Every Business Is (Or Should Be) a Social Business

Mali Health Clinic

I believe the distinction between social and non-social business is a false dichotomy. And yet, it’s one we continually want to make. We talk about “social businesses” — those that are mission-led and focused on creating positive social change — and “non-social businesses” — those that focus on revenue and profit. Social entrepreneurs launching ventures may ask themselves if their business models need to be different. Does pursuing a social purpose require something unique to describe and structure your business?

As someone who works with a variety of organizations in my roles as strategy and innovation consultant, venture capitalist, professor, and mentor, this question intrigues to me. To answer it, I evaluated a few years worth of business models created and implemented by clients (usually established, mature businesses), invested companies (early stage), entrepreneurs I’ve mentored, and college students starting new ventures. The results? I found that both social and non-social businesses focused on making sure revenues were greater than costs, either through selling something, raising money or getting grants. The differences were more along traditional business characteristics: virtual vs. physical product or service, B2B vs. B2C, etc.

That said, this initial evidence showed that social businesses focus more on achieving a positive impact in each of the nine business model elements — value proposition, customer segment, channels, relationships, key partners, key activities, key resources, costs and revenues — as well as the whole model. Many of the non-social businesses in my sample also focused on the impact of each element and interestingly, they are very successful businesses (might there be a correlation?).

All businesses are social. All companies have people as customers, employees, and suppliers. At some point, in deciding which supplier to use, in engaging your workforce, and in getting your product into users’ hands, relationships with people matter. Improving these their experiences always improves the outcome for your company.

If a business isn’t providing valuable, meaningful solutions to real customers’ problems or delivering outcomes that both make a positive difference in the customers’ lives and support the company’s mission, the business won’t have to worry about profits or outputs for long. The market has a way of taking care of that.

The historical division between social and non-social business and “purpose” vs. “profits” is artificial and antiquated. Almost exactly two years ago, Michael Porter and Mark Kramer called for a new definition of capitalism — “shared value” — to unify this false choice. I think this is how Adam Smith envisioned capitalism; we just redefined it to serve our purposes. In fact, our financial crisis in part stems from non-social businesses divorcing impact from profit and the outcome will haunt us for a long time.

To further test what I had learned, I turned to business model guru and friend, Alex Osterwalder (I’ve used his Business Model Canvas since 2009 because I believe it’s one of the best methodologies out there). He has vast experience creating business models all over the globe, in almost every industry sector, and he came to the same conclusion: There is no significant difference in the business models themselves. In fact, we agreed that for-profit social businesses are a powerful way to increase impact. For instance, Sun Edison’s business model demonstrates that increasing impact doesn’t decrease profitability. One of Alex’s favorite businesses, PeePoople, is implementing a similar model to provide basic personal sanitation to the 2.6 billion people who don’t have it today. As Alex says, “The most amazing business models are those where profit and impact live in harmony. Business models can be designed where impact doesn’t diminish revenues or profit and vice versa.”

Does this answer the question about needing something different for a social business? I think so and the answer is clearly no. It’s time we stop talking about “social” vs. “non-social” and encourage all entrepreneurs to focus on impact in every element of the business model as well as the whole. We read about companies, like Patagonia, Virgin, Cemex, who profitably and purposefully balance doing well and doing good. If they do it, why can’t you?

There are also some quiet, under the radar companies, like 6th generation family-held Menasha Corp. in Wisconsin’s Fox Valley. The 164-year-old corrugated packaging firm has over $1B in revenue. Despite being in a commodity-driven market, it has experienced seven consecutive years of remarkable growth, even during the recession. Menasha’s plants use heat from the corrugators to warm the buildings; they’ve reduced water usage while increasing production; their culture is collaborative; and their people are active in their communities, serving on school boards, supporting art and music, and having plain old fun in the Muscatine Great River Days boat races. The result is synergistic growth of a company and its communities.

By focusing on each individual business model element and the model’s overall impact to create outputs that support sustainable outcomes, perhaps our social entrepreneurs can help society break down this tired, man-made wall between social and non-social businesses.

This post originally appeared in Harvard Business Review's  Scaling Social Impact series.

Trust Inc. to be Released November 1st!

Very humbled and honored to contribute to the new book Trust Inc., edited by Barbara Brooks Kimmel.  This book is a collection of essays by internationally known thought leaders on leadership and trust...and then me! I share the story of one of my incredible clients, Menasha Packaging, who epitomizes integrity, character and trust in all they do.  Please order it - read it, share it, but most importantly, live it!!!

Collaboration for the Long Term

I'm re-posting from the archives because the issue of real, authentic collaboration has been coming up a few times a lot lately, especially in light of the Vulnerability & Trust Leadership Paradox radio showJohn Hagel, Saul Kaplan and Mike Waite did with me a few weeks ago.  Menasha Packaging has a legacy of integrity and authenticity - going back 164 years. These posts demonstrate their commitment to team work, collaboration and how they value their people.... read on, re-read on and listen and learn - so many gems of wisdom in here.

Sustaining Collaboration for Decades: Part I
Sustaining Collaboration for Decades: Part II 

ODE to Innovation

One of the most amazing leaders I’ve ever met, Mike Waite, President of Menasha Packaging Corporation, believes his job is making sure his people get to live their dreams.  While profit, revenue, shareholder value etc. are critical, without his people’s ability to turn dreams into reality – for customers and for themselves – there is no revenue, profit or anything else…simple…and too rare.  Mike is Menasha’s ODE, Official Dream Enabler. 

Dreams allow us to think of what could be, of what is possible - maybe not probable, but possible.  That’s why dreams are innovation’s fuel.  We know what happens to organizations that don’t innovate - look at the 1990 Fortune 100 list. 

We are innately creators and dreamers.  Somewhere along the way, for most of us, we are taught, encouraged, required to push those inherent capabilities to the back and obey the status quo (e.g., public education).  So how do we become an ODE to innovation?

My friend Whitney Johnson’s book, Dare, Dream, Do, provides a framework for becoming an ODE to our people and ourselves.  It provides a roadmap for risking to and realizing dreams – both for individuals and more broadly organizations.  If individuals aren’t allowed to dream, how can teams and organizations?

Three quotes in the book stick in my mind:

  • “The only safe harbor is our convictions…because it ensures we are honest to our core values.” For dreaming - innovation to have a positive impact, it must be based on values and integrity.  As we are finally recognizing from the financial crises and our youth’s response to ‘Corporate America”, without providing meaning and purpose, there is no sustainable money and profit;
  • “Sometimes we set out to be competent.  At other times our competence is simply the unintended consequence of doing what needs to be done…” We’ve been hiring for skills first and maybe culture and passion.  It’s time to turn that around.  Skills can be taught – enhancing a culture and bringing passion to work? Not so much; 
  • “Hell is a place where nothing connects with nothing.” T. S. Eliot commenting on Dante’s “Inferno”: As many of you know, connecting, networking is in my DNA.   Dreams and innovation are not solo events; they are team sports.  How you encourage, support, reward teams around common passions will determine how well you delight your customers…and your people.

Do you define your role, your success, by the ability of your people, let alone yourself, to dream? 

Do you allow your people, yourself, the freedom and autonomy to turn dreams into reality?

Can you become an ODE to Innovation? Start reading Whitney’s book – for your people, yourself, even your family.  And then you can start turning dreams into reality.  So, go – Dare, Dream, Do.

Packaging Up Innovation & Radical Management

In May, I was honored to be part of Steve Denning's workshop on his Radical Management principles for redefining 21stCentury management.  Recognition that we need to find a new way to ‘manage' work is gaining ground. We tend to think of 21st Century ‘new management' companies as those in ‘cool' industries: Internet, tech, alternative energy, social media, etc. These companies shun command-and-control!  However, there are some "old" "boring" companies that are surprising 21stCentury.

So, think packaging. You know, those brown boxes that your amazon books come in? Those displays at the end of store aisles that get you to buy more snacks? It's a commodity business, ruled by big huge vertically integrated behemoths with entrenched hierarchies held sacred.  Kind of boring huh?  You bet...not!

In the middle of Wisconsin (not Silicon Valley) is a 163 yr. old, private family business that reinvented itself, pulled a few classic "Blue Oceans" and looks more like a 21st Century newbie than a 19th Century oldie: Menasha Packaging Corporation (MPC).   MPC views their transformation as a journey, not a destination.  Their success is due to their most important asset - people.  And it's not just words, its action based on their values.  MPC has organized itself not as a traditional hierarchy, but as a network to enable and foster their culture.

A small headquarters organization is focused on removing obstacles and leveraging synergies while maintaining a strong entrepreneurial culture in each business.  Instead of centralizing the usual functions and capabilities, MPC relies on standardization, when applicable, to drive efficiency without bureaucracy.  Additionally, if one business has expertise another business needs or could use, it's shared in a center of excellence construct across heterogeneous businesses within MPC instead of being duplicated.  This allows each business to use its resources more innovativelyeffectively and efficiently...a rather unique approach for an ‘old' company.

In one business, an employee created an engaging way to identify and monitor safety issues.  To her, this was just a normal thing to do - see a problem, create a solution.  Soon it spread through the plant and shifts, becoming named "Safety Snags".  Eventually, this became an internally branded initiative throughout MPC.

MPCs culture of customer co-creation is based on listening to customers, quickly creating prototypes set in realistic environments, getting feedback and iterating the experimentation/prototyping until its right. This is also done across MPC businesses to find the right solution.

My initial perception when I started working with MPC, of an old manufacturing company, was quickly changed, and continues to be.  It is not just the new, young, hip companies that are reinventing management and seeing the results.  So what does this say? That it is really possible to create and sustain innovation in established companies.  Perhaps, it starts by innovating management itself.