this is actually a profit center for most mail order firms - they charge more for handling and shipping than it costs them so they make a little profit on it also (when you ar a hybrid, you have to think in terms of profit).
Can you share offices? Yes, but local laws vary. If your non-profit status exempts your organizationf rom taxes, make certain that housing a FPO in the same office does not cancel your tax exemption. You may have to confine the NPO to a certain section of the office (at least on pater, if not for real), and charge them for that space. As a non-profit, local laws may prohibit you from giving away resources to a FPO.
Staffing and salaries may also be tricky. Does your country treat FPO workers differently from NPO workers? If so, your staff may have to keep their jobs separate -- one person may not be able to work both FPO and NPO. If the tax laws are the same for both, this will not be a tax question, but it will be an accounting question. You will have to keep separate books for hte FPO and the nNPO and staff will have to charge their time to the two entities.
If the two entities share resources like a fax machine, internet connecton, accosuntant, etc., the NPO will have to bill the FPO for its use (which is an easy way to transfer income from the FPO to the NPO without taxquestions.)
My advice is to draft a plan with as many specifics as possible and then take it to your lawyer or to a business advisor for corrections, changes, suggestions and references. And good luck.
Anyone else on the page have any suggestions for Eustace?
abromber - Nov 10, 2006 5:22 pm (# Total: 28) Warning: this is a long post!
This talk about hybrids is of great interest to me, since I do a fair amount of work in this area. Most of the people who talk about hybrids refer to an enterprise that combines a business purpose and a social purpose within a single entity or a "family" of entities. Usually, these hybrids take a few basic forms:
First, a nonprofit can carry on a business within itself, without a separate entity to carry out the business. The biggest advantage of doing it this way is simplicity. But the nonprofit may be subject to liabilities from the business, and if the business becomes too big, it can jeopardize the charity's tax exempt status. Also, because nonprofits can't issue shares, it can be hard to raise capital.
Secondly, a for-profit corporation can operate in a socially responsible manner and can dedicate profits to charity, without the need for a separate entity. Again, the advantage is simplicity. But the managers of a for-profit business owe a duty to maximize return to shareholders, and so their ability to run the company in a "charitable" manner creates real tensions, and it just isn't feasible beyond a certain point.
More common is a situation like Jim Fructerman describes, where a nonprofit creates a subsidiary to own and operate a business. If the subsidiary is wholly-owned by the charity, this works quite well. However, if the business needs outside investment, you have problems, not only because of the duty to shareholders, but also because IRS rules limit a charity's ability to participate in a business with non-charity shareholders, especially if the charity does not hold a controlling interest in the business. In practical terms, this means that the charity may have to reduce or eliminate its involvement in the business if it wants outside investors or if its need for capital grows because the business grows. These rules also hold true for joint ventures between charities and for-profit entities.
I favor LLC's for these kinds of ventures, because they allow for very flexible management structures and the members of an LLC can agree to almost any distribution of authority and profit they want. As "pass-through" entities for tax purposes, LLC's allow each investor to pay tax (or not) based on its own tax status. A charity can use its tax-deductible contributions to buy a share in such an enterprise. Social values can be built into the "DNA" of the company, profits can be allocated in proportions different from capital contributions, a charity can be given control over certain aspects of the business that are related to its exempt purpose, while investors can be given authority over pure business decision, outside entities can be issued special classes of shares that give them veto power over certain types of decisions,like mergers or changes in structure, etc. LLC's can also issue a full range of debt and equity instruments, which gives them flexibility to develop creative capital structures. And, if they are structured correctly, LLC's can be perfect vehicles for PRI investment. The big downside is that LLC's are not suited to public companies, nor are they very well suited to ventures where investors will come in and out on a frequent basis.
Another great option is to use various agreements -- rather than ownership -- to structure collaboration between a charity and a business. These agreements, including management service agreements, loans, rents, royalties, etc. provide a simple way to make sure that the charity is compensated for the use of its assets, so there is no undue enrichment to the owners of the business. property drafted, they can also keep the relationship between the two nice and neat and avoidd any nasty problems with IRS.
None of these options is perfect, and none are really designed as vehicles for social enterprise as we are coming to understand it. But they are the best we've got under current law.
In my view, what is really needed is an entirely new form of business entity that would allow a social purpose and a business purpose to co-exist peacefully. It wouldn't be a 501(c)(3), and it wouldn't be a regular tax-paying business. It would be tax-advantaged so long as the structure, compensation and profit participation operated within certain limits. It might have to issue some kind of social impact statement each year, along with its financial statements. Some have suggested that the price of ownership units should be set by the company itself, rather than by the market, to avoid the corrupting influence of Wall Street. Most agree that some kind of special tax designation would almost certainly be needed.
There is a growing movement to develop such an entity, and conversations have begun with several state legislatures and with the IRS. But these efforts are very young, and there is a lot of work to be done to determine what the key characteristics of such an entity should be, and how it could acheive legal recognition. After all, it took ten years after Wyoming passed the first LLC law in the country (in 1977) before any other state adopted one, and that only happenned after the IRS agreed to treat LLC's as partnerships for tax reasons. That was the last time a truly new form of business was created in the US.
Methinks we have a long road ahead.
Laurinda - Nov 11, 2006 9:42 pm (# Total: 28) Carrying on from previous message.
I couldn't agree with your post more. It took us nearly three years of trials and runs ... not to mention a tremendous amount of research.
We have a NFP fundation at the top which owns via a share structure 40% of all operational companies which are for profit. This has two benefits:
* maximising shareholder value the NGO benefits and because they are the major shareholder they have control.
* we have also introduced a policy of 10% of turnover as a CSI contribution monthly which is channeled via the NGO for endorsed social, environmetal and economic projects such as SMME development.
We then created under the FP a channel of operations which has three legs of ops ... i.e. commercial (which deals primeraly with the 1st world business, NGO and gov ... and charge market related)
a social franchise that manages all the NGO projects
and an environmental franchise
It is a simple structure within a very complex framework.
... and it is working.
We run a series of 9 workhops testing the idea prior to start of implementation. The response from all sectors was terrific ... we got a 95% buy-in of the model.
Regards
Laurinda
Patrick O'Heffernan - Nov 12, 2006 10:33 pm (# Total: 28) We are considering shifting ThePeopleChoose to an LLC partially or completely owned by the non profit that incubated it. But we have to consider the liability implications. Because TPC was incubated by a television network, there is an FCC license at stake...the license is worth millions of dollars, and so cannot be put a risk. Risks that can flow from a website that posts politically oriented user generated media - even a C3 that is non partisan, can include libel, slander, and copywrite violation, plus political interference at the FCC.
This is why we are exploring the LLC model. I wonder what abromber and laurinda think about this. Also, I want to complement Laurinda on the thorough tesitng....this is the way it should be done.
Ed Beauchamp - Nov 13, 2006 7:12 am (# Total: 28) World Tourism Foundation
The World Tourism Foundation calls a Hybrid a "Marketplace-Driven Public-Private Partnership" (MD PPP). Structurally there are two interdependent organizations to connect the very different motivators each world holds.
The FP World Tourism Network could not exist without the branding and political access provided by the non-profit World Tourism Foundation. Likewise, the World Tourism Foundation could not exist without the business mentality of the FP World Tourism Network driving revenues. All revenues (the Top-Line) the FP generates are shared 50-50 with the NPO.
Hybrids/MD PPPs are win-win! Today's consumer WANTS to purchase products and services that have a "do-good" aspect. Governments and wealthy donors can no longer carry the load of social issues. The marketplace provides the only hope. NPO should actively seek alignments with FPs, and FPs with NPOs. It is definetly the "shape of things to come."
Our Chairman has projected "by 2025 any corporation that does not provide returns EQUALLY to shareholders and social issues,.... will fade from the marketplace!" She adds that "this includes some of today's largest and well known corporations."
Ed
Mal Warwick - Nov 13, 2006 11:24 am (# Total: 28) Author, consultant, public speaker
Let's not lose sight of the unavoidable facts:
Patrick O'Heffernan - Nov 14, 2006 11:49 am (# Total: 28) Mal's book, (reviewed earlier on this site and in a podcast) lays out great information on this topic for both NPOs and FP's. Mal's firm is a good example of how a FP can incorporate social ends. The Greenfest, which was just held in San Francisco, had hundreds of such businesses and tens of thousands of people at their booths
shawtreatment - Dec 22, 2006 6:17 am (# Total: 28) Brad Arsenault, Cofounder
I'm the cofounder of http://www.shawtreatment.com , and thus far and after 2 years of research, we've decided to follow the Newman's Own 'recipe' of business. Which is to say, run it as a for-profit and give it all away. But I plan to look into the hybrid system in Canada. Does anyone have experience with hybrids in Canada?
Rosalyn A.J. - Jan 2, 2007 8:14 am (# Total: 28) Our organization, Executive Service Corps of the Charlotte Region (NC, USA), will be hosting a spring community forum on nonprofit advancement that will include a session on social entrepreneurism. We are looking for a speaker and would appreciate any recommendations.
Rosalyn Allison-Jacobs
Deputy Executive Director
Mae - Jan 9, 2007 8:01 pm (# Total: 28) Hello Everyone!
I am seeking some insight and advice. I am with a start up organization that will be a womens association/membership. Our organization consists of seven core programs that have the opportunity to involve earned income strategies. In addition, we would like to have a foundation which reaches a certain target market in addition to expanding our mission as well as a mix of social enterprises. Because we are a start up, does anyone have any advice on things I should look out for, do etc?
Thanks!
Mae
Carrie V. - Jan 30, 2007 11:21 am (# Total: 28) Hello Everyone!
Can you please provide me with some pros and cons of just sticking with the traditional 501c3 route but creating an earned-income enterprise? I am doing just that at the moment- and the income is related to our social purpose (healthcare) so I won't need to worry about unrelated income tax. I feel that going the nonprofit route makes us much less "threatening" to our target market, which is typically wary of for-profit business. Also, while we will run this venture as a self-sustaining and scalable enterprise, 501c3 status does allow for the possibility of government/private grants, should we decide to go after traditional donations. I would like to hear some thoughts from the group!
Sep 27, 2006
Emerging Nonprofit / Business Partnerships in India
Hosted by Prof. Dr. J. Christopher Daniel (September 2006 - Closed)
With Prof.Dr.J.Christopher Daniel, Executive Director, Goodwill social work centre, Madurai, India. The need for cross-sector partnering between businesses and nonprofits for social development efforts in rural and urban areas is greatly realized in most of the world to respond to the development demands of humanity. Many businesses, in particular in developed countries, have been actively involving themselves in corporate giving either directly or through nonprofit sectors for community development initiatives.
Many businesses in India are already involved in building social infrastructure of a community (education, health care, housing, economic development, culture, sports, civic measures, environment development and improvement of other human environments), but their community initiatives do not ensure full participation of the poor, the marginalised and the disabled in the economic and developmental process.
In general, their partnership initiatives are not geared towards meeting major social development issues such as eradication of poverty, reduction of unemployment, or fostering social integration.
Studies have reported that many Indian corporations have been taking up philanthropic community assistance programmes in short-term partnerships with nonprofits. These partnerships are not transactional --when organisations carry out their resources exchanges through specific activities, such as cause-related marketing, event sponsorships, licensing and paid service arrangements. They are not integrative either --when collaborative relationship is developed and the partners’ missions, people and activities begin to experience more collective action and organisational integration. In the Indian scenario, only a few nonprofits and companies have advanced to this degree of integration.
Questions for discussion:
1. Why do businesses collaborate with nonprofits? What are the benefits of partnering for corporations?
2. Where do most of the businesses fall on the collaboration continuum (Philanthropic / Transactional / Integrative)?
3. Do corporations still have the charity syndrome or would they want to be developmental in their perspective?
4. What collaborative strategies could be used to make businesses-nonprofits relationship be more sustainable?
5. What kind of corporate human service professionals get involved in this partnering initiative?
6. Do businesses-nonprofits enter into collaboration agreement and if so, how do they execute it and do they bind to the agreement?
Jump in the conversation here!
Mal Warwick - Sep 26, 2006 2:22 pm (# Total: 26) Author, consultant, public speaker
Your questions are interesting. But I'm more intrigued to know what's really happening on the ground in Madurai. By coincidence, it's a city I've gotten to know through four or five visits in recent years -- working on fundraising with a large charity hospital there. Can you provide concrete examples of which businesses are working with which nonprofits -- and what each is getting out of it?
CHRISDANIEL - Sep 26, 2006 10:09 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Mal Warwick:
Greetings to you. Thank you so much for your response.I am glad to know of your visits to the temple city of Madurai.Yes there are a number of industries in and around this city who have been involved in corporate giving/philanthropy or running direct and/or indirect programmes through their own foundations/trusts in the fields of education,health,sanitation etc. Sadly enough,cross-sector partnering between these companies and nonprofits is not very much evidenced. Though a few corporates are involved in cross-sector collaboration with nonprofits,their programmes are not of long term in nature nor multi-year partnering.It may be fitting to mention that the concept of 'corporate partnership with nonprofits' is not understood nor the importance of corporate giving is not very much realised by many companies in and around this temple city. There are no concrete examples I could cite wherein businesses get activley involved in cross sector partnering with nonprofits in Madurai.In fact, my organisation 'GOODWILL SOCIAL WORK CENTRE' took up a corporate-nonprofit partnership project with a "DuPont(SHE)Award 1997,offered by the DuPont South Asia Limited,Madurai Plant,India.It was a one time grant fund used for environmental action program for children in villages(1997-98).You may visit my organisation's website:http://mfcs.malianfoundation.org/goodwill/. I look forward to the opportunity of meeting you here in this temple city when you will visit again.Best wishes.
Prof.Dr.J.Christopher Daniel
Bharat Kakkad - Sep 27, 2006 8:41 am (# Total: 26) Synapse Market Access Fund
Most of your questions are very relevant and in seeking answers they lead to further questions. In my experience there is a lot of 'lip service' offered by larger corporates as part of their modern approach to Corporate Social Responsibility. While this subject has received a lot more attention in the recent past, there are few examples of great "success" stories.
Information and materials on this topic is fragmented with few people who have in-depth knowledge. It would be good to use this platform to accumulate as much material as possible then assess if there is commonalty across countries, continents and the world.
Would be happy to participate in further discussions.
World Tourism Foundation
Brand alignment. Brand is the most underutilzed Asset of non-profits, an asset that could generate substanial income. Look at the Olympics.
Mal Warwick - Sep 27, 2006 10:01 am (# Total: 26) Author, consultant, public speaker
Thank you, Prof. Daniel, for your response about the limits to corporate-nonprofit partnerships in south India. Unfortunately, I wasn't surprised by your answer. Both your comments and those of Bharat Kakkad reflect the same reality I've seen -- not just in India, but in most parts of the world.
The proverbial bottom line is that CSR is more fiction than fact for all but a handful of companies. It's true that, worldwide, the principal multinationals have grudgingly begun to issue annual social impact reports as well as financial reports, and some of those firms have launched impressive initiatives. However, for the most part, CSR in my opinion is little more than window-dressing for most companies. Many call it "reputation insurance."
The problem is partly one of definition. Most companies look on CSR as a call to engage in corporate philanthropy and, secondarily, in environmental activity. Yet a recent study by the international public relations firm Fleischman-Hillard shows that the public -- the U.S. public, at least -- feels that those are the *least* important aspects of CSR. Most important of all: paying workers well. Second: engaging with the community or communities where the company does business.
To compound the problem, the discussion about CSR focuses on big businesses -- yet the overwhelming number of businesses are small. There are only 500 companies in the Fortune 500 -- out of more than 25 million businesses in the United States alone.
It's true, of course, that big companies -- once they start walking their talk and demonstrating a concern for all their stakeholders -- will have a big impact on society. But it is the efforts of *small* companies that, in the final analysis, will truly bring CSR home.
That's why I teamed up with Ben Cohen, co-founder of Ben & Jerry's, to write "Values-Driven Business: How to Change the World, Make Money, and Have Fun." In this little softcover book, Ben and I profile two dozen small and mid-sized companies that have taken great strides toward genuine CSR -- striving toward the "triple bottom line of people, planet, and profit."
To date, I've seen companies in such countries as Brazil and South Africa -- not to mention Europe -- demonstrate equal commitment. So far, though, I haven't seen it in India. Too bad!
Akhil - Sep 27, 2006 8:37 pm (# Total: 26) www.ief.in
I would tend to agree that a large majority of Indian companies have not started focussing on CSR activities. But there are exceptions. The most obvious examples are the the TATA group, the Birla Group, ICICI Bank... These entities have always invested in contributing to the society. A simple search would reveal the extent of their CSR activities.
But as Mal points out, it will be the efforts of the small companies that will bring about a significant change. I dont want to tom-tom our company's initiatives because there are a lot of friends/companies I know who are quite serious about giving back to the society and are doing their bit.
Our company is focusing on the education sector in India. It aims to set quality benchmarks in the education sector AND become the largest diversified education player in India. 5% of our EBIDTA goes into funding our foundation www.ief.in which has the mandate to improve the quality of K12 education in India. The two entities combined, in the long run will definitely make a significant difference in the education scenario in India. But as I said, our company is not alone in making CSR an integral part of our operational and financial strategy. There are many others.
CHRISDANIEL - Sep 27, 2006 9:52 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Mr.Bharat Kakkad:
Many thanks indeed for your response.I am in full agreement with your views.I am attaching an article of mine on 'Business/Non-profit partnerships' in India(courtesty:www.foreignaid.com).Hope you will find it useful.Your views and comments are most welcomeLooking forward to be in contact with you.Regards.
Prof.Dr.J.Christopher Daniel
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Attachments: |
Introduction2.doc (41 KB) |
CHRISDANIEL - Sep 27, 2006 10:52 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Mr.Mal Warwick:
Thank you so much your response.Your question 'Is CSR for real'? is so revealing.I am attaching an article of mine 'Business/Non-profit partnerships in India'(Courtesy:foreignaid.com).You will really find it interesting to know more of CSR in India!.Happy reading!
Prof.Dr.J.Christopher Daniel
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Attachments: |
Introduction2.doc (41 KB) |
OKInternational - Sep 28, 2006 9:57 am (# Total: 26) Occupational Knowledge International
This is an interesting discussion. I agree that there is more lip service than reality in many Corporate CSR programs. However, I would like to tell you about some exceptions.
My organization, OK International, in partnership with two Indian NGOs has been working cooperatively with business leaders to address one of India’s most significant environmental health threats. The Better Environmental Sustainability Targets (BEST) program is designed to restructure the incentives that drive industry behavior. The goal is to encourage lead battery companies to adopt improved pollution control measures by offering a certification program as an incentive. Participating companies that agree to meet minimum emission standards, and to take back batteries for proper recycling, will be eligible to place eco-labels on their batteries.
These environmental certification standards for the lead battery industry are being developed by a multi-stakeholder group convened by OK International along with our Indian NGO partners -- Development Alternatives (DA) and the National Referral Centre for Lead Poisoning in India (NRCLPI) -- for this purpose. Participants include the two largest battery companies in India, major purchasers including Hero Honda and Tata, government and NGO representatives. The program was initially piloted under a cooperative agreement with Amara Raja (India’s second largest battery company) which provided us access to their facilities.
The stakeholders have completed three meetings and substantial progress has been made. The process is expected to be completed in February 2007 and the resulting draft standard will then be circulated for public comment. Although the program is being launched in India, it is anticipated that the program will be phased in on a global basis following its initial introduction.
In general, we have found much interest among Indian businesses to engage in open and constructive dialogue. My experience with these large players (as well as with small-scale stone crushing industries on another project in Orissa) suggests that there is more openness among businesses to work cooperatively with NGOs in India than in the U.S. I also believe that there are many more opportunities to conduct similar programs with other industries in India that are not being pursued due to lack of funding for these types of initiatives.
For additional information contact see: www.okinternational.org
Perry Gottesfeld Occupational Knowledge International (OK International)
K.L.SRIVASTAVA - Sep 28, 2006 7:53 pm (# Total: 26) Researcher and Consultant,Hyderabad,INDIA
Collaboration is an important concept for sustainable development of countries like India. Thank you Prof. Daniel for hosting this discussion.
In this context, the initiative of agencies like OK International can play significant role in facilitating the process.
I was wondering whether there is any initiative from Confederation of Indian Industry (CII) or Govt. of India for facilitating this process. Is there any other international agency working in this field?
Thanks and regards,
KL
priyapatil - Sep 29, 2006 8:04 am (# Total: 26) Thank you Dr. Daniel for starting this discussion. I am working with CRY - Child Rights and You, an organisation working for Child Rights in India. My experience with corporate partnerships has been diverse, we have had partnerships of all kinds as mentioned on the collaborative continuum, however, most of them have been transactional. The last few years have seen CRY move to a rights based approach and it is a challenge for us to take our resource partners on the same path. While some companies are moving away from the "charity" approach, we are still some way off from companies looking at CSR or corporate giving with a "development" approach. I am interested in what you call "integrative" partnerships on the collaboration continuum and would appreciate some thoughts on the same.
Thanks and regards,
OKInternational - Sep 29, 2006 11:10 am (# Total: 26) Occupational Knowledge International
Dear KL
I am not aware of any programs in India devoted to NGO/Business partnerships. Although CII is participating in our stakeholder process, it may be difficult for them to take the initiative on such efforts without backing from membership companies. The government is also participating, but not focusing on our effort as a model that can be replicated.
As for other international agencies working in this area, I am aware of a program at the International Finance Corporation (IFC) that is called The Local Community Development and Stakeholder Engagement Program which has supported our efforts. Also in the UK The Centre for the Advancement of Sustainable Development Partnerships (CASDP) is focused on this area.
Regards Perry Gottesfeld
CHRISDANIEL - Sep 30, 2006 10:43 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Priyapatil:
Thank you so much for subscribing your views.It is good to know that corporates who partner with CRY have advanced into the transactional stage relationship on the collaboration continuum. I must appreciate the good work your organization has been doing in the promotion of children's rights in India and working in partnership with corporates in India. I have given below a brief presentation on 'integrative partnership' which might interest you.
An integrative stage relationship is the higher level of engagement of partners’ missions, organizations and activities. This mutual mission relationship is described as ‘boundarylessness’.While businesses and nonprofits remain separate entities, when they come together to take up any development initiatives for the community, they become one organization. To quote from the book “The Collaboration Challenge” (James Austin, 2000) ‘The integrative stage relationship begins to look like a highly integrated joint venture that is central to both organizations’ strategies. The magnitude and form of resource exchange increases, and joint activities broaden still further. Personnel interactions intensify, and in several of the third stage relationships studied. One of the corporate partner’s top executives had been to the nonprofit partner’s board of directors and had become engaged in the governance of that partner. Individual value creation escalates to joint venture creation; each organization’s culture is affected by the other’s; processes and procedures are instituted to manage the growing complexity of the relationship.Ultimately, the alliance becomes institutionalized’. Obviously enough, this third stage of the collaboration is at the extreme level in cross sector alliances.
Evidently, there are a number case studies reported on the Integrative stage relationship between businesses and nonprofits in the developed countries.Relatively no such alliance is evidenced in the Indian context.Have you come across any such instances wherein nonprofits and companies have advanced in to this degree of integration? Thanks.
Prof.Dr.J.Christopher Daniel
priyapatil - Oct 1, 2006 4:39 am (# Total: 26) Thank you for the information on integrative relationships. It does give ideas on how we can attempt to move some of our transactional relationships towards an integrated stage. We have had some partnerships which would lie in the domain between transactional and integrative relationships, however sustaining them has been a challenge as change of key personnel, change in policies, performance to name a few, directly affect non-profit and corporate relationships. I haven't yet come across any such alliances as described by you in the Indian context.
CHRISDANIEL - Oct 1, 2006 6:34 am (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Priyapatil:
Thanks very much.Looking forward to remaining in contact with you in the future.Please log on to my organization's website:http://mfcs.malianfoundation.org/goodwill/. Regards.
Prof.Dr.J.Christopher Daniel
CHRISDANIEL - Oct 1, 2006 6:37 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Mr. Perry Gottesfeld:
Thank you so much for your participation in the discussion. I have greatly enjoyed visiting your website and getting to know of OKI International’s mission statement and description of activities.
I must express my warmest appreciation to you for your partnership initiatives with non-governmental organizations, government and businesses in environmental protection for sustainable development. It is so absorbing to learn about the fact that your organization in partnership with two Indian NGOs has been working in close cooperation with business leaders to combat environmental health threats and Indian companies have been engaging in open and constructive dialogue. Indian businesses ought to be ‘socially responsible’ in the sense they should feel more responsible towards the environment and even future generations. A socially responsible business has awful environmental, social and ethical obligations, which it needs to sustain. It should consider the “planet as a stakeholder “and take into account the environmental damage that they do.It is a heartening news that your organization is actively in building an integrative stage relationship with nonprofits, businesses and government for promoting ‘corporate environmentalism’.
Please log on to my organization’s website: http://mfcs.malianfoundation.org/goodwill/ . Our organization would be most willing to associate with OKI in taking up any partnership initiatives in the State of Tamilnadu, South India. Best wishes.
Prof.Dr.J.Christopher Daniel
CHRISDANIEL - Oct 2, 2006 9:09 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Mr.Srivastava:
I am deeply grateful to you for participating in this discussion.I am attaching my article for your attention.Looking foward to remaining in contact with you in the future.Best regards.
Prof.Dr.J.Christopher Daniel
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Attachments: |
Introduction2.doc (41 KB) |
tutormentor - Oct 3, 2006 5:17 pm (# Total: 26) Cabrini Connections Tutor/Mentor Connection
Mr. Priyapatil, and others. I lead a US non profit that has been building connections with many US business and professional people who come from India.
My focus is on education, and connecting youth living in poverty with adults and businesses who will help these youth move through school and into careers. I have created a strategy intended to support all tutor/mentor programs in the Chicago region, rather than just one or two. This is based on using GIS mapping software and searchable databases.
A few years ago I received a contribution from one of CRY's US sponsors who indicated that since he lives and works in the US, he wanted to make donations in the US, not just in India. That has led me to many new friends, most recently with the India Development Coalition of America. http:www.idc-america.org. This group will be holding an annual meeting in Chicago in a couple of weeks. If you're able, I encourage you to attend.
In my networking with people from India (and other countries), I recognize that many of the problems of big cities are similar. The ideas that work to solve a problem in one country could be borrowed to solve the same problem in many countries, if the resources were availabe.
I also recognize that the huge IT sector in India could be partners with me or other organizations in developing technology solutions that could benefit people in both countries.
In talking about SCR I feel that one strategy that could reach big corporations, or smaller ones, is for groups in multiple cities or countries to develop working relationships, which could be supported by branches of companies that do business in many places. Such collaborations would have an international appeal over local organizations that may have stronger local power than our own organizations.
Meeting on this portal is just one step toward forging cross country partnerships and working together to obtain corporate sponsorship and support. I hope we can connect more in the future.
CHRISDANIEL - Oct 4, 2006 5:37 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Mr.Dan Bassill:
Thank you so much for participating in the discussion.It is quite absorbing to know of your partnership initiatives with businesses within the US to work with youth and adults living in poverty. Your title 'intercontinental collaboration' looks attractive.
I really fall in with your points of view.I am attaching the full text of my article that will enlighten you on the subject under discussion in the present Indian scenario.Best wishes and Thanks once again.
Prof.Dr.J.Christopher Daniel
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Attachments: |
Introduction2.doc (41 KB) |
lakshmi - Oct 5, 2006 7:26 pm (# Total: 26) I am Lakshmi Iyer, member of the Corporate Philanthropy team of and Indian non profit - GiveIndia and my role is to manage the social initiatives of an Indian Corporate
Mr.Dan Bassill's : "connecting youth living in poverty with adults and businesses who will help these youth move through school and into careers" sounds very similar to the social initiatives strategy of the corporate whose program I manage. I wonder if you could share your program in more detail especially the NGO-corporate collaboration bits
As part of my work I do get to see NGO-corporate engagement at various levels, though not as high as mentioned by Prof Daniel !!
CHRISDANIEL - Oct 5, 2006 11:15 pm (# Total: 26) PROF.DR.J.CHRISTOPHER DANIEL
Dear Ms.Lakshmi Iyer:
Thank you so much for your response.It is so delightful to know that you are managing partnership initiatives of an Indian Corporate. I would like to hear more about your activities? Where does your organisation fall on the collaboration continuum? Do you partner with any grassroots level NGOs in India and provide funding for taking up social development programmes?
I am the Chief functionary and Executive Director of Goodwill social work centre(NGO),Madurai,India.You may please log on my organisation's website:http://mfcs.malianfoundation.org/goodwill/. Looking forward to remaining in contact with you in the future.Best regards.
Prof.Dr.J.Christopher Daniel
priyapatil - Oct 5, 2006 11:49 pm (# Total: 26) Dear Dan Bassill and others
I do hope we can connect to look at cross country partnership options and obtaining corporate sponsorship and funding. CRY is also present in America (www.america.cry.org) and I will definitely inform my colleagues about the IDCA. I work from CRY from Pune, India.
I would like to know whether you have had any experience with working with the corporate sector on partnerships aimed at restoring to people their rights. A rights based approach is somewhat intangible, is quite process oriented and "results" take time - which is difficult for many people to understand in today's "instant/quick fix world". I would like your thoughts on how one can forge long term partnerships in such a scenario.
Thanks and regards,
Priya
lakshmi - Oct 6, 2006 1:19 am (# Total: 26) To answer your questions, Prof Daniel :
The focus of our social initiatives is to empower underprivileged youth to become more employable. To achieve this, we do partner with implementing NGOs who work in this area. Some of the programs (mostly vocation training based) are funded while others are non financial in nature.
Whether the partnership has a financial angle to it or not, we do engage with our partners at various levels, eg. we support our partners in - developing curricula, post training placement, delivering sessions that add value to their existing curricula, training of their trainers etc.
Though we have moved beyond the transaction stage, I must admit we are nowhere near the “higher level of engagement” stage articulated by Prof Daniel
As mentioned earlier, it would be interesting to hear more about Dan Bassill’s program and the levels of NGO-Business engagements therein
tutormentor - Oct 6, 2006 1:16 pm (# Total: 26) Cabrini Connections Tutor/Mentor Connection
Prypa and Lakshmi,
In the LINKS section of http://www.tutormentorconnection.org I have a sub category titled Process Improvement, Innovation and Collaboration. This divides into sub sections such as Concept Mapping, Geographic Information Systems, etc. These sites illustrate various thinking about how we might collaborate on solving complex problems such as the one of getting people and corporations to give long term attention to the issues we're discussing.
In the Tutor/Mentor Institute section of my site I use GIS maps and simple charts to illustrate my ideas. I feel that until others beging to visualize their ideas, or the process of getting from here to a desired result, we won't be able to understand what each other is talking about, and we won't be able to add to the blue print we each are visualizing.
The type of thinking in the Process Improvement and Innovation section is taking place in companies and universities in India, the US, and in other parts of the world. Until we recruit people with these tools, who understand these concepts, to work with us to map our ideas, we not only won't reach much agreement amoung a few people about ways to solve our problems, but we won't create a path for millions of others to follow.
As you read this, take a look at your rolodex, and your own web site or blog. Think of all of the ways you can tell the people you know to come to this portal, or the T/MC portal or to other web sites, where complex ideas are being visualized and shared as discussions intended to lead to shared understanding and collaborative action (which to me is action done with self interest in mind).
In short, we need to create knowledge centers that attract people to our discussions, and marketing and communications that reaches out every day to draw more people. This is what faith communities have been doing for years. We can learn a lot from them.
Dan
simonthreehands - Oct 27, 2006 6:58 am (# Total: 26) I've been very interested to read this thread.
We are researching the possibility of businesses in India taking part in our Socially Responsible Development programmes; team, personal and leadership programmes which deliver development and learning whilst engaging the teams in community projects. There's more info on www.threehands.co.uk .
I'd appreciate your views.
Simon Hamilton
tutormentor - Oct 27, 2006 9:01 am (# Total: 26) Cabrini Connections Tutor/Mentor Connection
Simon,
I visited your web site and it looks like you are focused on project based activities that serve a few organizations in the UK. I think this is important, but would encourage you to consider another level of leadership.
If you create a map of the UK or India showing where specific social issues create a need for socially responsible involvement (such as poverty indicating a need for education support, or water poverty, indicating a need for water solution projects, or AIDS concentrations, indicating a need for health solutions) the map could then be a roadmap for your role in connecting people who could help, such as corporations and corporate volunteer teams) with people and organizations addressing these issues in the different parts of the UK or India where the issue needs to be addressed)
Instead of just mobilizing volunteers, or donors, you begin to be an intermediary bringing people and resources together to solve problems. You could focus on a single city, or an entire country.
I model this type of thinking and acting in the work being done by the Tutor/Mentor Connection. In the Program Locator and Tutor/Mentor Institute sections of http://www.tutormentorconnection.org you can see maps and charts that illustrate where help is needed, what help might look like, and how long help needs to be provided.
I also host a conference in Chicago to bring people together to discuss the issues, the challenges, and to create capacity building collaborations. At http://www.tutormentorconference.bigstep.com you can read about the Chicago conference, and you can view an eConference page that illustrates how I'm trying to connect with partners around the US and the world who might facilitate part of this, drawing their own stakeholders together, and connecting them to me and others around the world.
In doing so my goal is to draw greater attention to the issues, and greater support from multi national organizations who might support a project with partners in many countries more than they would support the same project presented by many different projects from many different places.
If you see opportunity for your group to take a role in the econferences, just for the purpose of expanding the discussion we're having here, let's talk of how that might happen.
This invitation is open to anyone else who visits Social Edge and is looking for a way to have a greater impact.
Dan Bassill
Sep 25, 2006
Benefiting from Social Entrepreneurship and Social Businesses in India
Hosted by K.L.Srivastava (November 2004 - Closed)
Article Summary (Full article available below) In spite of progress in several fields, the social and environmental conditions in India continue to be grim. Today about 300 million Indians are not able to meet even their basic subsistence needs. There is high incidence of social inequity and exploitation of weaker sections. The alarming rate of environmental degradation is another cause for serious concern. Thus the current development approaches have proven inadequate in tackling social and environmental problems.
Although there has been rapid growth in the number of citizen sector organizations in India, the practice of social entrepreneurship and management of social businesses as effective tools for solving social problems are not receiving their due attention. The Government departments and Public Sector Corporations still handle most of the social sector programs in India. Due to the sheer size of resources needed for the social sector and also due to political factors, this picture is not likely to change much in the near future.
Some of the large business houses are gradually showing interest in the social sector. Their intervention is needed, not only because they can inject financial resources into the social sector, but also because they can provide sophisticated technologies and creative solutions for this sector. As an example, the "e-choupal" initiative of ITC Ltd. is likely to generate large social impact in several rural areas.
In view of the above-mentioned points, the social entrepreneurs are needed not only in citizen sector organizations i.e. NGOs and community-based organizations (CBOs), but also in the Government and private business sectors in India. Some social entrepreneurs may be able to operate only as "free-agents" (i.e. without any formal institutional affiliations).
Many development challenges like provision of water and sanitation, health, education and power for the weaker sections of society can be best addressed if there are collaborative arrangements involving Government, business and citizen sectors. The social entrepreneurial values and methods can play significant role in successful accomplishment of such collaborative missions.
Many of the public sector enterprises (e.g., Housing Development Corporation, Agro-Industries Corporation, Irrigation Development Corporation etc.) and cooperative sector units were established long back in India with primarily social goals in view. However, most of them have turned bureaucratic, ineffective, and loss-making units over the years. There is considerable scope for injecting entrepreneurial energy and passion for social development in many of these enterprises through collaborative arrangements or through outsourcing of works to NGOs. In order to be successful in developing such collaborations, the support from policy-makers is often required.
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"Many economists treat development as a form of ‘tough love’. Fortunately, most development planners have now recognized the importance of social and ecological factors and processes in the development approach."
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Several of NGOs have made major contributions and innovations in implementing natural resource management projects such as watershed management, wasteland development, and participatory irrigation management. Implementation of these projects has included strategies for empowerment of poor people in rural areas and for encouraging them to set up micro-enterprises. In general, the quality of people’s participation in development programs has improved significantly in India during the last two decades. The credit for this achievement goes largely to social entrepreneurs in NGO sector.
Many economists treat development as a form of "tough love". Fortunately, most development planners have now recognized the importance of social and ecological factors and processes in the development approach. Consequently, more people are now talking about sustainable development. In his recent book Development as Freedom, the famous Economist and Nobel laureate Amartya Sen writes: "the overarching objective of development is to maximize people’s capabilities – their freedom to lead the lives they value, and have reason to value." To a certain extent, this may sound too idealistic; but if we use the spirit of this viewpoint, much of it can be accomplished by promoting social entrepreneurship in conjunction with business entrepreneurship and general development approaches.
Social entrepreneurship, although an old field of practice, is a new and emerging field of systematic knowledge and learning. The growth in social entrepreneurship should not be left to chance. In his famous book Innovation and Entrepreneurship, Peter Drucker writes: "... everyone who can face up to decision making can learn to be an entrepreneur and behave entrepreneurially. Entrepreneurship, then, is behavior rather than personality trait. And its foundation lies in concept and theory rather than in intuition". Even if we concede some role for personality factors (as some other experts have suggested), a large number of selected people (after initial screening) can be trained to be entrepreneurs. Extending this logic further, I think that most people who can combine a spirit of social service and entrepreneurial behavior can learn and develop themselves as social entrepreneurs.
It is important that this field of practice develops as a knowledge- based practice, rather than just a random occurrence based on "hit or miss" approaches and intuition. Furthermore, when social entrepreneurial education and training is spreading in other countries (e.g., USA and UK), there is growing need to promote such education in India also.
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"Social entrepreneurship, as a special type of leadership, can flourish here only if its value is recognized by a significant section of Indian society."
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In UK, the Blair Government is taking initiative in promoting social businesses in a big way. Since the Government is a prominent player in social sector in India also, India can learn several lessons from the experience in U.K.
Social entrepreneurship, as a special type of leadership, can flourish here only if its value is recognized by a significant section of Indian society, especially the policy makers, media and the other important players. If this happens, it can make major contributions for the equitable and sustainable development of India.
K.L.Srivastava, M.Tech. (Agricultural Engineering) from Indian Institute of Technology, Kharagpur, is a specialist in natural resource management, technology-community interface, and rural development. Earlier, he has worked with International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) as a Senior Scientist. He has also worked as a Consultant in several development projects. Presently, he is working as a Consultant with PRDIS (an NGO based in Hyderabad.)
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K.L.SRIVASTAVA - Nov 22, 2004 4:46 pm (# Total: 14) Researcher and Consultant,Hyderabad,INDIA
Based on my experience of working in rural development projects in India, I have recognized the necessity for social entreprenurial research and education incorporating relevant elements from three broad areas: (a) development management (including environmental concerns), (b) business entrepreneurship and management, and (c) social welfare. As a hybrid field of practice, the social entrepreneurship is likely to offer ‘hybrid vigor’ and new opportunities as well as challenges for the practitioners in this field. However, I am not aware of any significant initiative for promoting research, education and training programs on social entrepreneurship in India so far.
In this context, I suggest following topics for your comments and discussion:
1. Any general comments on the article or on the meaning of terms used. Any clarifications? 2. If you feel that social entrepreneurship and social businesses are important for India, how should they be enriched and promoted? What strategies should be used? 3. What can India learn from educational, training, and promotional activities in other countries? What aspects need to be emphasized in India? 4. What should be the roles of government sector, private business groups, charitable foundations, international development agencies and NGOs in promoting research, education and practice of social entrepreneurship in India?
Keely Stevenson - Nov 26, 2004 1:25 am (# Total: 14) Royal Bafokeng Economic Board
Hello K.L. Great article. You pointed out many important topics relevant not only to India, but the evolution of social entrepreneurship globally. I would be curious to hear more about the "e-choupal" initiative that you mentioned. What do they do exactly and how are they are generating large social impact in several rural areas?
Cheers!
Charles Cameron aka hipbone - Nov 26, 2004 11:10 am (# Total: 14) HipBone Games / Rheingold Associates
Hi, KL:
And thanks for hosting this event (and for your email kindly drawing it to my attention). I was here yesterday, before Keely posted, and wanted to say hi but not to occupy the first post out of the gate, so I'm glad someone has now posted and delighted that it's Keely who did so -- hi there, Keely!
In any case, we're under way. Your article gives us a rich overview of a vast field, KL, and as Keely says, much of what you say could be transposed to other parts of the world. And since you ask us to mention terms we'd like to see explained, I too can say that I'd like to hear more about the "e-choupal". I know Steve Rudolph has mentioned this topic here before, and Al Hammond did so at response 7 in his own recent event.
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Underlying your whole post -- and our whole situation here as people who would like to see improvement in Amartya Sen's "freedom to lead the lives they value, and have reason to value" – to my mind is the great psychological issue which you characterize thus:
- Many of the public sector enterprises … and cooperative sector units were established long back in India with primarily social goals in view. However, most of them have turned bureaucratic, ineffective, and loss-making units over the years.
Your insightful comment:
- Many economists treat development as a form of 'tough love'.
- For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.
*
And lastly, if I may, you know my interest in issues having to do with water… Stephen J. Lansing's work, set forth in his book, Priests and Programmers: Technologies of Power in the Engineered Landscape of Bali (Princeton 1991), is already something of a benchmark for a new approach: one which validates both the innate knowledges of the "locals" and the advances in an increasingly subtle global understanding of – for want of a better phrase – how systems work.
How is India faring in terms of similar ventures which combine local traditional knowledges with technical savvy? This seems to me to be one of the crossover areas where much "hybrid vigor" will be found.
Warm regards to all…
K.L.SRIVASTAVA - Nov 28, 2004 3:41 am (# Total: 14) Researcher and Consultant,Hyderabad,INDIA
Hello Keely,
Thanks for your message.
The e-choupal initiative is a successful example of combining business goals with rural development. This initiative has been launched by ITC Ltd. which is a leading private company in India.
The word 'choupal' in Hindi means village meeting place. The company places computers with internet facilities in villages at its own cost. ITC has made significant investments in creating and maintaining its own IT network in rural areas and to idenify and train a local farmer in each of such selected villages.
The e-choupal serves several purposes: (a) social gathering place, (b) e-commerce hub, (c) local information and recreation centre etc. The host farmer takes public oath to serve the community.
This system is alleviating rural isolation in a large number of Indian villages and empowering the community through IT tools. The income of farmers has also increased.
The e-choupal initiative has helped ITC in its agricultural trading operations and improved its profits. Simultaneously, it has contributed significantly in empowerment of rural people and rural development.
Thus the private company has set an example of earning profit by investing in rural development.
Please visit following link for further information:
www.digitaldividend.org/case/case_echoupal.htm
Thanks and regards,
KL
K.L.SRIVASTAVA - Nov 28, 2004 5:10 am (# Total: 14) Researcher and Consultant,Hyderabad,INDIA
Hi Charles,
Happy to meet you on the edge and receive your 'gift'. As always, your post provides us with food for thought.
I fully agree with you that the management of welfare, development, and business entrepreneurship interface (i. e. Social Entrepreneurship) involves several psychological considerations.
Basically, there are three factors : (a)motivation for the entrepreneur for undertaking innovations, taking risk and doing hard work, (b)competiveness of product or service at the market place, and (c)motivation for the community for engaging in self development and hard work.
Normally, profit motive and wage incentives drive us to strive for higher level of performance and better results.
However, there has been significant advances in understanding of human psychology. Social Entrepreneurship has to tap this understanding, and knowledge of people like you to improve the situation.
The public sector units in India did not tap the passion of capable people for achieving social development and welfare goals. In name of accountability, these units introduced bureaucratic procedures and mind set which inhibited innovations and flexiblty. In nutshell, these units did not apply social entrepreneurship in their operations.
Similarly,the model of social entrepreneurship should strive for opportunities for self development in the communities. There has to be a balance between welfare, development and business depending on the local factors.
Also, there are new approaches like social investing, fair trade, ethical buying etc. which should be utilized for achieving fair profits along with development and welfare.
The challenge before social entrepreurship is to prove Keynes wrong in this new era. The new century can bring happiness and development to a large number of people (not just to a chosen few).
Your point of hybrid vigor in water sector by combining local wisdom with modern science is quite useful. To some extent, it has been used but much remains to be done.
Again, thank you charles for your post.
Regards,
KL
mitra - Nov 28, 2004 1:53 pm (# Total: 14) Natural Innovation
KL, I think when you say:
"The public sector units in India did not tap the passion of capable people for achieving social development and welfare goals. In name of accountability, these units introduced bureaucratic procedures and mind set which inhibited innovations and flexiblty. In nutshell, these units did not apply social entrepreneurship in their operations."
It needs to be repeated over and over again, I've seen the dead-hand of accountability, and "good governance" kill the spirit of many organisations, and essentially drive away the innovative, creative, people.
Of course, without a doubt, there are people who will use a position of responsibility in a non-profit for unreasonable personal benefit.
The challenge is how to provide the right balance, I found Ricardo Semler's book "The Seven Day Weekend" interesting in showing how a different balance was found inside a company, Semco, in Brazil. I'm not sure where we have good models in the social enterprise field of giving people the freedom to do their best.
- Mitra
suhit - Nov 29, 2004 1:58 am (# Total: 14) No less a corporate guru than Peter Drucker, the grand old man of corporate management theory, has now devoted several books to the subject of management of non-profit organizations which, he says, is a much more difficult task than management in the corporate sector. A chief reason it is so difficult, he says, is that the non-profits are more democratically run and there isn't a "bottom-line" focus to act as a good standard of measurement.
The Not-for-Profit sector in the US of A is leaps and bounds ahead of other countries. It has created institutions like the Salvation Army, identified by Peter Drucker as "by far the most effective organization in the United States,".
Drucker says that [PDF], Statistically the nonprofit sector is America´s largest employer. Over 80 million people work as a volunteer. They work in average nearly five hours each week in one or more nonprofit organizations. This is equal to 10 million full-time jobs and if this where paid volunteers they would earn $150 billion.
The Harvard Business School celebrated the 10th anniversary of its Social Enterprise Initiative recently. This is a significant initiative considering that HBS attracts regularly some of the best people in the world. This in turn means that some of the biggest problems in the world are tackled by them.
This is the goal of SEI @ HBS :
The Social Enterprise Initiative at HBS generates and shares knowledge that helps individuals and organizations create social value in the nonprofit, private, and public sectors. Social Enterprise plays a critical role in supporting the School's mission to educate leaders who make a difference in the world by integrating social enterprise-related research, teaching, and activities into the daily life of HBS.
The SEI group is hearing suggestions on the The Next Ten Years of Social Enterprise.
The question at hand: What will the next ten years of social enterprise look like at HBS, and how can the School continue to contribute to the social sector in meaningful and important ways?
The overriding sentiment from panelists: Think big; change the way the world works.
Nancy M. Barry (HBS MBA '75), president of Woman's World Banking (WWB), urged the SEI to take a problem-solving approach, using cases and research to examine social issues and explore ways to solve them.
She encouraged Harvard to take on the role of catalyst, using its resources and talents to show businesses that they can do well by doing good—what she termed "enlightened capitalism." She proposed that HBS and Harvard's John F. Kennedy School of Government collaborate by first choosing a cause such as global poverty and then working to fix it. "Change the way the world works," she challenged.
Barry warned against a tendency to focus solely on nonprofit organizations and routine management issues that are covered in any business school education.
Thomas J. Tierney (HBS MBA '80), founder of Bridgespan, a nonprofit consulting company, offered another challenge and framework for the audience to use in formulating ideas about the future of SEI: What would this university have to do to increase its social impact on the world ten-fold in a decade?
Tierney focused on what he sees as a "crisis of leadership" in social enterprise. People are leaving the sector because of issues of money, geography, and burnout, and often there aren't enough qualified, socially oriented leaders to replace them. With money piling into the sector, we need leaders who have the skills to address the complex issues involved in running a social enterprise, he said.
This leadership crisis won't be solved simply by HBS turning out more leaders, he continued. Educational institutions involved in social enterprise issues need to work together to train leaders and solve social problems.
One factor working against educational institutions interested in producing more socially aware leaders is business school rankings produced by various publications. The lower starting salaries earned by graduates going into nonprofits can drop a school's ranking, Tierney said. These rankings should begin to take the nonprofit sector into account, perhaps weighting salaries of nonprofit sector graduates differently. Publications should also rate schools on their contributions to society.
India requires a focus on the Non-profit/NGO sector. We need a Social Initiative group at an IIM. We need a C K Prahalad thinking, writing and working with the social sector. More than anything else we need 100 million Indians volunteering their resources - time, expertise, knowledge, money to increase the social impact on India ten-fold in a decade.
suhit - Nov 29, 2004 2:02 am (# Total: 14) Look at this example of One World, which is a classic case of a Social Entrepreneur.
In who can't pay dies John McMillan, who in his book "Reinventing the Bazaar" talks about the market system which enables the creation of innovative and life saving drugs.
But these life-saving drugs do reach the poor in the developing countries. One of the conclusions was that the biggest problem was povery. A new company, One World has developed a new business model which can revolutionize the pharma-drug delivery industry to the developing world.
The Scienticfic American has the story on the couple who have created the first non profit pharmaceutical company in the USA. [http://www.sciam.com/article.cfm?chanID=sa001&articleID=0006B5F7-A926-1084-A92683414B7F0000&pageNumber=1&catID=2]
When Victoria Hale left her job as a pharmacologist at Genentech in 1998, she made a list. It detailed areas that she felt the pharmaceutical industry had ignored: orphan drugs for metabolic disorders, treatments for substance abuse, modernization of contraceptives, and global infectious disease. Hale, an ebullient woman who also had more than five years of experience as a drug evaluator at the Food and Drug Administration, looked over what she had written and decided that, of the various choices, fighting infectious disease would have the most pronounced impact on public health.
To achieve her goal, however, would require setting up a venture that would differ radically from the traditional business models embraced by the pharmaceutical and biotechnology industries. To make drugs affordable in places where annual family incomes were often less than the cost of an MP3 player, the first thing that would have to be jettisoned was the profit motive.
Even on her first trip to Switzerland in 1999, however, she gained answers to some basic questions. The most important one had to do with identifying the mission for a nonprofit drug company with virtually no resources except human capital. Philippe M. P. Desjeux of WHO suggested that an opportunity existed for an off-patent antibiotic that needed one last clinical trial to prove its worth as a drug against a deadly parasite.
Hale's husband, Ahvie Herskowitz, a physician, had also decided to leave his job. He had been running large clinical trials for the Ischemia Research and Education Foundation. Both he and Hale started their own drug-development consultancy. The work gave Hale enough time to travel and explore her idea. Herskowitz often became locked in discussions with his wife about whether a profitless drug company would really be practical. He, too, began to devote more time to the venture. As a child of Holocaust survivors, Herskowitz was driven by some of the same impulses as Hale: "I am lucky to be alive--I was successful professionally and felt I needed to help those less fortunate."
In 2000 the pair launched the Institute for OneWorld Health, with Hale as chief executive and Herskowitz as chief medical officer. The first obstacle was bureaucratic: getting Internal Revenue Service approval for a nonprofit pharmaceutical company, a designation that, at first glance, seems like an oxymoron--and one that the agency had difficulty grasping.
But the timing of Hale's vision for a new type of drug company was impeccable. Just about when the two were getting started, the Bill & Melinda Gates Foundation was coming into its own. When Hale approached the foundation, the officers told her that they were already supplying money for leishmaniasis through support for vaccine research for the disease. Hale emphasized that vaccines for parasites had a pitiful track record--malaria being a notable case in point. In 2002 the Gates Foundation agreed to provide $4.7 million, most of it for a Phase III leishmaniasis trial. "They're doing great stuff," Bill Gates says. "Just take that one thing, kala-azar. Hey, that's going to be a medicine [paromomycin] that is going to save a lot of lives." Late last year the foundation decided to supply another $5.3 million.
The biggest challenge will be to build a distribution system to ensure that the drug gets supplied to those who need it. "Pharmaceuticals haven't penetrated into the depths of these communities as much as Coca-Cola," Herskowitz remarks. In the past, India has had in place an emergency system that was mobilized when the disease reached epidemic proportions--and a collaboration of OneWorld, WHO and the Indian government will try to construct its supply network on this model.
Word of OneWorld's work has spread, and the company receives frequent calls from scientists and executives at other pharmaceutical firms who wonder how they can play a part in the nonprofit's mission. Celera Genomics licensed to OneWorld royalty-free a drug for Chagas disease that it inherited when the company acquired a smaller biotech firm. And Yale University and the University of Washington licensed on the same terms another compound for the parasitic disease, which afflicts 16 million to 18 million people in Mexico and Central and South America and causes 50,000 fatalities every year. The Chagas treatments, with some of the development work funded by the Gates money, will test the company's ability to take a drug all the way through the clinical trial process. And OneWorld has the makings of a pipeline--it has early-stage development programs for drugs to treat malaria and diarrhea.
At a juncture when the global pharmaceutical industry is under siege for the prices it charges, Hale and the 25 employees of OneWorld have demonstrated that the spirit of the entrepreneur can be directed toward supplying something besides simple knockoffs of cholesterol and depression medication.
K.L.SRIVASTAVA - Nov 29, 2004 7:37 pm (# Total: 14) Researcher and Consultant,Hyderabad,INDIA
Hello Mitra,Suhit and other friends,
Thank you very much for your contributions and for sharing your perspective with all of us.
Social Entrepreneurship has potential for generating new energy, creating new intellectual capital, and providing new methods for solving our old problems. But this field of knowledge and learning is still at its infancy. It needs good upbringing, nurturing and support from the society. I was in the US sometime back, I felt so happy to see the rapid and healthy growth of SE there. Being a member of Social Edge also keeps me informed about the developments.
But back home in India, I am yet to see any networking or coordinated effort. Occasionally, it is raised in some forums, but soon it fades away because of lack of wider interest or support.
Of course, there are some very good social entrepreneurs in India who have learned by trying different ideas. But the country needs several hundreds of them. It is obvious that there is need for research, education and training facilities in the country so that more people can develop themselves as successful social entrepreneurs. As Suhit says, the IIMs should take a lead. Many other initiatives will also be needed. A related question that needs to be addressed is: What are opportunities for meaningful work (either as self-employment or paid employment) for educated/trained work force.
I treat this discussion as a new beginning in our journey on a uncharted path of research, education and training in India. We can continue this discussion outside this forum even after this event comes to a formal close today. I am leaving my e-mail address below:
klsrivat@yahoo.com
With warm regards and best wishes,
KL
K.L.SRIVASTAVA - Dec 1, 2004 8:54 am (# Total: 14) Researcher and Consultant,Hyderabad,INDIA
In my previous post, I wrote my concluding comments assuming that a new event will be featured from Nov30. Subsequently, I have learnt that we can continue discussion on this topic for another week.
I have been looking for information on different institutions conducting educational,training and promotional programs on social entrepreneurship and related subjects. Let me share information about an institution which is working in this field. I am also connected with some of its activities.
Centre for Social Initiative and Management(CSIM) started its activities in Chennai in year 2000, and in Hyderabad during December,2002. CSIM's Founder and Managing Trustee, Mr P.N.Devarajan is deeply interested in Social Entrepreneurship. CSIM has a mission of shaping social change agents for meeting challenges in the field.
You can learn more about this institution at the following site: www.csim.org
I wish to request social edge members to provide information about other institutions who are working in this field.
Also, I wish to see more comments on the points I raised in my opening statement.
In post#6, mitra enquired about organizational models for optimum utilization of innovative people. Let us know if you have information on this subject.
Thanks,
KL
Charles Cameron aka hipbone - Dec 4, 2004 9:49 am (# Total: 14) HipBone Games / Rheingold Associates
KL:
I'd like to thank you warmly for your panel here, brief though it has been, and to endorse your call for continuing conversation on the topics you and others have raised. More generally, I'd like to invite all those who came here for this forum to use our search function to locate other conversations across SocialEdge that might be of interest and to join them. Short events like this have the potential to snowball into a rich community of discussion if some of us who may come here for a specific, time-limited event "migrate" to the larger SE community and join in (or start up, or revive) topics of interest...
And thanks again, KL, I look forward to your coninuing posts around the SE discussions.
Trilok Kumar Jain - Dec 9, 2005 12:51 pm (# Total: 14) Professor and Researcher (Social Entrepreneurship)
I believe that it is wrong to rely on Government for social entrepreneurship. Social entrepreneurship is not new in India. In the past, in pre-independent India, many social institutions used to function. However, many of them were organsied on some erstwhile social models which are not appropriate today. While social entrepreneurship should develop with economic prosperity, Why the spirit of social entrepreneurship is not growing - it is due to over dependence on government and on funding agencies. What is needed is transparency which can bring this sector its desired glory and enable it to move towards public ownership.
force3 - Jan 7, 2006 9:08 am (# Total: 14) force3 ( forum for Creative entrepreneurship)
If farmers continue to get the same unremunerative price & the ITC gets 30-35% savings on its landed price at factory gate; it is GOOD only ITC & not for Farmers. I still await Nagpur office's "Fact finding" field visit for myself. Local ITC staff was instructed by none other than by ITC chief Mr Deveshwar himself. eChaupal at best is GOOD only for ITC, it is definately not good for farmers. There is no point in allowing Farmers co-operative institution to get over-riden by ITC's well managed publicity. Hype, International awards given undeservedly without cross xchecking facts on the grounds are responsible for all such initiatives... Open to criticism if any...
Srijith Sridharan - Sep 6, 2006 12:28 pm (# Total: 14) Social Service Foundation
Hi Friends and Experts @ Social Edge,
I am not sure whether I am attaching the right post to the forum, but am taking enough courage to do so and feels you all will accept the same.
Munro Island Community Tourism Project is a resoluted body under Social Service Foundation, a registered Trust registered under Indian Trusts Act 1882 with activities in Education and Social Development areas since 1999. Munro island Community Tourism Project is planned in association with the actice participation of the local community and is aimed as a Sustainable, Community based, Eco-Tourism Project.
Cross-Sector Partnership
Sponsored by WRI (November 2004 - Closed)
 Globalization and the Poor, Part 2: Cross-sector Partnership This event is sponsored by WRI, in conjunction with their conference, “Eradicating Poverty through Profit”, December 12-14 in San Francisco. For more information, see http://povertyprofit.wri.org Neither civil society nor most developing country governments can provide needed services to tens of millions of people every day. Large companies have the capital, management skills, and technological capacity to operate on that scale-and, potentially make a significant dent in poverty. However, that requires access to and cooperation with those communities, which suggests a critical partnership role for community groups, NGOs, private foundations, and other elements of civil society. How can such cross-sector partnerships facilitate commercial success and ensure that companies add enduring value? Is civil society prepared to help globalization—and market-driven processes—succeed in poor communities? If so, how can we do it successfully? |
What are cross sector/ multi-stakeholder partnerships? By Jeff Hamaoui Stakeholder refers to persons and/or groups of people that affect, or are affected by, an organization’s decisions, policies, and operations[1]. Consequently, the word stake, in this context, means an interest- or claim on a business enterprise. Those with a stake in the firm’s actions include such diverse groups as customers, employees, stockholders, the media, governments, multilateral organizations, professional and trade associations, social and environmental activists, and non-governmental organizations.
Business organizations are embedded in networks involving many stakeholders. Each of these has a relationship with the firm, based on ongoing interactions. Each of them shares, to some degree, in both the risks and rewards of the firms’ activities. And each has some kind of claim on the firm’s resources and attention, based on law, moral right or both. The number of stakeholders and the variety of their interests can be diverse, making a company’s decisions very complex.
Not surprisingly, business and stakeholder interests often coincide. When their interests are similar, stakeholder and companies may form coalitions, that is, alliances to pursue a common interest. These strategic alliances or coalitions among companies and their stakeholders are often referred as partnerships.
Some useful working definitions of cross sector / multi-stakeholder partnerships are:
A partnership is an alliance between organizations from two or more sectors that commit themselves to working together to develop and implement a specific project. Such a partnership implies that participants are willing to share risks, costs and benefits, review the relationship regularly and revise the partnership as necessary.
Alliances between parties drawn, for example, from businesses, government and civil society, that strategically aggregate the resources and competencies of each to resolve a specific problem/challenge.
Partnerships across different sectors of society imply transcending some of the divides between business/NGOs/governments. Interest from many governments and NGOs in working with business is quite high so the partnership model has been replacing the adversarial model.
Partnering across sectors means that different sectors of society are open to communicate and collaborate with each other, fostering and creating more inclusive-participatory models for solving problems.
A management tool to deliver business, social and environmental development outcomes by optimizing the effectiveness of different partners' resources core competencies.
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"...multi-stakeholder partnerships are partnerships that could engage two or more parties from various sectors of society such as: businesses, governments, multilateral institutions, Non governmental organizations, civil society."
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It is important to bear in mind that partnerships are about sharing not shifting risks and they should aim to find innovative ways to pool resources and talents based on each parties’ core strengths. They ought to be designed and maintained over time in such a way as to deliver mutual benefits for all collaborating parties.
Another point to consider is that multi-stakeholder partnerships are not static. Groups that are highly involved with a company today may be less involved tomorrow. Controversial issues that that are highly important at one time may be replaced by others; stakeholders that who are most dependant on an organization at one time may be less so at another. In addition, interests and priorities in companies can change over time so the nature and objectives of partnerships change as well.
Attached are some other useful documents, including a recommended reading list, case studies and background information.
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Janine Firpo - Nov 10, 2004 2:49 pm (# Total: 25) Hewlett Packard
As a contribution to this conversation, I would like to make key three points.
First, I believe that it is important to remember the purpose of business. The roots of business are, at their core, about the exchange of social value. Business began because one person had something that another person wanted or needed. As business has grown, we have lost sight of these beginnings and sometimes see business as opposed to social value. Yet reseach has shown that the companies that have been the most successful over the longest period of time are those whose mission encompasses the social vision from which the company emerged. Remembering these roots, and what business is really about, may help us place this conversation in a broader context.
Second, I believe that when we speak about private sector involvement in the bottom of the pyramid markets, it is important to think beyond the MNCs. Although there is value from the largest companies, there can be tremendous value, and potentially more flexibility and creativity, from smaller companies. There are many, many companies in the world of all sizes. Yet these conversations tend to focus on the MNCs. Why don't we speak very often about the next level of companies? The Fortune 1000? Or even the smaller players within the BOP markets? What is their potential role?
Third, when multinationals are described in these conversations, there is always a reference to them as sources of capital. While that is true, I am concerned that too often the capital investments are considered a key corporate contribution. After working within this space for a multinational for the past 4 years, I now believe that the intellectual capital, the convening power, the business acumen, and the management capabilities that corporations bring to their work in development can be much more important than the capital investments. Capital can come from many sources. These other assets I mentioned are unique to corporations and could be much more central in conversations about their partnership strengths in this space.
Jeff - Nov 10, 2004 3:48 pm (# Total: 25) Origo
This is another one of those difficult topic areas that is fast becoming a meaningless buzzword as everyone from development agencies, multinational corporations, NGO’s, foundations, governments, communities and social entrepreneurs strive to figure out how to work together to accomplish shared goals.
Right now, pretty much anything from a formal conversation between organizations to a meticulously planned alliance is hailed as a partnership; often with words like “revolutionary” or “visionary” thrown in for good measure. Everyone working at the BOP seems to be talking about partnerships; some are trying it out and a very few may even be succeeding…
So what is all the fuss about? The basic idea is actually a fairly intuitive one; that different groups with different capacities are really good at doing some things and poor at doing others, and that when it comes to the restricted resources available at the ‘base of the economic pyramid’ it makes sense to see how they can work together to provide some kind of systemic and complementary interaction in a given region or market to address the seemingly intractable challenges faced from any one organization’s or individual’s perspective.
However, the promise of partnerships is more profound than assembling a neat puzzle of complementary competencies, and needs to be clearly understood before you can make those pieces even fit together. For corporations, the partnership motivation at the BOP is clear: finding a more effective way of engaging in new and emerging markets by working with partners who have different capacities, credibility and in some instances capital. The bottom line for corporations to invest into partnership efforts at the BOP, however enlightened they are, eventually comes down to the bottom line; it’s all about potential roads to growth and profit.
For almost everyone else, cross sector partnerships promise something slightly different—but ultimately linked to the corporate motivation. If you can get a partnership to work with a corporation, then the opportunities for harnessing the corporate engine and its ability to scale, innovate and move capital into new markets is mouthwatering.
The challenge then is to avoid establishing partnerships that passively place players “side-by-side” and create active partnerships that allow partners to influence and integrate the way each other’s business is designed. This is no mean feat and, given the variety of ‘business’ imperatives at play in any partnership, the trick to achieving that level of influence is to prove that the best business design comes from novel partnerships themselves.
There are a growing number of cases in this area and if you are interested you should check out some of the attached materials posted with this article; they range from an exploration of the passive style of partnerships that focus on ‘brand’ and ‘philanthropy’ to the more active partnerships focused on business results in a variety of sectors; from partnerships to understand how to deliver micro finance services between HP, Accion and the Grameen foundation in Uganda to CARE Internationals goal to train over 100,000 women in Bangladesh in a business partnership with Hindustani Lever (HLL).
This seems to be a good place to start this discussion.
One last note, for social entrepreneurs it is worth checking out the Guide to Development Actors we helped the World Business Council for Sustainable Development (WBCSD) create as many of the players that business can turn to will work or have resources to work with SME’s: http://www.wbcsd.org/web/devguide.htm
In addition; the other guides at the page below have some useful case studies on cross sector partnerships that look at both the operational partnership structures and also at innovative capitalization strategies.
http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=Njc&doOpen=1&ClickMenu=LeftMenu
I have included some other useful documents, including a recommended reading list, case studies and background information, in my main article, above.
jdailey - Nov 10, 2004 7:17 pm (# Total: 25) When the original message starts with
"Neither civil society nor most developing country governments can provide needed services to tens of millions of people every day. Large companies have the capital, management skills, and technological capacity to operate on that scale-and, potentially make a significant dent in poverty.",
...it raises my hackles just a bit. The market, that perfect invisible hand, cannot adequately address issues of wealth distribution, public goods, or systematic economic subjugation. In academic circles they call that neoliberal mythology, and it is just that. http://www.pbs.org/wgbh/commandingheights/
Finding common ground with companies large and small that wish to do well while doing good is an admirable ideal, and one that should be pursued. Companies should recognize the triple bottom line is about creating the customer long term. e.g. slowly killing off your workers through groundwater pollution is counter productive long term. Governments should not abdicate responsibilities that rightly rest with the people, and civil society actors should assert their voice of the under-served and under-represented. http://www.civilsoc.org/
Market failures, like the provisioning of financial services to the poorest are defined by both the inability of corporations to see the benefit of creating new customers and by the dynamics of economic class and social caste. Microfinance institutions that seek to redress this face an incredible uphill battle and do more with fewer resources than most of those in the corporate world could comprehend.
Nonetheless or perhaps therefore, I believe that corporations do have resources that could be more productively utilized in the proverbial "raising of all boats", that in turn could lead to more stability locally and globally. For instance, water purification technology, partially subsidized by government but sold by corporations, could do more for public health than the health education programs that dot the world scene.
The corporations in turn, benefit from the increased stability of the workforce and should therefore surrender some profit to the government. The same could be imagined for many other products.
Conquering abject poverty will require many creative applications of business models and partnerships, and corporations as the new power centers have a huge role to play, but the limitations of the neoliberal mythology should be understood.
"In democratic countries, knowledge of how to combine is the mother of all other forms of knowledge; on its progress depends that of all the others."--Alexis de Tocqueville
jdailey - Nov 10, 2004 7:18 pm (# Total: 25) When the original message starts with
"Neither civil society nor most developing country governments can provide needed services to tens of millions of people every day. Large companies have the capital, management skills, and technological capacity to operate on that scale-and, potentially make a significant dent in poverty.",
...it raises my hackles just a bit. The market, that perfect invisible hand, cannot adequately address issues of wealth distribution, public goods, or systematic economic subjugation. In academic circles they call that neoliberal mythology, and it is just that. http://www.pbs.org/wgbh/commandingheights/
Finding common ground with companies large and small that wish to do well while doing good is an admirable ideal, and one that should be pursued. Companies should recognize the triple bottom line is about creating the customer long term. e.g. slowly killing off your workers through groundwater pollution is counter productive long term. Governments should not abdicate responsibilities that rightly rest with the people, and civil society actors should assert their voice of the under-served and under-represented. http://www.civilsoc.org/
Market failures, like the provisioning of financial services to the poorest are defined by both the inability of corporations to see the benefit of creating new customers and by the dynamics of economic class and social caste. Microfinance institutions that seek to redress this face an incredible uphill battle and do more with fewer resources than most of those in the corporate world could comprehend.
Nonetheless or perhaps therefore, I believe that corporations do have resources that could be more productively utilized in the proverbial "raising of all boats", that in turn could lead to more stability locally and globally. For instance, water purification technology, partially subsidized by government but sold by corporations, could do more for public health than the health education programs that dot the world scene.
The corporations in turn, benefit from the increased stability of the workforce and should therefore surrender some profit to the government. The same could be imagined for many other products.
Conquering abject poverty will require many creative applications of business models and partnerships, and corporations as the new power centers have a huge role to play, but the limitations of the neoliberal mythology should be understood.
"In democratic countries, knowledge of how to combine is the mother of all other forms of knowledge; on its progress depends that of all the others."--Alexis de Tocqueville
Radu Seserman - Nov 10, 2004 8:28 pm (# Total: 25) Janine, I agree with you, mostly on your first two points. A business's function in society is to provide goods and services. The existence of a profit allows the business to continue its activity. It seems that is forgotten and the business reason of being is to generate quick, huge profits. Third point it is true but practically is defeated by the first point.
K.L.SRIVASTAVA - Nov 10, 2004 9:56 pm (# Total: 25) Researcher and Consultant,Hyderabad,INDIA
The topic of cross sector partnerships is extremely relevant for countries like India where Government sector is vitally important for streamlining and funding development pathways. It will be naive to think that private business sector will suddenly change its business practices and start aiming for social and environmental returns. Similarly, the NGO sector alone is not equipped to deal with deep- rooted and gigantic social and environmental problems which are increasing year after year.
We have to move from the present "sector polarisation paradigm" towards a new "sector collaboration paradigm" in several areas. In order to achieve our goals, we need better conceptual clarity and a new breed of leaders/entrepreneurs and managers who can translate these ideas into reality.
Ofcourse, there are several problems and traps in this line of work. But they need to be managed sincerely. I believe that the cross-sector partnership will emerge as an important part of Social Entrepreneurship in many parts of the world.
Thanks,
K.L.
Emma69 - Nov 11, 2004 5:56 pm (# Total: 25) Hello,
I also think that the main issue/relationship embedded in the role of business and society has been left entangled in policy circles. If we apply closer scrutiny into this problematique, one aims among so many others would be to inquiry about this surge and trends toward the role of corporations, and their applications of shareholders’ value as core business practices!!!!!! In my opinion, it is along these dots that the whole prospects vis-à-vis corporations’ standing and societal development should be re assessed. These prerogatives bearing upon critical reflections in regards to the state of our current corporate governance practice, and the standardization of these platforms toward strategies for market penetration and the arrangements of private and public partnerships.
Moreover within the nexus of private/public engagements, the role of the private sector has become highly prominent; but to ensure proper accountability another aspect behind this phenomenon seems liaised with the dynamics of diffusion of power. To talk about this process for example, put the mantra of "common sense values", as the focal point vis-à-vis sustainable development and Poverty Reduction Strategies at national/governmental levels. Under this web the role of the private sector being one that has greatly evolved as power brokers, when it comes to involvement into policy formulation in states and markets in developing countries. Hence, within these layers (private/public partnerships), the status of intergovernmental and non-governmental organizations brings about these new paradigms to harness approaches toward market liberalization, equity and the role of western institutional investors to guide standards, norms in corporate governance.
Emmanuel Asomba
ianbryan - Nov 16, 2004 4:31 pm (# Total: 25) The Sensible City
I could not agree more with the point being made in the second paragraph. I work 100% with companies that gross UNDER 30 million dollars per year. In my environment, the social capital that is created by several dozen small businesses cooperatively working with local communities outperforms the impact of one big company tossing money at a needy community.
On a global scale, we find similar scenarios. Businesses willing to "roll up their sleeves" and get involved in human communities are usually smaller businesses with a long-term commitment to the area of development. Larger corporations, by design, have no choice but to abandon their efforts if new global markets do not tender results.
I incourage more dialogue about cooperative, community-oriented business at every level and the possibilities that arise when small businesses team together with the same entrepreneurial approach applied to the 3rd sector that they apply to business at home.
edward - Nov 17, 2004 3:22 am (# Total: 25) self
The stated or implied tension in this discussion between the 'business of business is to make money' and other goals such as community good reminds me of one of the often forgotten (deliberatly?) principles declared by Adam Smith. He stated that businesses and common society work best when they work together and are in harmony. He argued that the sole pursuit of profit to the extent that it 'injures' society is wrong (again something of his writing that is often ignored). For those who do not know, Adam Smith was a philosopher in the 18th century Scottish school that contributed to the European Enlightenment. He is credited with having 'invented' capitalism with his concepts of the division of labour and the 'hidden hand' of commerce. His monumental work is often used to justify the most predatory and rapacious forms of business practice in the name of free enterprise. It's therefore all the more intructive that such a philosopher in fact argued that business and the common good must go together and when they do, both prosper.
Janine Firpo - Nov 17, 2004 1:11 pm (# Total: 25) Hewlett Packard
Hi IanBryan - I would like to know more about the companies that you work wtih and the kinds of contributions they are making. Would you be willing to chat?
Janine
ianbryan - Nov 18, 2004 12:08 pm (# Total: 25) The Sensible City
Adam Smith is not forgotten! But many Americans do not know (or choose to forget) that when the nation was formed, careful attention was placed on the pursuit of private enterprise. You could only establish a corporation if you could prove that your intentions and methods of development would actually benefit society. Furthermore, the Revolution itself was a rebellion against the corporate (and backed by the Crown) chokehold on daily life in the colonies. The Boston Tea Party was not a rebellion against the Crown... it was a rebellion against the Tea Trade.
So now, there are regular forums and debates about the "question" of "whether or not" a business should take care of society. Yet, in America, social responsibility was once and should still be more of a mandate than a debate.
But to come to a point, the only sustainable solution is to find ways in which businesses can make heavy community and environmental involvement profitable. This is the focus of my firm and it is the focus of organizations like the Community Action Network in London and others.
If we can teach businesses that street-level, grass-roots compassionate human involvement is MORE profitable than multi-million dollar advertising campaigns (augmented by a few donations to nonprofits), then there is hope for sustainable capitalism.
ianbryan - Nov 18, 2004 12:12 pm (# Total: 25) The Sensible City
Hi Janine, I would love to chat. I have been collecting case studies over the past few years and have over 100 compiled. There is a lot of really exciting stuff going on out there.
Re: Private Sector Involvement at the BOP (Msg 10 of 11)
Hi IanBryan - I would like to know more about the companies that you work wtih and the kinds of contributions they are making. Would you be willing to chat?
Janine
Jefbuder - Nov 18, 2004 12:35 pm (# Total: 25) oneVillage Foundation
I would like to add a few things here.
Importance of Global Strategy It is very important that we link BOP strategies with a global approach to sustainability. Development in bottom up economies must proceed complementary to as Amory Lovins puts it, a Factor 10 reduction in reduction in human consumption levels overall. Remember that we here at this virtual conference are mostly that 1/10th of the world's population that consumes according to UNDP 9/10ths of the resources. More about Factor Ten: http://www.rmi.org/sitepages/pid1081.php
Cross-Sector Partnerships At the oneVillage Foundation http://www.onevillagefoundation.org, we are developing a comprehensive program to provide end to end human Services. We feel it is very important to develop grassroots connections, not only with what is called the BOP economy as discussed here, but also in relation to affluent regions. The linking up of the BOP cross-sector partnerships with socially conscious consumers, businesses and investors in affluent regions is central. We also feel that corporations have an important role to play in this process, however at a reduced level than is currently seen in so-called advanced nations like the US.
What is missing to power up the bottom up economy? Useful and effective tools Financing Networks Education and Training
Replication Rapid replication is vital... Humanity needs to rapidly move towards the more effective allocation of ecological as well as human resources, for current unsustainable trends cannot continue indefinitely... Key to replication of sustainable systems is the careful integration of the components listed above - finance, networks, and sustainable technologies, ICT - through you guessed it cross-sector partnerships.
To move forward on the overall approach mentioned above, the oneVillage Foundation is currently working with the Brussels’s Chapter of the Club of Rome to organize the Digital World Conference. This conference is sponsored by UNESCO and the Club of Rome. It will take in Paris in May of 2005. Go here for more information: http://www.onevillagefoundation.org/ov/news/bdd.html
Thanks so much for reading this. I look forward to your responses.
go here for more: http://blog.onevillage.tv/archives/2004/11/crosssector_par.html#more
Jeff
moniquec - Nov 18, 2004 1:15 pm (# Total: 25) Microfinance Opportunities
This is my first time participating in Social Edge. However, this discussion seemed like a good opportunity to share our experience with this BOP paradigm. I work on microfinance. One of our areas of specialty is microinsurance. Microinsurance services, be they protection for property, life insurance, livestock insurance or other options, are in demand by the poor. The success of this new financial product for the poor depends on partnerships between insurance companies and microfinance institutions (MFIs). The latter are the agents for the delivery of insurance to those low income populations. MFIs have a comparative advantage understanding low income market dynamics. The MFIs have track records of operating effectively in these markets with other financial services, such as credit and savings. Partnerships of this kind are an effective business strategy for both the insurance companies and the MFIs. They can limit the risks for each player while maximizing each institution’s comparative advantage and existing infrastructure–physical, social and financial. The numbers for those who have already dared to explore this market are encouraging. Through 2000, AIG’s profit on a group personal accident policy reaching over 40,000 working poor in Uganda was over 30% per annum of premiums paid. This program has grown to cover over 1.6 million people in that country. Today, AIG has numerous partnerships with microfinance institutions throughout Eastern and parts of Southern Africa. And that is only one product.
ianbryan - Nov 19, 2004 12:08 pm (# Total: 25) The Sensible City
Thank you for your post. Is there an American organization or institution where I can locate more information?
Emma69 - Nov 19, 2004 2:45 pm (# Total: 25) Re : Importance of global strategy
About the importance of global strategy key factors around this nexus are the necessity to develop and improve information mechanisms on developing countries. These approaches bearing upon the state of informed decision-making vis-à-vis markets, and the role of policy makers in such debates.
Furthermore, to look into the prospects and implementation of standards, these exercises should take into consideration the specific realities of low income countries, and their participation in the definition of those standards. It is interesting to note that the relevance of improved information and the implementation of standards carry out challenging dimensions for developing countries. On one hand such challenges identified in terms of the cost benefits behind such mechanisms, while on the other hand also prevail the efficacy or level of technical assistance needed to undertake such measures at low income country levels.
Emmanuel.
moniquec - Nov 19, 2004 4:46 pm (# Total: 25) Microfinance Opportunities
Ianbryan:
Our organization, Microfinance Opportunities partners with the MicroInsurance Centre on issues of microinsurance. The former focuses on undertaking of market research to identify the opportunities for delivering microinsurance for low income populations, the latter develops the partnerships between insurance companies and microfinance organizations.
For more information please go to our websites: www.microfinanceopportunities.org www.microinsurancecentre.org
Love Humanity - Nov 20, 2004 12:59 pm (# Total: 25) Louise Williams
Being new to the Social Sector I find this an interesting discussion. I feel it is an important one and from my observations there is a trend where the larger multinational organizations are realizing the benefit of partnering with organizations to effect positive change. On the other hand if they are unable to find the appropriate oranizations to partner with, they are forming a division to carry out various projects to make their communities better places for work and also for recreation.
I do not think that the private business sector will change overnight, but if properly presented with the reasons why their involvement both financially and in partnering in some way during the implementation of a given cause will benefit their companies in the long run, I think private businesses will step forward in due course. It is all in the presentation.
Examples of this in India are the Tatas and Birlas. These companies both realize the benefit of giving a helping hand-up out of poverty...not a hand-out.
From my observations most charitable organizations currently approach business just for wanting money so the organization can do good for others. I think if charitable organizations would approach businesses differently by planning further out to see the end result of why the social change must take place and why the businesses would benefit, then the businesses would realize the value of their participation in project.
To be part of effecting positive change for the future requires one to partner with others. It cannot be done alone.
Radu Seserman - Nov 20, 2004 7:46 pm (# Total: 25) In the November 19th issue Financial Times presents 'World's Most Respected Companies' (based on a survey of more than 1000 senior executives). All companies on the list are well known in the world. Most of the reasons these companies are admired and made it on the list, as the newspaper quotes, are: "They have a monopoly"; "They rule the word"; "There is hardly any village in the world where ...... isn't known"; "For 100 years, they have maintained dominance." So the question is not whether large corporations can eradicate the poverty in the world. Obviously they can, "They rule the world", and obviously they choose not to do so. The question is how to change corporate mentality of dominance, thirst for power, and careless about the little guy. The success examples about corporate involvement are exceptions. They based on the good will and heart felt feelings of some leaders, they do not bring structural changes. They do not offer economic sustainability because they always advocate growth, and growth it is, ultimately, at the expense of others. Until the conditions are set so small business can flourish, individuals be able to acquire enough productive assets to secure employment and support themselves, and communities are economically sustainable there will always be poverty because the many are at the mercy of a few to bring in or take out jobs. The history teaches us that there are very few good ‘philosopher kings’. Also history teaches us that we cannot succeed without trying and perseverance wins.
Radu Seserman - Nov 20, 2004 7:59 pm (# Total: 25) Ian Bryan, I completely agree with you and I believe that the solution lays in cooperation among community oriented businesses. If you are interested to discuss more and eventually take some constructive action please contact me at radu@adrisgroup.com
tutormentor - Nov 21, 2004 8:18 am (# Total: 25) Cabrini Connections Tutor/Mentor Connection
This is another interesting Social Edge conversation. I participate in this forum as a form of research and sharing. The links many people post to their own web sites provide ideas and inspiration to my own work. I hope the links I often provide do the same.
With that said, I feel that we'll not get far with this type of conversation until we "map" the various issues that we're all addressing, then create "communities of involvement" where people who care about the same issues can go to get information that leads to further involvement.
In terms of mapping issues, think of a pie chart. Each slice represents an issue that is important to one or more groups of people. I'd like to be able to find a place on social edge, or someone else's web site where the slices of the pie are interactive entry points into hubs where I can grow my involvement with an issue. For instance, the "health" slice would have links to AIDS, hunger, social/emotional, etc., while the environment slice might have global warming, water useage, etc. While no single organization can reach out and gather all that is known about current involvement in each of these categories, an interactive web site could be created where people log in an add links to show what they know.
By creating issue hub, conversations like private sector involvement, would have a greater chance of being populated by people who care deeply about the issue and are more willing to act on the ideas shared than they are in a generic dicussion of issues like this.
There are a growing number of organizations beginning to host communities interested in social issues. As these begin to focus on specific issues, I feel more people will get involved and begin to innovate actions. At www.tutormentorconnection.org and www.tutormentorexchange.net I'm creating a hub for people interested in mentoring kids from poverty to careers. In the Learning & Management tools section of www.tutormentorconnection.org I put links to web sites which I feel are good examples of knowledge sharing and innovation.
I'd like to see a section on Social Edge that collects and maps similar links, by issue category. I feel this would help us all put these ideas to good use.
ianbryan - Nov 21, 2004 10:57 am (# Total: 25) The Sensible City
Louise, I could not agree with you more. One of my favorite nonprofits, The Jane Goodall Foundation, spends more time teaching villagers how to farm than they do feeding the hungry. But there is more to be done.
The current norm in corporate enterprise of throwing money at problems and feeling accomplished is starting to fall apart because we aren't seeing sustainable programs that regenerate human society. This is the essence of Social Enterprise. This is where no multinational corporation can go without the guidance of a grass-roots sensitive, tactical, compassionate, street-level initiatives to empower each community (not the WORLD or the COUNTRY, but the community - one population at a time).
I don't mean to toot my own horn, but you might be inspired by what we are doing at The Sensible City. Go to www.sensiblecity.com if you want to see this in action.
Welcome to the community!
~Ian Bryan
vibowman - Nov 21, 2004 6:46 pm (# Total: 25) Performance Studies Theatre, Inc
And that is what I also strive to do, help one community at a time through a non-profit after-school arts program. Our education system stinks in early childhood learning and behavioral actions. I have been trying now for 3 years to get funding to establish this program in one of the poorest communities in Phoenix, and all I get is people telling me to go here and there and do this and that. I have spent any extra that I have to get this program going. Studies have shown how positive this program can be but studies do not give you seed money to start. So tell me, who's listening and who gives a damn about children who really, really need and parents also, someone to show them the way. Surely everyone know that not everyone learns through books but they can learn when you connect them to action. I am little upset and maybe this isn't the forum I should be in. So except me for my passion and not my pain.
Glad to meet you,
Vivian
OKInternational - Nov 27, 2004 2:54 pm (# Total: 25) Occupational Knowledge International
So if I can take this discussion outside of the abstract for a second, I just returned from Bangkok where my organization received an award for our partnership to address lead poisoning with an environmental certification program for the lead battery industry. The Seed Awards (Supporting Entrepreneurs for Environment and Development) were presented to 12 partnerships from around the world working on innovative projects and should be of interest to anyone interested in cross sector partnerships. (see http://www.seedawards.org/)
I think the most important part of forming our partnership was to establish trust with the businesses and governmental agencies that we approached to join in this effort. Working with major battery manufacturers in India, where we are pilot testing the program, has been a bit easier than expected because it was clear that we share common objectives of increasing the supply of raw material (lead) from proper recyclers, and also we are helping to level the playing field among their competitors by raising standards (see http://www.okinternational.org).
The biggest challenge in our case is to extend the partnership to include the major purchasers of lead batteries – the auto industry, solar industry, and computer companies. Their input is essential to the ultimate outcome of our certification effort, but it is difficult for them to see the direct connection between their purchases and the social and environmental impact of the lead poisoning epidemic. This is a case where the connection to their operations is a bit removed. As they see it, lead poisoning is an externality beyond their control. The question is whether they want to take control by requiring environmental certification from their suppliers and in this way act much like individual consumers who buy certified organic, or Fair Trade, or FSC certified wood.
I am open to any suggestions on how to reach out to these companies to join the partnership.
Thanks,
Perry
sjordan - Dec 6, 2004 3:09 pm (# Total: 25) US Chamber of Commerce CCC
Over the past few years, we've been involved in a number of business coalitions that have reached out to different stakeholder groups. From a business perspective, I can share with you some of the things we've learned about how civil society groups engage with business successfully. Here are some of them:
1) learn about the business or businesses you want to work with, what they do, their competitive context, what they'd like to achieve. Not every business is going to be a good candidate to partner with, but there are over 3 million businesses in the U.S. and countless more around the world, so build "coalitions of the willing" first. 2) talk about how your project reflects your potential partner's values and traditions and will make a difference in the community where they do business. 75% of companies cite their traditions and values as the main driver of their civic activities. 3) be willing to listen and assume that the corporate representative you are talking to is a moral human being. 4) have clear, concrete, well-defined goals for the project, and a realistic strategy to achieve them, 5) be confident in bringing your knowledge and expertise and core competencies to the table, and be professional
The nonprofits that have really succeeded in working effectively with our business coalitions have been very competent, very high energy, very focused, and have been "pro-business" in their mentality and attitude.
In terms of wealth creation, we need to re-think our approach to the poor, and start focusing on asset creation, human capital development, infrastructure development, and other platforms that promote productivity -- the beauty of this approach is that all of these ideas are very congenial to long-term business development and to far-sighted business investors.
Regards,
Stephen Jordan
Social Fusion: Going Corporate
Hosted by Amber Nystrom, Janine Firpo, Jeff Hamaoui and Steve Leventhal (August 2005 - Closed)
A top set of innovators from social and corporate camps offer candid perspectives on tapping into the multinational reach of global corporations.
On August 26th Social Fusion, a business incubator for entrepreneurs to grow for-profit and nonprofit businesses that produce sustainable social and environmental impact, presented its fourth Conversations in Social Enterprise session, which is part of a larger six-part series. Social Fusion’s Conversations in Social Enterprise, now in its third year, has a threefold purpose – to build:- Knowledge: by bridging practical lessons from the trenches and strategy in taking on the greatest growth challenges in social enterprise;
- Community / Networks: by building a cross-sector community of business leaders, investors and philanthropists, and social entrepreneurs that are developing leading edge solutions to our toughest social and economic challenges;
- Capital: by facilitating capital and resource flow in social enterprise through a ‘safe’ environment (ie, pitch free!) to engage on issues of substance about how to bridge business and social change.
- “Corporate partnership” – what do we mean by this, and why do we care?
- Who/what type of social enterprise should be thinking about this; what stage?; what about the power imbalance – are some corporations just using this to wipe their conscience clean? Is this a bad thing?
- In extending the “why” of what we’re talking about, let’s dive in deeper about the complex motivations on both sides of the coin: what are the motivations from multi-national corporations’ perspectives, and have these been increasing in recent years with the bad PR, as well as increased focus on BOP?
- What are the opportunities out there for tapping into the reach of multi-national corporations and how do we access them? And very importantly, what are some of the pitfalls, and how do we create a compelling playing field to achieve the highest value-add for both corporations and enterprises?....
- What’s the future hold for “super-sizing good”?
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Audio Taken From Social Fusion Panel Discussion - August 26, 2005 at The World Affairs Council, San Francisco
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Introduction from Amber Nystrom: 
ifpeople - Sep 1, 2005 6:00 am (# Total: 2) ifPeople
Thanks for posting this content - is a great chance to share the conversation for those who could not attend.
I particularly like the question about systems design and wanted to add a comment here about it.
In an enterprise, especially smaller ones where everyone is doing a bit of everything, it can be difficult to keep the flow of information between the strategic, systemic understanding of the business and its context and the practical application in operations. If that circular information flow breaks, then you loose the continuous improvement that is possible through that feedback cycle, and the potential for innovation and success are compromised.
A recent book out that develops a systems-view of business and that shows how you can balance the strategic and operational aspects of business is called The Escher Cycle. I highly recommend this book for those seeking a systems perspective, yet wanting to know immediately how it applies.
The framework presented in this book could also feed into an argument for sustainable enterprise, though the author doesn't do it.
Cheers,
Chris
--
ifPeople - Innovation for People
www.ifpeople.net
stevel - Sep 2, 2005 9:28 am (# Total: 2) Chris,
I appreciate your comments. I've heard of The Escher Cycle, though not read it yet. Your thoughts are well taken, esp in the context of development. In a system where you often have donors far removed from the field thinking the 'big' thoughts, and people on the ground lacking funding, resources, and often any training in strategic planning, the opportunity for disconnect is obviously great. On top of that the lack of technology systems that can facilitate the flow of timely current information and feedback loops to management and field people is also a big issue - particularly in humanitarian crisis contexts in developing countries. Just look at what's happening right now w/ the hurricane crisis, in a country that supposedly has all the resources in place!
Social Fusion: Hybrid Capital and Sustainability
Hosted by Stacey Lawson, Stephen DeBerry, Paul Frankel, Priya Haji and Darian Heyman (August 2005 - Closed)
New leaders in social change are redefining the rules of public good. “Hybrid” models offer a new breed of innovation that unites profits and conscience.
Social Fusion, a business incubator dedicated to making social innovation sustainable, presented the second of two panels on business and capital markets based social change last Friday July 29th at the World Affairs Council in San Francisco. This engaged dialogue focused on “Hybrid” models and how these types of organizations are offering a new breed of innovation that unites profits and conscience. San Francisco is quickly assuming a global leadership role in social investing, where investors and philanthropists are achieving simultaneous financial as well as social benefit returns on investment.
Panelists for the July 29th session “Social Change – for Profit? Hybrid Capital and Sustainability” included top social investors and entrepreneurs recognized for building unique and cutting edge progress in bridging business and social change; each shared breakthroughs as well as hard lessons learned from the trenches.
With over 100 of the Bay Areas leading business, social sector, investment and philanthropic innovators in attendance, Social Fusion’s July 29th session provided a key resource for the growing social entrepreneur community in the Bay Area.
All Conversations in Social Enterprise forums focus on a balanced between practical, hands on explorations and lessons learned; and larger questions of strategy and vision. Questions we (as well as the broader Social Edge audience) would like to continue delving into from our Friday session include:
1] Are we at a Tipping Point? Are we at or near a so-called tipping point in this space, where we are going to see a wave of new market mechanisms, businesses and capital flow that will transform business as we know it?
2] Tradeoffs: Are there necessary trade-offs that exist when we are talking about hybrid captial and sustainability?
3] The role of philanthropy vs. traditional capital: What is the right relationship between philanthropists and investors as we look at bridging the traditional realms of doing good (philanthropy) with doing well (business/financial markets)? Is there a need for “smart subsidies” where philanthropists subsidize some for-profit social enterprise development to address some of our most pressing social, economic and environmental challenges?
4] Ethics: Are there ethical challenges that we need to look at when we look at hybrid entities focused on making the world a better place? If so, what are these issues, and how do we resolve them?
This session is part of a larger, 6-part forum series called Conversations in Social Enterprise that Social Fusion is offering for the 3rd year as part of our commitment to blur the boundaries between philanthropy and business. Together, we are Empowering Entrepreneurs to Change the World.
For more information about Social Fusion’s social enterprise incubation services, and upcoming public programs, please visit the website at http://www.socialfusion.org.
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Audio Taken From Social Fusion Panel Discussion - July 29, 2005 at The World Affairs Council, San Francisco
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stacey_lawson - Aug 2, 2005 3:31 pm (# Total: 25) UC Berkeley
Greetings,
Thank you for participating in the Social Fusion dialogue on Hybrid Capital & Sustainability. At our luncheon on friday, Stephen, Paul, Priya and Darian did a great job outlining the motivations, as well as the opportunities and challenges, for hybrid social ventures. I'd like to continue the dialogue and pose a follow-on question to the Social Edge community:
What is the right relationship between philanthropists and investors as we look at bridging the traditional realms of doing good (philanthropy) with doing well (business/financial markets)? What is the right mix of capital for hybrid ventures? And is there a need for “smart subsidies” where philanthropists subsidize some for-profit social enterprise development to address some of our most pressing social, economic and environmental challenges?
Stephen DeBerry - Aug 2, 2005 6:17 pm (# Total: 25) Omidyar Network
You pose an interesting question about the relationship between philanthropists and investors, Stacey. I have a couple of thoughts:
1) I think the ideal scenario is one in which social good determines profitability for business. Those opportunities do exist today, but they're hard to find since there are so few of them and because the models for this are still emerging. We have a long way to go to get there but I think the idea of having social good drive returns is worth considering.
2) I think it's easy to fall into the trap of allowing descriptive categories to determine our behavior. "Investor" and "Philanthropist" are not mutually exclusive, and if we're serious about the ideas we've been discussing then we ought to hold the two to increasingly similar standards.
This is an exciting time and there's lots of room for innovation in and around the idea of hybrid capital. I look forward to seeing some of the thoughts and questions that others have to share.
SparkPeopleChris - Aug 3, 2005 4:46 pm (# Total: 25) Hi Everyone
I'm with you Stephen, it seems like everyone involved in this movement can sense we're at an exciting time for making a difference in the world!
Something might be happening that is leading to a critical mass on this issue which could then lead to the virtuous cycle of more great minds getting involved. If enough great, passionate minds get involved, the capital seems sure to follow?? (especially if we get good early results)
My favorite part is finding that intersection of a "great business opportunity" with a "great social opportunity". It seems like all the great people involved in this movement will figure out new ways of looking at new places for this intersection to happen.
Right now I'm more excited than ever on this subject because of something my company is working on. We launched the world's first online healthy pregnancy planner in August 2003 - it focuses on pregnancy fitness and nutrition and other health topics (http://babyfit.com)
Several months ago, we decided to make this a free ad-supported site for the reasons talked about here: 1) We realized BabyFit could be the best distribution system ever for consistent pregnancy health information and motivation since our members use our site WAY more than they see their OB - and we have a global audience.
2) There are so many good products surrounding babies that it's a good business opportunity.
Since that decision, BabyFit has grown into one of the largest baby sites in the world with huge growth rates and an incredible reaction from members. Our goal is to make a measurable impact on world health by focusing first on the health of moms-to-be.
Good luck to everyone, together we can do it!
Chris/SparkGuy
Rupert Ayton - Aug 3, 2005 4:59 pm (# Total: 25) Is hybrid capital another name for an investment with a plausible return? Investing has generally become a very opaque process, which has lead to a significant misunderstanding of true returns on investment, and therefore implausible expectations. Certain sophisticated institutional investors are very transparent and not return driven, but operate on such a huge scale that they cannot access social enterprises offering a plausible return on investment. The impediment is the lack of capital market infrastructure serving both institutional investors and social enterprises. I'm oversimplifying to make the point that society needs to examine the financial intermediation process as well as the instruments of finance.
tintin - Aug 3, 2005 5:24 pm (# Total: 25) Increasing the flow of capital to good
I agree, Stephen, that in this early market, categories are not as helpful as they are in other areas; in the dot.com era, since money was flowing so fast, taxonomies and common definitions had huge value. but in this space, where new money is flowing in, but much more slowly, it's kind of like trying to build a flood control plan when you need to do a rain daince. Though I am a single malt drinker, I am finding people are finding a middle ground between giving and traditional investing... a third bucket.. for which they have fewer frames that make sense to their various constituencies, so their actions are ahead of their conceptions. That's what I'm sensing anyway.
tintin - Aug 3, 2005 5:31 pm (# Total: 25) Increasing the flow of capital to good
what does that phrase mean Rupert? that it's plausible that I will get a return? is it different than market rate?
Darian Heyman - Aug 3, 2005 6:01 pm (# Total: 25) Craigslist Foundation
It was truly an honor to sit on such an esteemed panel and I look forward to continuing our dialog on Social Edge. In particular, I'm curious to hear people's thoughts about my notion of American Democracy. As mentioned, it's my belief that today people feel that democracy and capitalism are inextricably bound, when in reality they are two separate philosophies. Democracy, which I believe to be nothing but a good thing, has been overshadowed by capitalism. Not without its virtues (i.e. the meritocracy & the American Dream), Capitalism also carries with it heavy baggage: the Poverty Dilemma. This is the “rich get richer, poor get poorer” quandary we find ourselves when a system is based on the premise that those with the capital get to invest it and potentially exploit those without.
It is my greatest hope that in my lifetime we will see these democracy extricated from capitalism, which will pave the way for capitalism to be salvaged. Those in charge are too smart and too powerful to allow for a full blown revolution, but evolution is inevitable in this age of freer flowing information. Corporations, nonprofits, government agencies & officials and even citizens are being held more accountable; part of this transition is the People demanding responsible behavior from organizations that are intended to serve them.
So what does this all mean, in particular as it relates to philanthropy and social enterprise? The walls between business and service are blurring and what was once a polarized world with corporations on one end and nonprofits on the other is seeing a gravitational pull towards a middle ground, social enterprise. Corporate social responsibility is all the rage and nonprofits are now expected to run with more business savvy.
So where do we go from here?
Mario Oliveros - Aug 3, 2005 8:23 pm (# Total: 25) Unfortunately, I missed the roundtable at the World Affairs Council, but this online discussion allows those of us who were unable to attend to comment on this excellent and timely topic.
I want to comment on three things: 1) the state of what is being called hybrid capital in this discussion and 2) Stephen's previous posting and 3) Darian's previous posting.
1) Hybrid capital, aka social investing, aka other terms is more than a fad... in my humble opinion. However, I feel that it is still emerging, still evolving and very far from the tipping point. In my work in diaspora philanthropy with a Philippines-based NGO called Unlad Kabayan, we are encountering an increasing number of people who bridge philanthropy and investing. Previously, we looked to tap into people who wanted to 'give' and let the private sector handle those who wanted to 'invest.' This is changing, and we are noticing a merging between the two 'areas.' Unlad's challenge / problem is developing the programs and enterprises that can sustain the intersest of social investors and commit them to working in a social investment capacity. We are not there yet, and for this reason, I say that we are far from the tipping point.
2) This leads me to my comment on Stephen's posting, and which is related to my first point. I agree that doing good should determine doing well. However, in addition to doing good, I believe that we need to be able to measure and show return - both in social and economic terms (double bottom line). Herein lies the difference between philanthropy and hybrid models. Our problem in attracting / closing deals with interested social investors is that we are unable to deliver the appropriate measurement or returns.
3) Finally, I apologize that this post is so long, but it is actually the philosophical debates that really get me going. I think Darian hit the nail on the head with his 'extrication' of democracy and capitalism. In my travels and studies, I have had an epiphany in that capitalism is culture-based. What capitalism looks like here is different than how it looks elsewhere, say Asia. Given US global dominance, it might seem that capitalism = American capitalism, but this is not the case.
What does the future hold for capitalism? I am sure there are plenty of opinions, and will leave it to those with greater knowledge than I. But I will say that I doubt capitalism will look the same in the future. My personal hope is that it will continue in a way that leaves fewer behind.
priya haji - Aug 3, 2005 9:48 pm (# Total: 25) Co-founder and CEO, World of Good
There are fruits and there are vegetables - and then there are tomatoes . . .
This is a great analogy for the hybrid space. There are two clearly defined sectors and their behavior is transparent and historically clear. Social-benefit-focused organizations operate to maximize the public good for every dollar they recieve (non-profits), and then the financial-return- focused companies maximize the economic return for every dollar they recieve (for-profits). Now - there are the tomatoes - they are concerned with both the social return and the public good.
The problem that I see is that because this blended space is emerging sometimes the fruits wish they could be vegetables and the vegetables want to be fruits. But there are really only a few tomatoes.
As we grow the sector - we have to all learn to recognize when our ideas best fit in one mode of maximization and should attract a particular type of capital, and when it it truly a blended value proposition. There is still alot of fog, on the capital level, and the entreprenuer's level - and this is critical to continue to clarify.
Claude Rallins - Aug 3, 2005 11:29 pm (# Total: 25) In this line of work, where the magnitude of the world's social problems dwarfs our collective efforts (profit, nonprofit, and hybrid) to do social good, perhaps we all have to be a least a little nuts.
A question that came to mind has I listened to the audio was... are there any "bootstrap" social entrepreneurs that have become rich, financially, exclusively as a result of their social-ent. business? And, if so what business model did s/he apply?
If there are some, or even one, then perhaps we are not nuts. But more to the point... such a role model/example would be an inspiration to others considering this line of work, as well as, of course, for those of us that are already on the path. Such an example would also best answer the "sustainability", and "hybrid capitol" questions.
KUDOS to Social Edge for making the audio content available! It is also very well structured, and presented (Vaz) --serving both poor and rich bandwidth computers, in a virtually universal format. I ate the whole thing, and loved every byte!
Rachel Elliott - Aug 4, 2005 1:15 am (# Total: 25) Ibstock Community Enterprises Ltd
Hi
You might like to look at http://www.adventurecapitalfund.org.uk. I accept its not true venture capital as it comes from the Government, but they are trying to do things differently. It is also the closest we are getting to taking Social Return on Investment seriously and trying to measure it.
We had some patient capital for our managed workspace project www.project57.org.uk but it was early days and I think we have a long way to go with these explorations.
I am currently working on a new project that I think would be a good candidate for some hybrid capital as it has both environmental and social potential. My main issues at the moment are devising an appropriate legal form that would allow us to make return on the investments and I know that things are different over there but any thoughts around this would be welcome. As a result of Enron (and other scandals) the legislation for our type of organisation is concentrating on 'locking in assets' rather than exploring alternatives about returns on investment. Consequently, at the moment over here, we seem to be stuck with loan finance as the only real alternative, unless I've missed something.
Regards
Rachel
m.i.zuberi - Aug 4, 2005 1:52 am (# Total: 25) university of rajshahi
Dear Stacey,
This is a very appropriate approach for the less developed countries, specially for poverty alleviation and sustainable development. Also it will be a 'test' for the 'hybrid' system in a different socio-economic background.
There are willing people to try but we need collaborators and capital for doing it.
Is there any one in the Socialedge to show us the path ?
M.I.Zuberi, University of Rajshahi, Bangladesh
mfidelman - Aug 4, 2005 3:01 am (# Total: 25) Center for Civic Networking
One source of capital that isn't often talked about is "program related investment" - where a foundation invests some of its endowment in an organization that is in line with the foundation's mission. As I understand the rules in the US, a foundation is allowed to invest a portion of its endowment, at below-market rates, if there is a mission-oriented reason for doing so.
I've seen it more often in the form of below-market-rate loans to non-profits - rather than equity investments.
I'd be interested to know if any foundation people on this list have experience with program-related investments that they'd be willing to share.
mfidelman - Aug 4, 2005 3:04 am (# Total: 25) Center for Civic Networking
EDCs, CDCs (community development corps) and various loan/grant programs by local governments seem to be pretty common sources of capital for projects with locally-focused economic development goals.
In these cases, the capital isn't seeking socially motivated businesses to invest in - the creation/support of a local economic base is the mission in its own right.
mfidelman - Aug 4, 2005 3:05 am (# Total: 25) Center for Civic Networking
Until its recent problems, the Catholic Church seems to have done very well for itself by investing in real-estate - and particularly in affordable housing projects that had tax breaks associated with them.
ChrisCook - Aug 4, 2005 3:18 am (# Total: 25) Hi
Just some reassurance to Rachel Elliott- in fact loan capital is not the only option for a Social Enterprise.
You can share revenues through "Co-owning" an asset as a member of a "new" UK LLP in a "Capital Partnership" - the other member being an Investor/Capital Partner. The Hilton group did just this a couple of years ago in a £350m deal.
With a bit of imagination you could proobably do the same in the US with LLC's and an unlimited US partnership.
See
http://www.opencapital.net/papers/LLPRegenarticle.pdf
and
http://www.opencapital.net/papers/Cook-BJGP-0412.pdf
and recently
http://www.opencapital.net/papers/co-ownership.pdf
in connection with which I made a presentation to UK MP's the week before last.
Essentially our Government has (accidentally and for entirely the wrong reasons) come up with a new - and probably optimal -corporate form which is neither "For Profit" nor "Not for Profit" but rather "For the mutual profit of member stakeholders" - which to me would be a good definition of "Social Enterprise".
Scots "get" this - it's in the same space as their "Not Proven" verdict - as opposed to "Guilty"/ "Not Guilty". No disrespect to our hosts, but I have yet to meet a US citizen who has transcended the "absolute" property rights inherent in their legal structures and got their head around the hybrid I am describing: I guess I just don't explain it well enough.
We are looking at a new form of "hybrid" Financial Capital here.
I call it "Open" Capital - hence my site www.opencapital.net but the Iranians (and Bangladeshi's, Mr Zuberi) consider it "Islamic" in the way that debt and interest are not involved and one or two Chinese I have discussed it with see it as "People's" Capital because it is neither "State" ownership nor "Private" ownership but ownership "in Common".
If you want some help structuring what you want to do, just contact me off-line on cojock@hotmail.com
Best Regards
Chris Cook
JessicaMargolin - Aug 4, 2005 3:49 pm (# Total: 25) Darian, you are speaking the truth.
Capitalism can only work if everything is valued accurately, and we're very far from it right now. I think there's momentum for re-evaluation of financial valuation, e.g. of knowledge assets, where a lot of work has been done, but obviously a lot is left to do.
But if I'm a publicly traded company, there's not really a way to incorporate the fact (if it's even explicitly known at all) that people who work for me are relatively healthier, happier, their children do better in school, and their interpersonal relationships are more positive; my financials might show that I have an unusually high headcount for my industry.
That makes me look like I'm being irresponsible as a fiduciary. That's bad.
Similarly on the economic side, natural resources of course aren't accurately valued either.
Personally I think social entrepreneurism is fantastic, I feel all this movement is great. However I think that ultimately capitalism will have to evolve, and with it there will be changes in reporting requirements which will pull different kinds of corporate decisions.
Interestingly, a lot of the research in this area is out of Scandinavia, which of course is an area that is capitalistic but with a strong reputation of social responsibility.
JessicaMargolin - Aug 4, 2005 3:59 pm (# Total: 25) Someone last Friday raised the question "What do you do if you're regionally relevant but you aren't scalable?"
Every now and them someone runs around and compiles a "Best Practices," (though in my opinion they're often so poorly segmented as to be useless) and that's the extent of how those successful entities propagate: it's word of mouth, sometimes facilitated word of mouth, but not awfully efficient, and there's a "telephone" effect in the replicability even when the environment is sufficiently similar.
So, is there a way to take the regionally successful program, delineate its differentiating criteria, package it, hire a team, create "McMission-Driven" University, and roll it out this way in such a way that it would work for the social investment community?
Paul Frankel - Aug 4, 2005 4:38 pm (# Total: 25) Ecosa Capital
Hi All -
A few scattered thoughts and quotes I'd like to share with you...
There is also little availability of mid-term, medium risk structured investment opportunities to round out either an investor’s diversified portfolio or a sustainable company’s sources of capital. This problem has at least three causes:
First, traditional lenders want to focus on significantly larger deals in order to achieve economies of scale. A portfolio of numerous small loans to smaller companies typically entails greater management oversight and has associated with it greater monitoring costs than a portfolio consisting of a few large loans to larger companies. As a result, small loans are less attractive for large institutions burdened by sizable administrative overhead. In the banking industry, in particular, consolidation over the last decade has increased the size, and reduced the number, of surviving banks. The surviving institutions have sought to limit their credit exposure to, and the monitoring costs associated with loans to, smaller businesses. In addition, traditional lending institutions operate in a regulatory environment that favors lending to large, established businesses. Over time, many traditional lending institutions have developed loan approval processes in response to such regulation that conflict with the entrepreneurial culture of smaller, green companies. Because the financial needs of many sustainable firms fall below the deal-size threshold for traditional lenders, green companies’ needs are not met in the existing financial services market.
Secondly, there is a deeply held belief on the part of the traditional financial community that green businesses are inherently more risky and less profitable than their non-green counterparts. While this belief is not based on any analysis of facts, businesses in sustainable segments of known markets and industries are viewed as outside the target markets for most capital providers. Any investment or lending activities to sustainable businesses is typically believed to be non-core and is associated with high opportunity costs, thus representing a significant barrier to the flow of capital to green businesses.
Thirdly, traditional debt sources are currently not able to readily liquidate green firms’ collateral. This makes these companies difficult to evaluate using traditional lending criteria and, to the extent that creditors seek collateral, makes the process of perfecting liens on, and foreclosing on, collateral more difficult than would be the case with loans to industrial companies. As a means of compensating for this perceived risk, lending institutions often under fund or overprice a firms’ financing requirements. As a result, sustainable businesses are often left in need of supplemental financing.
For these reasons, I believe that many viable sustainable companies have difficulty obtaining the complete financing amount or reasonable terms from traditional lending institutions. What are your thoughts? I have several other notions I'd like to share on this and related topics mentioned by the above contributors, and will post again shortly. For now, I'll leave you with a quote from The Soul of Capitalism, written by William Greider,
http://www.thenation.com/doc.mhtml?i=20030929&c=1&s=greider
"The challenge of financing innovative startup firms that are willing to accept more ambitious social commitments in exchange for patient capital [is difficult]. Given the extraordinary variety of hybridized financial instruments that Wall Street devises, the potential for elaborating specialized interventions is vast but largely unknown. Conceivably, for instance, environmentalists could organize targeted capital investments in major corporations to provide financing for