Social Mission as Strategy
Call it the “death of distance” or “democratization of data”, call it the “flat world” or call it globalization, call it what you will, the fact remains that business has changed. Economic environment in the twenty first century is about saturating western markets while profitable markets are to be had in developing countries(1). Social entrepreneurs are working in this new eco-system, where the potential constitutes 4 billion people who live on less than $2/day (2). Their approach is to create opportunity for the underprivileged so that they can participate in the economy thereby creating a virtuous cycle of market development and sustainable growth. As corporate social responsibility evolves from compliance to a proactive involvement in the global agenda, social entrepreneurship models of doing business gain great relevance.
However, investors view any business plan which includes a social mission with healthy skepticism because there is not enough evidence yet that it really is possible for a business to “do well by doing good” (see Note at end). Indeed, economists delineate the roles of the private and public sectors to ensure fiscal responsibility among entrepreneurs and corporate leaders and social responsibility among political and foundation leaders.
Nevertheless, at one time, even software as well as internet businesses lacked well understood business models and the winners were the ones who foresaw the possibilities. If the need for new strategies and business models for a global economy is acknowledged, then making the leap from business entrepreneurship where the success criterion is the health of the individual and the business, to social entrepreneurship where the success criterion is the health of the community and the business, is possible.
Three women led enterprises have been studied whose social mission has become a differentiating and competitive strategy for the business. These enterprises operate in distinct geographies and cultures but all three address a social gap to deliver value. The study spans innovation in multimedia communication to engage at-risk youth, technology usage to enhance education in rural areas and social inclusion for low skill workers. These cases are:
- Southwest Creations Collaborative, a 501c3 non-profit enterprise in New Mexico, integrates a successful contract sewing and handwork business with a social mission to enhance dignity in the lives of families. Website : www.southwestcreations.com
- Digital Equalizer, a flagship program of the American India Foundation, is charted with bridging the digital divide by taking advantage of computer and internet technology to engage, educate, enrich and empower India’s underserved children. Website: www.aifoundation.org
- Vamos Blogar (Let’s Blog!), a Reuters Digital Vision Project at Stanford University, is aimed at improving employability of at-risk youth in Brazil through an innovative literacy curriculum based on multimedia web logs. Website : blogar.org
Evolution of “Leading with Economics”
Southwest Creations Collaborative (SCC) is making a difference in the lives of women with low employability due to lack of education and language skills by providing them an income and social support.
Soft goods, glass and ceramic manufactures in the US often face a conflict between their need for speed and customization and the necessity of reducing production costs through offshore manufacturing. This is where SCC steps in. SCC has created a business by solving this important problem for its customers by filling custom orders for quick delivery and in many cases, managing off-shore partnerships so SCC customers can take advantage of lower cost offshore production for high volume products seamlessly.
Susan Matteucci, founder and executive director of SCC says that the operating model she created for her business evolved from her experience in the field of micro-finance.
In forming the peer lending groups Susan learned that the women in her peer group wanted to stay together, even when there was no business reason, for the social support they provided each other. Without a micro-loan business, peer groups could not give each other economic support, but they still gave each other social support.
Susan realized that if she could create an environment where employees felt connected and provided each other social support, she could create a business where they would be motivated to stay not just for the income from the job, but also for the stability they got in their family life by being part of the larger business enterprise. SCC’s social mission became a strategy that delivered lower workforce turnover as well as higher quality production that comes from having reliable employees. Susan calls the business model leading with economics.
Leading with economics means providing for employee welfare as a business need and managing its associated costs just as you would other business costs.
SCC provides employment as well as education, child care, health care and other family support services to its employees. Having given employees something they value, SCC holds them accountable to the highest standards of performance.
SCC was started in 1994. In 2004, SCC had half a million in annual revenue and was cash flow positive on an operational basis, providing full time employment to 35 women with families to support. By 2009, estimates are for revenues of two million and complete self sufficiency with no philanthropic or grant investment needed. Total grant investment in getting SCC to sustainability is expected to be approximately $3.7 million. The first $3 million achieved self sufficiency. The next $660K will fund expansion and growth on the road to achieving sustainable economics. (4)
SCC provides a stable family life to low income workers by giving them social support in addition to a job. Initially, their women employees have low skills but given training, become high performing workers while keeping SCC labor costs low. This allows SCC to provide value such as custom work to their customers cost effectively. Examples of business competitiveness that arose from a reliable workforce in this cutthroat business where they compete with off-shoring are:
- domestic on-shore production capacity to quickly produce custom orders
- flexibility and just in time delivery for custom orders
- daily drop-shipping
Digital Inclusion: Technology for Education
In the year 2000, Gurcharan Das made famous the story of a destitute boy living in a remote corner of India. Fourteen-year-old Raju cheerfully waited tables at a roadside village café, serving hot South Indian coffee and vadas, earning less than 40 cents/day. His mission? To take evening computer classes and one day run his own company. (5)
What is it about this story that launches the imagination?
“The real tragedy of the poor is the poverty of their aspirations” said Adam Smith succinctly summarizing that poverty is a result of lack of motivation. Raju’s story shows the way for climbing out of the social abyss that is poverty.
Raju was poor but not his aspirations. Raju had seen a TV show about software startups that gave him hope for his own future. Such is the miracle of technology.
That is the good news. The bad news is that without access to computers and the internet the poor become even more marginalized. In a world where technology has become one of the most powerful tools to attain global prosperity, its proliferation has been limited to the more affluent parts of the world. And, as the digital divide has widened, so have inequalities in economic opportunity.
The Digital Equalizer Program is striving to ensure that Raju’s spirit stays alive.
In India less than one percent of the population owns a personal computer, and just over one percent uses the Internet. The Digital Equalizer (DE) Program helps in preparing children ages 10-15 to enter an information age so they can participate in creating their own future. (6)
DE program operates by establishing computer/internet centers in underprivileged schools and providing operational and management support for three years. The goal is to have the center become self-sustaining by allowing fee-based usage of the equipment during after-school hours. Entrepreneurial teachers can develop materials for fee-based usage or for use in the school system. DE centers cost $7000 for the initial set up; this includes hardware, software, connectivity and teacher training. The only permanent staff is regional directors – appointed on as needed basis as the program scales in different regions. DE Program started in 2001 as Schools On-line with 45 schools, became independent in 2002 with 51 schools; added content rich curriculum in 2003. (7) There are plans to reduce pilot costs by using a replicable model by 2007 with a goal to achieve self-sustenance in 2008. (8)
In early 2005, DE achieved a significant milestone: the first group of DE centers became independent and self-sustaining. Shobha Murthy and Usha Rani, teachers at the Madapati Hanumath Rao Girls High School in Hyderabad made their school the first to achieve financial self-sustenance after three years of support.
With this proof of concept, the DE program is starting to attract the attention of state governments in India. In 2005, DE management partnered with Punjab Government to help launch 1,300 schools in the state of Punjab.
Such a partnership and subsequent scale-up of the model would not have been possible without DE’s social mission of providing education to children from underserved areas because the schools in such areas are run by the state, the teachers that DE trains are state employees and hence active involvement of the school administration as well as the community requires no additional investment in infrastructure from the DE program. Regular for profit educational institutions have not been able to create a successful operating model for these communities where infrastructure is non-existent or poor. The DE business model is closer to venture capital funded entrepreneurial startups where a handoff or partnership is the metric of success.
DE management plans to leverage this success to attract other state governments to fund new DE centers while core investment is shifted to develop appropriate language content for different regions. The DE program expects a 200% CAGR because of its ability to attract government partners even while reducing its own investment in setting up the DE centers 90-95%.
A social mission as strategy has been successful for DE as reflected in their ability to scale rapidly once the basic delivery model was shown to work. Hence they now have a model which is called large scale partnership model:
- Based on successful demonstration of prototype, engage the local government and community to elicit capital and resources for scaling and capacity building
- DE Provides monitoring, training and assessment
Video and Illiteracy: Innovation in Media
More media will be created in the next 4 years than in the last 40,000 years combined and most of it will be multimedia, concludes a UC Berkeley study (9). As with any change there comes the bad along with the good. The jury is still out on the current phenomenon of media explosion. Old fashioned text competes with slick multimedia productions for attention and amusement. How then to keep kids in school? Especially at-risk urban youth?
Children and youth living on the streets have a self-destructive behavior and are at high risk for diseases and HIV, drug addiction and violence. In Brazil there are at least 23 million youngsters nationwide that are at such risk. They are, typically, functionally illiterate, have low self-esteem and are unmotivated. Traditional methods of reaching out to them to participate through a literacy or job curriculum have failed. (10, 11)
Saori Fotenos and Deepti Rohatgi decided they could turn the lure of media into literacy training. Video is a key part of our landscape in the world today (mind-numbing music videos, movies, games to name a few) and they observed that youth are confident with video as a medium. This key insight combined with the observation that children are interested in themselves and their friends became the fundamental principle behind Vamos Blogar (Lets Blog!). They created a program that would take advantage of the ubiquitous presence of media in contemporary pop-culture to improve literacy and enhance employability of children living on the streets in Brazil. (12).
By leveraging existing open source, multimedia web log technology, Vamos Blogar has created an authoring environment that serves as a communications curriculum for low-literacy urban youth. After creating the platform, a pilot was done to gauge effectiveness of the approach. They found that children were not threatened by the technology like they are with educational text materials. In the favelas – or slums - of Rio de Janeiro, Bruno blogged about carnaval costumes; Wellington responded with a comment and Bruno worked with a teacher to write a response to Wellington The pilot successfully demonstrated that unmotivated, high risk youth can be drawn out to communicate and subsequently learn skills by participating in creating content which is personal and allows peer interaction. (13)
“It works because the technology is taught from an inverse perspective by starting first with multimedia and then returning to text and word processing” says Saori.
In Brazil alone there are 3200 tele-centers and teachers can be trained cost effectively through workshops of tele-center coordinators. Deployment costs are highly leveraged because the multimedia blogging platform is free, content is generated by users and the growing tele-center infrastructure is the vehicle for propagation and scaling. The curriculum consists of 8 one-hour classes taught in any order after the first class in which youth immediately video blog. Hence a very low-cost franchise model is possible.
Vamos Blogar’s mission of social inclusion capitalizes on a media savvy pop-culture and builds up youth self-efficacy thereby creating the motivation for learning job skills not related to drugs and violence.
The following table summarizes the key attributes of the three cases:
| Southwest Creations | Digital Equalizer | Vamos Blogar | |
| Social mission | Enhance dignity through employability | social change through education by harnessing technology | Engage at-risk youth to provide job skills, literacy |
| Social sector | Low-skill women in New Mexico | Underserved children in India | Street children in Brazil |
| Key insight: competitive advantage | Providing social support to low-income workers creates stability in their family life and hence: - low employee turnover - training gets leveraged - employees able to deliver high quality | Harness technology: - leverage existing school, community infrastructure - pre-package, pre-configure HW, SW, connectivity for low-cost replication - train local teachers | Video blogging engages media savvy at-risk youth - provide a “safe” place to be - hands-on, self-taught skills in communication, literacy, computers |
| Sustainability model | Achieve cost effectiveness and quality through employee loyalty and retention | Prove concept through pilots and seek government partnerships to scale | Open-source SW platform deployed on computers in NGO run (or other) tele-centers |
| Social metrics | Employees’ children stay and perform in school; Acquisition of English language skills by employees | Number of children educated; Number of schools started | Number of youth that stay off the street by coming to the tele-center |
| Economic metrics | Revenue from business, cost effectiveness of services offered; Reduction in social service costs | New partnerships, scaling ability, self-sustainability of a center | Impact of lowered crime, drug use as reflected in reduced social and law enforcement services |
How to Turn a Societal Mission into a Competitive Business Strategy
Social entrepreneurship is not simple. Even at the concept level it causes confusion. Is it about social work or is it about business? Is it about spending or making money?
The metrics for fiscal responsibility are well defined and a social entrepreneur would do well to honor those. But a social mission, if positioned as just another operational issue in an underserved market, may not be convincing- rather, make it a strategic advantage as illustrated by the case studies: SCC got competitive advantage through a loyal, low-cost workforce by employing the unskilled “unemployable”; DE is able to scale 200% with no new investment in its core program by securing institutional partnerships and capital; VB’s at-risk-youth program works because of its innovative use of media technology.
One definition of social entrepreneurship is “the pursuit of the double bottom line” (3) referring to social and financial wealth as two metrics to track. It is a useful simplification but it does not highlight the strategic aspect of a socially motivated business. In the early stages, when there are significant operational differences between a traditional for-profit venture and a social enterprise, such simplification can mask complexities that must be managed. There are fundamental differences between the two in how the business gets started, progress is measured and employees are motivated. Once a social entrepreneur led business becomes self sustaining, it starts to look more like a regular business and at that point the double bottom line becomes a very practical definition.
A social mission that is also a successful business strategy has the following key characteristics:
- operates in an underserved area
- addresses an underserved market
- benefits the community by integrating into the social fabric
- business sustainability plans are put in place from the outset
- delivers value that is recognizable by the local community
- delivers value that is affordable by the local community
Hence creating a business around a social mission requires its leadership to be well versed in “business speak” (to attract capital and become self sustaining) as well as “social speak” (to manage operations).
At Southwest Creations Collaborative, Susan’s vision was of “women coming together under one roof as a community, where they would feel connected, not isolated.” This is the value proposition she gave her employees. To her investors, the value is new business creation. Mythili Sankaran, executive director of the Digital Equalizer program talks about the excitement she sees in the faces of the girls when they get to touch a computer keyboard. The teachers at Vamos Blogar encourage children to come back to the program to continue the dialog through video blogs by helping them feel successful in an educational environment. In other words, social entrepreneurs recognize that business rigor is essential in achieving sustainability, but the benefits are far greater than pure economic indicators can capture and the language of the leadership reflects the social as well as financial gain.
Key Success indicators: Motivation, Hopefulness, Aspirations
Early success indicators for social entrepreneurs have to do with human behavior. If they can build hope for the future then they can look for more quantifiable results.
“Southwest Creations supports us in our dreams for a better life for ourselves and our children. It's not just a job, it's a family” says Fermina Lopez, a contract sewing worker at SCC. She has been with SCC since it was founded and thinks of it as her family unit.
In its first twelve years of operation SCC has had only one employee turn-over. Similarly, number of DE centers has been increasing; they see increased teacher motivation and co-operation among students - even, in one case, students helping slow-learners through the use of media programs. VB has been able to get children to come back to its tele-center repeatedly in after school programs (the first pilot was done with about thirty youth and 80% came back – note to be confirmed stat).
Operational details are provided below to illustrate how a social mission as strategy yields high economic and social value with almost zero financial overhead:
An example of a social metric is the Buena FE (families+escuelas) program in SCC’s Strong Families Initiative to expand support and encourage job retention. It is a partnership with schools and other parent advocacy groups to facilitate the involvement and collaboration of 100% of employees in their children’s schools. They track their employees’ kids’ educational health as a metric of employee health.
This is how it works: SCC employees must spend 1.5 hours/month (paid) visiting the child’s teacher where they discuss insights into things that could affect learning. The teacher and parent are drawn into a contract where they are both vested in keeping the child in school and performing at capability. At the beginning of the school year a formal contract is drawn up outlining expectations and issues to overcome. This contract is updated and monitored at each visit and submitted at the end of the year to SCC management. SCC management sets an expectation and watches progress. Instead of having 1:1 meetings, they have group meetings where information is shared openly with a spirit of supporting one another thus achieving the right balance of support and peer pressure.” The result is a self-managing worker program with no extra management overhead and a financial investment of just 1.5 hours/month/employee that results in more children graduating from high school as well as a more motivated employee.
Social Mission as Strategy: What makes it Hard?
“It is an honor and privilege for our foundation to work with Southwest Creations Collaborative. The model they are developing is one that gives us hope for the future.” EMA Foundation (SCC brochure)
Case studies like SCC, DE and VB make you wonder why every business isn’t rushing to use this concept of doing good to the society it operates in as a business strategy.
That is because creating businesses for underserved markets is new and social entrepreneurs are using different approaches, appropriate for the local conditions- e.g. while a social mission is the strategy in all three case studies, it is not the same mission.
David Shipley in his book, The Working Poor: Invisible in America, has documented some heartbreaking stories of people whose fortunes remain unfound. As he says “the term working poor should be an oxymoron”. Many of these are women, often in low income jobs and having high needs with regard to raising their offspring. In spite of a growing American economy, these people (coming from all ethnic and racial backgrounds) remain invisible (14). What becomes obvious is that each story is individual and the factors that lead to change are also unique.
Thus, local understanding plays a noteworthy role in determining a successful outcome for social mission as strategy.
Measuring social return is also new; there is no accepted language or metric for it. In addition, given that factors like geography, culture, community norms and local relative poverty levels play a significant part in how a business should be run, investors want to make sure the social entrepreneur has hands on experience. Also, first time results need not mean replicability. For example, further development needs to be done to ensure that video-induced motivation can be made to last long enough to take the children to literacy and employability even when the first step has been successful in an area where traditional methods of education and reaching out have failed. Social entrepreneurs may sacrifice some profitability by reinvesting in their mission thus delaying a financial return on investment which makes it harder for the investor to track progress. Thus there are aspects of social entrepreneurship that do not fit traditional business models making it appear financially riskier than standard for profit business.
The table below highlights differences business and social entrepreneurship in order to assess when a socially motivated business approach may be more successful than a traditional approach.
| Business Entrepreneur | Social Entrepreneur |
| • Motivation: Revenue (social benefits follow) • Metric: growth, profits ($) • Market: growth demands geographic expansion (but 50-70% of world market lives in “relative poverty”) • ROI: lower costs enable larger customer base; reduction through supply chain optimization | • Motivation: Social agenda (economic benefits follow) • Metric: Social return sustained by revenue from business • Market: 4+ billion living in “relative poverty” (but growth is outcome of business sustainability) • SROI: investment in training leads to virtuous cycle of empowerment; product or service quality through employee and community support; (requires local knowledge) |
Conclusion
A global economy demands new insights. Multinationals must expand into new geographies to grow market share as well as to tap into new employee pools. As SCC, DE and VB show, entrepreneurs can employ a social mission as strategy to deliver competitive advantage and develop new markets in the twenty first century.