The mobile phone has changed everything.

I first worked in Zambia in 2005 with Engineers Without Borders, a Canadian volunteer organization. At the time, mobile phones were just becoming popular, but reception was terrible. Fast forward seven years – the roads are still full of potholes but at least now I can have a weekly video skype call with my family back in Canada.

My name is Mike Quinn and I’m CEO of a start-up business in Lusaka called Mobile Transactions. We are on a mission to turn Africa cashless by connecting organizations of all sizes to the mass market using mobile technology and a country-wide agent network. Our products and services include money transfers, social cash transfers and voucher subsidies, microfinance loan disbursements, and salary payments via mobile phones.

I’ve lived in Zambia for a total of three years, where I’ve transitioned from an idealist development worker, to a social entrepreneur, to simply an entrepreneur with a good conscience. While at Oxford as an MBA Skoll Scholar in 2008, I used to get caught up in the “entrepreneur vs. social entrepreneur” debate, but the reality is running a good business in Africa is challenging enough.

• Can the mobile phone help Africa to become cashless just like the debit and credit card did in the Western world?
• Will change happen faster by targeting individual consumers, such as the M-Pesa model in Kenya, or by providing mobile payment solutions to corporate, donor, and government clients?
• And perhaps most importantly, can a Zambian start-up win?

I know, I know: This is a community about Social Entrepreneurship (check out my posts from the 2008 Skoll World Forum). But since joining a big tech company, I’ve also become smitten with Social INtranpreneurship, the idea that change agents inside corporations are a key part of the social change equation, too.

• This crew of still-newly-minted MBAs is fairly well-versed in social entrepreneurship (82% have some degree of familiarity; 30% are ‘very familiar’) – yes, there is some truth to Berkeley stereotypes—but only 3 in 10 are fluent in social intrapreneurship (at least branded as such).
• Three-fourths think it’s ‘Difficult’ or ‘Very Difficult’ to drive any major change in their organizations (whether of the social/environmental variety or not). And there seems to be an inverse relationship between the belief one can become a social intrapreneur and the size of his/her organization.
• With respect to how to do so, skills cited include influence without authority, building an expansive and diverse social network within the firm, vision (articulating what’s right for the long-term, not just short-term penny-pinching), and uncompromising belief. Oh, and ‘extreme attractiveness.’ Which of course can’t hurt.
• There’s also a healthy skepticism of embarking upon such initiatives without solid footing: 8 out of 10 say it would take more than a year to successfully do so, and 43% think the sweet spot is in the 2-4 year mark. One classmate noted that ‘a social intrapreneur must be happy with small changes that add up to turning a large ship around over a 5+ year period.’ This probably has something to do with the time it takes to forge relationships: Only 13% say they have strong ones outside their core teams.

• Being ‘multi-lingual’ is key to the social intrapreneur’s ability to rally support across the organization. One must be able to speak the language of sustainability and responsibility but also make a clear business case. You know, ROI and all that. Otherwise most new ideas, even if they’re great, are dead upon arrival.
• Securing senior sponsorship is critical. At my company, for example, I’ve seen the way our head of Marketing beams when she talks about our foundation’s work with low-income youth. It has become a matter of personal passion for her, and you get the sense that she’ll do everything in her power to make sure it remains an organizational priority.

• Social ENtrepreneurs vs INtrapreneurs – clever wordplay, to be sure, but ultimately aren’t they all just change agents operating within a larger system? Does the distinction really matter? Would the best ‘SE’s be similarly infectious and effective if you plopped them inside a big company?
• Is the skill set really all that different? In particular, what about willingness to accept incremental change? Every SE I’ve known has not exactly been lacking in a sense of urgency.
• Are you fundamentally rosy or skeptical about the role of business in catalyzing positive societal and environmental change – or at least not making things any worse? Come on, people, show your true Milton Friedman colors…

Protecting Your Mission: The best legal structure

This discussion board recently hosted a discussion about hybrid non-profit/for-profit structures (The Social and Commercial Two Step). Much of that weighty discussion focused on managing where start-up capital and ongoing revenue come from.

Today I’d like to introduce a different slant on the question of what legal structures best foster social ventures. Specifically, when launching a new venture, what is the best way to protect the mission?

Social entrepreneurs tend to have strong feelings on this subject. They see themselves as the “Keepers of the Flame” who hold the vision for the venture close and who are responsible for protecting mission. But great things are rarely done by lone individuals alone. Rather they take partners, funders, investors, customers, and countless others.

Fans of for-profits like them because they can own them. “I’m the founder. It’s my company and I’ll make sure we always do what’s right.” This simple idea is certainly appealing, but as a venture grows the founder usually needs to bring in investors who now own their share of the company. Market forces and the need to turn a profit can also force decisions down the line that a founder never dreamed of making. Finally, it can be hard to resist when some big conglomerate comes knocking at the door with a multi-million dollar buyout offer, especially if you have investors to consider.

Others see non-profits as the way to go precisely because nobody owns them. We create them explicitly to serve some social purpose. Another simple and appealing idea, but as anyone who has ever been involved in fundraising knows, keeping to a clear narrow mission when someone else is paying the bills can be hard. Boards change, what’s hot this season might be passé next year.

And finally, whether you start a non-profit or a for-profit you will have to think about your exit strategy. Yes, someday you will leave your venture, whether it is from a huge buyout that makes you rich, a messenger from G-d calling you home, or just knowing that it is time to move on.

So here are some questions to get us started:

1. What is the best legal structure for protecting your mission?
2. Besides standard non-profits and for-profit entities, what kind of legal tools and structures can social entrepreneurs use to protect their mission?
3. How can social entrepreneurs make sure their mission is followed when they are gone?
4. Do we need a new structure that reflects the new reality of social and commercial missions blending?

Join Joy Anderson, Elizabeth McCance and Jackie VanderBrug, with Criterion Ventures, in the conversation.

Are dual structures the best way to do this dance?

The desire to combine social and commercial in the pursuit of an outcome has led to creative ways to structure an enterprise—often known as a hybrid model or dual structure, because it combines a nonprofit arm with a for-profit arm. The for-profit allows an enterprise to facilitate investment, while the nonprofit can facilitate grant capital and provide non profit-making services to a community.

While hybrid structures are innovative, they are, in essence, stopgap measures to get around the fact that in most countries, there is no legal label that meets the needs of an entity that exists to provide social good and yet makes a profit. 

However, the legal system is catching up in some countries: Community Interest Companies (CIC) in the UK enable a proprietor to run a business for the benefit of the community rather than for the benefit of the owners of the company. In the US, a few states have adopted a low profit, limited liability company status or l3c, which is unique because it lets companies facilitate investments while simplifying compliance with IRS rules for PRIs (Program Related Investments). There’s also the B Corp movement, which has no legal ramifications yet (except in Philadelphia!), but serves as a “trustmark” and signifies social responsibility to customers. 

While the US and UK are on the cutting edge of the blended value business space, most countries have to work with what they’ve got. As a result, more and more entrepreneurs are choosing to launch both a nonprofit and a for-profit to get the best of both models. But this choice is not without its challenges, including questions about branding, positioning to investors and donors, competing work cultures between the for-profit and nonprofit, transparency, and more.   

We’d like to explore elements of hybrid ventures with you over the next few weeks, and have posed the following questions.    

• Is splitting a venture into for-profit and non-profit actually just a crafty way of getting around the fact that your venture is NOT economically self-sufficient?
• Is it truly possible for a profit-making company to separate itself from its nonprofit counterpart?
• Might it be better from a transparency standpoint as well as a community-building standpoint to find an NGO partner with a similar mission that is unaffiliated with your company?
• Where do cooperative business structures fit into this system?

And, here’s the biggie, the elephant in the room, about hybrid legal forms:

• Could the creation of new legal structures actually slow down real large-scale change in mainstream business? Does a new structure—take the l3c for example—take away the incentive for large corporations to change the way they work?

Join Lindsay Clinton, with Intellecap in Mumbai, in the conversation.

What does it mean to seed innovation –to help a community or a sector create new solutions?
 
In the Ripple Effect project, seeding innovation means supporting motivated organizations to experiment, learn, iterate, and scale new strategies and offerings in the water sector.  Ripple Effect is a collaboration between IDEO, Acumen Fund, and prominent water organizations in India and Kenya, funded by the Gates Foundation.
 
This project focuses on the often-overlooked areas of water transport and storage – that is, increasing accessibility to safe water, reducing the time and effort to collect water, and reducing contamination.  The water organizations include social enterprises and non-profits in diverse areas of India and Kenya. Some purify and sell water, others focus on household water treatment; some favor technological solutions, others focus on awareness-building and community activism.

With such a range of organizations, we feel that it is critical not to standardize but to help each organization innovate according to their own strategy and approach. The Ripple Effect collaboration includes funding, business support, and sharing IDEO’s Human-Centered Design innovation process (which can be applied to designing new products, services, businesses, and systems).

Ripple Effect is a new model for impact, and we’re embracing the opportunity to learn and share with others.
 
Let’s discuss innovation approaches that work: from principles for successful collaboration to the nuanced examples that come through specific projects and experiences. I’m thrilled to be able to discuss these issues with such a diverse community of thinkers and practitioners.
 
Some questions to get the conversation started:

• What elements are important to seeding innovation? What makes innovations “stick”?

• What types of support do organizations value most—is it funding & resources, new ideas, structures & processes, collaboration, competition. Something else?
• How can you seed innovation in a way that meets both your goals and the goals of the organizations that you are working with? Does a funder get to choose, or the implementer? What kind of negotiation might take place?

Join IDEO’s Sally Madsen in the conversation. Be innovative!

• Mapping for Justice: Invest in Mentoring, not Guns!
• Tutor/Mentor Connection Map Gallery
• Tutor/Mentor Connection Program Locator
  

• How can you take this method -- in the first instance, Dan's use of geographic maps -- and tweak it so as to apply it to your own situation, social enterprise or area of passionate concern?
• What nearby local services could usefully be mapped alongside yours?
• What other social concerns (health, education, food, water, online) are relevant in the community you serve?
• Which of them could use local mapping, and perhaps share resource development with you?
• What other factors (poverty, crime, potential funders) could usefully be mapped in your area?
• What challenges could you make to churches, industry groups, etc to "fill the map" with stars (donations, services, etc) in a given year?
• Who do you know (locally, globally) who might benefit from reading about these mapping techniques, applying them in their own situation and/or joining our conversation here?

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...