Social Ventures in the Competitive Business World

While the compettion lesson was the one that jumped out at me from a number of the cases, the book contains many other lessons. Each case had a number of lessons to teach, all valuable. Jerr has assembled a collection of SE cases that can help answer most questions about launching an enterprise, profit or non profit. I can't recommend this book too much.

I have to admit, working in the for-profit world for several decades that I wasn't much of a businessman, if that meant being brutal. Sure, I saw plenty of stunts being pulled, but the living I earned was adequate, I had loyal customers who valued the product and service on offer.

When we turned that business into a revenue generator for a social mission it was rather a different matter. We were after all, focussing our efforts in a part of the world where corruption and violence were synonymous with both business and government and my mentor was telling me that "lifting up the rock and shining a flashlight was guaranteed to send the insects scurrying". Reckless as it seemed, he managed to survive it, all I had to do was keep the revenue flow going.

My customers don't even know they're contributing to a social business. They get the service they always had, so why should they need to? Besides, there would be complications - how could I tell the defence industry they were funding an effort to oppose them, or a major finance institution that we were campaigning against their kind of capitalism.

We'd said from the outset that it didn't matter how a business deployed its profit, we can do what we want without their consent and legally. But now, when it comes to social enterprise and hypocrisy, the advocates who don't walk the walk or shirk paying for what they've been supplied, I know, they've recently discovered a born again rotweiller.

Welcome back Jeff, Did your experience lead to any advice you could give others starting in this path? It seems that competition is the norm whether or not your customers or suppliers know that your are running an SE organization - your competitors are just doing everything they can to maximize their revenues and profits, regardless of your status. One of the lessons that some SE's learn is that when they try to venture into the competitive marketplace as a NPO, they face pressure on government from businesses to ban them, based on the argument that they have an unfair businesses advantage in that they don't pay taxes. Any thoughts on that argument?

Perhaps Patrick. As a business before converting to a social enterprise we had a product based on an original idea, enhanced it and made it stable over 20 years. We weren't good at marketing so the customer base remained relatively small but we did have loyalty. For instance, one major corporate customer who've run the same version for the last 13 years. Several times there's been both internal and external pressure to replace it, that's the nature of business, but in this case every time, the user had the final word and what they were offered couldn't do what they already had. On the other hands there are those who do, who ironically themselves advocate social enterprise. In a recent case an MBA school, teaching it.

As a social business, we are totally off radar. Taking a form recognised by our Department of Trade and industry, a conventional business contributing more than 50% of profit to community purpose. That means we pay taxes and because of the way we're doing it, there's no tax deduction for the social investment, simply a business overhead. Like any new business startup, we're prepared to forego personal income to get up to speed, minimise our expenditure on adminstration and infrastructure and wear many hats.

Our unfair advantage, if we have one, is being able to deliver with low overheads using a legacy software application.

Patrick, this blog is timely and I’m glad someone raised this very issue. I’ve often thought that npo’s are a bit naïve as they enter into competition for the same market share that for-profit companies operate in.

My background… I won the Terminator award from the Windows Marketing Team, a battery-powered water machine gun. Gives you an idea how brutally competitive the software business is. That said, I have to say that I was able to stick to my ethical standards. My managers knew that if I were asked to violate my own ethics, my productivity would plummet – so luckily I wasn’t asked to do anything remotely shady. That said, everyone has a different ethical standard. As my VP used to say, business marketing is very gray. Yes, but which shade of gray is right for you?

As I start my own social entrepreneurial organization and scout/interview for talent… I’ve posed ethical scenarios to potential employees. And it’s quite enlightening… who will stick to “their” ethical code when posed a difficult scenario? And then, will they change positions when I say… ok – you’re no longer just an employee but now the Sr.VP responsible for the payroll of 5,000. You believe that your core business is at risk … will you stick to your code or violate it? And some will change positions. I hope I won’t be one – but who knows?

I’ve spent the last 12 years as a minister/social worker – I’ve forgotten how to compete! Ministry for me was all about making the other person look good, the other person succeed. So now, I’m having to re-learn my competitive instincts (I’ve joined a lot of sports teams lately) and thinking hard about the tough calls for me… if I knew my competitors were engaging in foul play – that perhaps it’s even a norm in the industry – well, then how do I build/define a competitive advantage that balances the risk I impose on my organization by sticking to some pretty high ethical standards?

In the book Good to Great and the Social Sector, Jim Collins illustrates that the path to building a great organization is similar for for profit and non profit organizations.

As is pointed out often in this forum, some of the challenges, such as access to capital are different.

I think traditional non profits that depend soley on donations, and those that are becoming social entrepreneurs who generate revenue from activities to sustain their efforts, compete with each other and business in more areas than money.

Maybe one of the most significant of these is the competition for public attention, and the competition for the time a prospective donor and/or vounteer has to spend learning about your organization or its products and services.

I feel that many non profits have very little understanding of how to market themselves, and how they must be marketing themselves in many ways and every day, in order to capture a share of this attention market.

Those who learn to do this well are probably more successful in building their businesses, regardles of the legal structure (non profit, vs for profit).

Daniel makes a good point. NPO's often do a poor marketing job and think there may be a systemic reason for this. Foundations and donors are interested in program outputs - what service are you going to provide to these people who need it and how many can you get to in a given time period. The assumption is that because NPOs are working with people who often cannot pay and hence will automatically que up for something that is free, marekting is no necessary. Additonally, marketing is associated with adversing and with consumerism - both seen as negative influences in our society by donors and folks in the NPO sector. Therefore, NPO staff sesldom think about marketing and donors seldom fund it.

While this may work in the NPO-service-to-the-poor/protect- (insert subject)-world, it does not work in the competitive buy- my-product/service-world. For-profits have honed marketing to a fine art because they have learned that good marketing will beat a good product any day (see Betamax, Apple computers, etc.). Both NPO entrepreneurs and donors need to understand that if they are going to play in this field, marketing is probably the most powerful and most necessary tool in your box.

That is a tough question. Often you don't even know that you are being fouled. A competitor's slaes force may be quietly undermining your product in meetings with your customers, and you will never know about it. Or a competitor is giving under the table kick-backs to buyers - again you may nver know about it. What you do depends on your business model, your staffing and the nature of the market you are competing in, but here are some ideas (these are NOT legal advice!!) 1. Stay in touch with your customers. Always. Sounds trite, but many businesses - both NPO and FPO - don't do it. If you have a sales force, train them to ask questions beyond the sales pitch and to really, really listen to the answers. And then record those answers and be sure upper management (you!!) see them.

1. If you don't have a sales force, use free tools like zoomerang or surveymonkey to query your customers. If you are selling a product, pack it with a self-addressed, postpaid response card and ask people if they would like to call and let you kow what they think of your product.
2. If you operate a service or do repairs, train your staff to ask questions beyond the business at hand when they are in the field - especially questions about your competitors - and record the asnwers.
3. If you operate a service like an employment agency, do post-placement internviews with your customers to determine whey they picked your person over another service's offering. Ask them about the competition.

What do you do if your competitors are playing dirty. Depends on the competitor and the dirt, but:

1. Call them out on it. If you have evidence that you are being maligned by your competitor's staff or sales force, send letters to your customers let them know that competior XYZ is telling them untruths and inviting them to call you or your staff for the facts. Also, there is nothing stopping you from calling the CEO of the offending firm and telling him/her to stop it. In extreme cases, you can resort to the courts, but that is expensive and may not be possible unless your lawyer will take a case on spec.
2. Kickbacks etc. are illegal and you can report them to your state attorney general or other regulatory body.
3. Match them. If you need to temporarily sell under cost to preserve your customers, you may have to do it for a while. It beats going out of business. But, make sure you don't run afoul of any "dumping" laws.

In general, identify the behavior being used against you, determine if it is illegal, unfair or just realy tough competition, and respond accordingly. And always, keep close to your customers.

It could be worse Patrick, both on the revenue creating end and the social objective.

For example, an outsourced IT provider who doctored an exchange of email to make it look like I'd ignored the customers needs rather than their demands for tribute. As it happened to be a government department publically pledging support for social enterprise, I raised a complaint through official channels, but it did no good, not yet at least.

Then there's the politically motivated detractor, who spent the best part of a year conducting a smear campaign on the web. That didn't work for him, but he may have given us a hand with publicity. Others who malign because profit for purpose is an alien concept so it must be fraudulent. Some who just feel threatened on their own territory.

That's before I even think about our founder getting drugged and incarcerated by the Russian FSB or having been denied a visa for not paying bribes.

If anything, the social purpose side seems to be worse, at least in a democratic country one doesn't have to face these kind of things in day to day trading.

Jeff

About a year ago an online tabloid, and a bored blogger decided to tarnish our image and name of our upcoming organization. One of the founders at the time was responsible for putting together the website, had no IT skills. It was a program that let you build your website. We had at the time about 300 members, and some of them happened to be models. So this tabloid decides to write an article slandering our organization and featured a blogger who further slammed our organization, followed by another organization The Suicide Girls to slam us some more! At the time we werent an official organization. They took content from our site and distorted it into something else. They cut and pieced together bits and pieces to make us appear as if we only accepted one kind of women. They posted copyrighted pictures of members who were models and placed them on multiple sites.

At first, because we were just an idea at the time felt that we couldnt do much. I sent a letter for them to take down the photos or face lawsuits. We lost a great deal of our members, not to mention we had a hard time recruiting volunteers because they read the articles. When you do a search on our name, there sites are the first two to come up.

Months later, I wondered why they attacked our organization out of the many that were out there, and found out some startling information. The editor and blogger were both members of an organization called The Suicide Girls. The Suicide Girls is a womens membership organization.

We would become there competitors and since we were new they wanted to take us out. It didnt work.

What we did, was close the website down and posted simple information. We reached out to our members and some of them are aware of the reputation the tabloid has. Before we launch which will be at the beginning of next year, we will have Cease and Desist to established our tarnished image.

Did I mention Suicide Girls is for profit? What they did to use was brutal and unfair, and illegal. It remains a pain in our side, however we knew we were doing something right and that was capturing market attention, by using the internet, forums, womens associations and groups to spread the word about our organizaion.

Marketing is not evil. Its the people behind the marketing that is bad. We will continue to do what we do.

That is the first case of pre-emptive competition of I have heard of, and it didn't come from the private sector. Is the lesson here tht we all have to watch our backs, regardless of our legal status. Too bad.

Something I now find a little ironic in my experience of being tarnished was the part Google played in helping us. Knowing the identity of our detractor, in an attempt to fend him off, I published his identity. He complained to Google and they removed it. I also complained to Google about the defamation and they made no response, allowing him to continue. As he lost all credibility in the end, I can honestly say that Google helped me in a rather inverted way, by letting him make a fool of himself on a global basis.

Can't figure why Google at least, didn't understand us, they are after all promoting a for-profit charity and they DO have a search engine, I believe.....

On this, I think I can offer some advice. Several times in my past, there've been moments in a strange place where I've suddenly become aware that whatever reputation I may have gained in my past wasn't transportable. I'd be challenged, at first slightly offended, yet coming round to realise that these were people who knew me not.

So in cyberspace, where everyone can hear you scream, you may still be alone. It helps to bear in mind the the words Shakespeare offered on the subject - This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man.

But you do have a reputation, with an indelible image of everything you've said, maintained consistently and re-iterated, perhaps for more than a decade. Your detractor on the other hand, conceals himself behind many aliases, poaches identities and launches into accusations about avery aspect of your being. He claims the support of an influential group, backed by lawyers and he mistakes your apparent isolation as a vulnerability. He becomes arrogant, assuming the upper hand throwing out threats of legal action to your counter-punches.

He has lost, utterly and completely. You simply advertise his work, saying "hey folks come look at my biographer" His rage and subsequent efforts to conceal himself provide a trail of evidence that actually identifies him.

You have the upper hand because he's underestimated you, and hasn't reckoned on the power of reputation.

worse than on Wll Street or Main St. But your point about the alien cncept is well-taken. Although I notice that pastors are "competing for souls" with one another, including slick marketing campaigns, so it depends n what part of the NPO community you are talking about; in some parts it is not so alien.

On the question of: How do you balance the needs of cost-containment and market retention with your values?

Here's a real-life for-profit scenario I learned from the Pepsico Intl CEO. During the apartheid years, PepsiCo made the choice of pulling out of South Africa. When they did go back in post-apartheid, they were never able to re-gain that market. Coke had made too much of a headway.

Talk about putting market retention and your corporate values to the test!

I suspect that there was another aspect of the Coke-Pepsi case. While I do commend Pepsi for pulling out of SA, and condemn Coke for not doing so, I suspect that even if both of htem had pulled out and re-entered at the same time, Coke would have still beat Pepsi in regaining market share. I say this because Coke's marketing machine has for years been far superior to Pepsi's. One of my allies in teh global video campaigns I produced for the UN conferences on teh Environment and Population and Development in the '90's was the Director of Global Advertising Research for Coke, Dick Halpern, now retired. Watching Dick gather and deploy information was a treat - he was light years ahead of Pepsi on both understnding the marketplace and the shape of messages needed to sell suger water. He had lived all over the world and knew the countries he was sellingin. Interestingly enough, Dick is a lifelong Progressive and served on the Boards of the ACLU and Amnesty International.

Howeer, hats off to Pepsi in any case.

In WWII, the Coca-Cola machine could not sell coke syrup to Nazi Germany, so the brand Fanta was invented by Coca-Cola bottler to serve Nazi Germany, while they had Coke for the Allied troops. Everytime I see the Fanata commercial, I see Nazi Germany...

Coke was able to instantly boot-up, after the end of WWII.

As for Pepsi pulling out of South Africa, there was a mass boycot of Pepsi before Pepsi pulled out. If there was no boycot, Pepsi would still be there. Pepsi was losing sales in the USA and they pulled out as a financial move, not as a moral decision. The question we should be asking is: why was Pepsi and Coke there in the first place $$$$ is the answer.

As for the evaluation of Green Businesses ----------------------------------------

We are setting up North America's first social stock exchange connected to a green social network, called the Green Stock Exchange (GREENSX) at: http://greensx.com, which will be launched in the Summer of 2008 to begin trading. It will trade shares in social businesses. A social business is a business that makes a profit, but benefits society as well. We have a triple bottom line (economic + social + environmental).

Since all the listed companies on the exchange are pre-screened, evaluated, and audited according to social and sustainable guidelines set by the exchange, it will make it much easier for green investors to find and support social businesses. The GREENSX provides opportunities for small green Issuers to access public equity capital efficiently, while providing early stage investors, angel investors, and venture capitalists with greater liquidity. This includes a eBAY.com trading system for carbon credits.

It is still in the beta stage testing. Check it out at: http://greensx.com.

Ch. 4 of the Perfect Store begins with the story of how Ebay beat its competitors Auction Universe & Onsale Exchange. At the time Onsale was the leader in online auctions. It also sent "bots" or automated data harvesting devices, crawling across Ebay's site to steal the same users' email addresses eBay had declined to sell. Ebay did what you suggested - sent a letter to the CEO of Onsale (Kaplan) to desist. But the bots kept coming. There's even a story of Kaplan's fiancee posing as AuctionGal on eBay cafe to promote Onsale. On finding out the truth, Ebay's engineers decide to virtually paddle her.

What I want to know...

When Jeff sets up the war room with bazookas, military helmets and dog tags -

Where's the line of ethics that Ebay drew for itself?

It's ironic that I'm posing this question as I'm partially responsible for pulling down Kaplan's prior company. I'm the unnamed figure in Kaplan's chapter "War" of his book Startup.

So - in a state of war, what's fair play?

That's our tag nowadays Clara, so no war for me! But to illustrate what was at stake, here's what prompted the campaign against our human rights advocacy:

http://eng.maidanua.org/node/581

Should we draw the line at illegal acts? If the representatiave government (US, here) has determined that a competitive act should be outlawed, then that is where the line is drawn. But....

let's face it, the representatiave government of this country is owned and operated by by a variety of corporate and commercial interests who write the laws and (mostly legally) bribe Members of Congress to pass them and the President to sign them. So, refraining from illegal acts, means in many ways that you are falling in line with the special interests who write those laws to protect their profits - and as we all saw in "The Corporation" corporations are amoral and by charter and structure operate as social psycopaths (I am sure I will get mail on that one!). Which is why we need socially responsible companies and ethical guidelines.

So where do we draw the line on competition. How about: - no lies - no secret deals or under the table cash - no false undercutting competitors or their products - no stealing key employees - no misleading customers - no stealing sales leads (but honestly taking away cutomers is OK)

Or to put it on a positive basis: - make a better product - make a better offer - run better ads - run better PR - treat your customers better - treat your employees better - treat the earth better and let your customers know it

Sounds just as naive, but a whole lot better.

Competition is bad enough without Google - or any transmission company - abetting it when it is unfair or illegal. I hope you brought this to the attention of the general counsel at Google, and the PR VP.

Or know about a general counsel. But it's a difficult position, with me being the only one governed by law. Both my colleague and defamer being resident in Eastern Europe, where law is often for sale. For example, there are laws governing payment of child maintenance, but frequently a notary is bought off to declare payments that won't be made.

And yes, I agree with that attitude when doing business, as I'm sure so would my namesake, the Canadian Jeff Mowatt, a renowned public speaker on doing better business by engendering respect.

Just reading about the Skoll awards and wondering as someone participating here over the last few years, how does one also participate something like this?

What I had in mind for instance, was something I could only find one place to register, a plan for comprehensive investmnent and return in childcare reform:

http://www.netsquared.org/projects/proposals/targetted-economic-development-for-social-and-economic-empowerment

It would seem to be along the lines of what we've been talking about in the two most recent discussions

What the Cooperative movement means by this is the freedom from paying returns to purely financial "rentier" investors.

All things being equal, a Cooperative SHOULD be able to out-compete any "For Profit" because it is able to operate on what Grameen's Yunus calls a "Not for Loss" basis.

It has been the absence of a workable enterprise model that has held back the Cooperative movement.

I believe that through using the UK LLP or US LLP it is possible to create a "Cooperative of Cooperatives" linking:

(a) a cooperative of service providers; (b) a cooperative of service users; and - the key innovation; (c) a cooperative of investors (probably customers) who simply invest in proportional "Equity Shares" in the future revnues of the enterprise.

It's not Rocket Science is it?

Ooops.."US LLC" I meant: late here.

Hi all,

The PepsiCo/Coke story is amazing. It reminds me of a Whole Foods article that I read about their animal compassion program....

"we don't sell sea bass anymore, even though it's our number two or three selling fish, because it's not being fished sustainably. We discontinued tilapia because we found out that they've been using hormones in the production of the fish"

It's very exciting to see new directions and standards being applied to all types of enterprises.

This business week article is about "Wall Street's New Love Affair" which, if you haven't guessed is its love affair with green businesses (http://www.businessweek.com/magazine/content/06_33/b3997073.htm?chan=top+news_top+news).

With the rise of green businesses, I wonder if there are any sites devoted to underperformig green businesses or green businesses in need of management help. Or is the industry too new for that? Also, does wall street really recognize that 'green companies might potentially have different performance standards?

With rating systems like the "Hip" investor (Human, Impact & Profit) http://www.hipinvestor.com/, maybe wall street will become a friend of green businesses.

In WWII, the Coca-Cola machine could not sell coke syrup to Nazi Germany, so the brand Fanta was invented by Coca-Cola bottler to serve Nazi Germany, while they had Coke for the Allied troops.

Coke was able to instantly boot-up, after the end of WWII.

As for Pepsi pulling out of South Africa, there was a mass boycot of Pepsi before Pepsi pulled out. If there was no boycot, Pepsi would still be there. Pepsi was losing sales in the USA and they pulled out as a financial move, not as a moral decision. The question we should be asking is: why was Pepsi and Coke there in the first place $$$$ is the answer.

As for the evaluation of Green Businesses ----------------------------------------

We are setting up North America's first social stock exchange connected to a green social network, called the Green Stock Exchange (GREENSX) at: http://greensx.com, which will be launched in the Summer of 2008 to begin trading. It will trade shares in social businesses. A social business is a business that makes a profit, but benefits society as well. We have a triple bottom line (economic + social + environmental).

Since all the listed companies on the exchange are pre-screened, evaluated, and audited according to social and sustainable guidelines set by the exchange, it will make it much easier for green investors to find and support social businesses. The GREENSX provides opportunities for small green Issuers to access public equity capital efficiently, while providing early stage investors, angel investors, and venture capitalists with greater liquidity. This includes a eBAY.com trading system for carbon credits.

It is still in the beta stage testing. Check it out at: http://greensx.com.