Response to: “Is it right to have the poor pay?”

Imagine you are walking along a wide sidewalk downtown Your City, USA.  In front of you and to the left you spot a table.  People are handing out vitamin supplement samples… for free. Do you take one?

A block later, you encounter another table set up.  It’s a different group, but also handing out vitamin supplements for a small fee – say $0.25 for a mini bottle.  Do you buy one?

Now, guess which table was more successful at encouraging people to try vitamin supplements?

A recent Fast Company article citing a similar experiment conducted by J-PAL has created a bit of a stir in the social enterprise blogosphere this last week.  First, BOPreneur Paul Hudnut wrote a very thoughtful and somewhat provocative post titled, “Is It Right to Have the Poor Pay?”  Shortly after, Francisco Noguera at NextBillion posted this equally interesting response to Hudnut’s comments.

The Fast Company article concluded that J-PAL’s experiment, which demonstrated that free mosquito nets were more widely adopted than paid-for nets, had proven false the widely-held belief that it’s right to have the poor pay small fees for development-related goods and services because doing so encourages a sense of ownership.

Really?

Hudnut’s post makes the great point that, while it may not always be appropriate to have the poor pay, “charity doesn’t scale.”   Noguera agrees that “free” sometimes is the best approach, even though market-based approached are generally preferable.  He also remarks on how cross-subsidies can make the latter possible within a social enterprise model.  Both make wonderful points.

But what about the simple fact that “free” is virtually ALWAYS going to be preferable to consumers!  Especially when the alternative is a small fee.

I haven’t read the J-PAL study cited in the Fast Company article, but if it’s as straightforward as it sounds, the outcome should be no surprise to anyone.

The real question is not, “To free or not to free?”  The real question is, Do you measure success by how many mosquito nets you hand out?

If so, maybe free is best. But I’d prefer to measure success based on what % of people are using their mosquito nets six months later.  Or perhaps the % of mosquito nets that are still effective (i.e. in good shape) after 12 months.  Or the change in the number of new malaria cases in the community after 3 years.  If these are the outcomes you’re trying to impact, maybe selling them a mosquito net at a small fee still is the best solution.

Which brings me to my real point here.  Businesses frequently have to create markets and stimulate demand through consumer education and advertising (though internet startups are increasingly doing this through free).  With effort, they get people to value their product enough to pay for it.  Should international development be any different?

Why the Social Entrepreneurship Club Feels Exclusive… Part 3

Ashni Mohnot wrote a fascinating and fairly provocative blog post on “Who’s in the social entrepreneurship club… and who isn’t.”

The post, which I found somewhat unsettling, garnered such attention that I felt a need to respond.  This is part 3.  Part 1 can be found here, Part 2 here.

III. The Developing World: Excluded from the Intellectual Conversation

“Are the only innovations in social entrepreneurship Anglo-Saxon?” asked Rod Schwartz, CEO of ClearlySo, sparking a lively debate on SocialEdge, the premier online hub for social entrepreneurship. Forum participants struggled with his controversial but timely question; many had just returned from the 2009 Skoll World Forum where they noticed that a majority of the speakers and panelists were Caucasian. They wondered – why weren’t more attendees from diverse racial, linguistic, and national backgrounds present?…Why are the voices of talented social entrepreneurs scattered across the globe rarely heard in the hottest online community of practitioners in the field? While over-representation of Caucasians is unsurprising in most fields, it is tragically ironic for this to be true in social entrepreneurship, especially in efforts to support international development.

What Ashni and others seem to be lamenting here is not the lack of existence (social entrepreneurs from diverse backgrounds are plentiful) but the limited visibility of non-WASP or non-“Western” social entrepreneurs.  I’ll lament with them, but only kind of.

First, it is absolutely unacceptable that ground-breaking social entrepreneurs outside the US and the UK might be left out of the conversation simply because they have not been invited or given a reasonable opportunity to participate.  I don’t know to what extent this is the case, but it’s entirely feasible and is an issue we all need to be aware of.

However, it’s also likely that many of the social enterprises that are achieving scale and notoriety are doing so because they are based in the US and the UK, where the support network for social enterprise is much larger and growing, and where there is a more ready pool of highly skilled talent ready to staff these endeavors.

That’s not to say that it is acceptable that more resources aren’t available to social entrepreneurs in less developed countries.  However, we need to remember that social entrepreneurship is about a hand up, not a hand0ut.  The ultimate solution is not coming to the rescue by providing American resources to Senegalese social entrepreneurs, for example. We need to support processes and policies in developed countries that will create friendly environments for social business and eco-systems capable of supporting local entrepreneurship.  In other words, the goal should not be a more diverse set of entrepreneurs at the Skoll World Forum in Oxford, but the rise of African, Asian, 0r Latin American-based Skoll equivalents that will host their own forums that outpace and out-impress those held by us in the US and UK.

This may mean that we wait another decade or two, but I do believe that the alternative threatens to lead us down the same ineffective path of dependence and dis-empowerment that brought us to social enterprise as a solution in the first place.

Why the Social Entrepreneurship Club Feels Exclusive… Part 2

Ashni Mohnot wrote a fascinating and fairly provocative blog post at PopTech on “Who’s in the social entrepreneurship club… and who isn’t.”

The post, which I found somewhat unsettling, garnered such attention that I felt a need to respond.  This is part 2.  Part 1 can be found here.

II. Young Graduates: Square Pegs in Round Holes

Opportunities in the field also seem to be limited to positions either requiring many years of experience or roles that are unpaid… Even tech giants like Google or major consulting firms like McKinsey offer positions of great responsibility like the Associate Product Manager or Business Analyst roles to college graduates, preferring to train employees in-house to ensure excellence. Why don’t social ventures (or even traditional nonprofits) do the same?… Given that young graduates, especially those who opted for nonprofit careers, are often armed with world-changing passion, it is unfortunate that so few avenues exist for them to channel their energy into the world of social entrepreneurship that thrives on the drive to make a difference.

The conundrum faced by younger people who are not professionally trained (not nurses, architects, engineers, etc.) is an old one and nothing unique to this space.  Speaking again from my own experience… I was trained in a liberal arts setting and, like all my liberal arts friends, left school feeling hugely capable of something, but unsure of what that something was.  In addition, as Ashni states, nearly every interesting-sounding job out there either paid nothing or required five years of experience.  So despite my academic credentials and internship and volunteer experience, finding a first job was, for me, hell.

It’s true, there are lots of large organizations like Google and McKinsey that do have more traditional entry-level career tracks that are designed to provide training and mentorship to young employees.  However, this is a luxury that fewer and fewer companies, smaller enterprises in particular, can afford.

It’s not a matter of not caring or not wanting to help younger professionals get their feet wet (though companies often do invest a considerable amount in developing new hires, only to have them leave after a couple of years).  Rather, it’s simply the case that smaller companies and start-ups don’t have the resources or infrastructure to support these kinds of jobs. Young companies need experienced, independent, “hit the ground running” types of recruits who can help get their organization off the ground.

So, again, I agree it’s unfortunate that more young people’s desires to change the world aren’t effectively channeled into interesting and well-paying jobs with up-and-coming social enterprises.  But this is not a matter of exclusion.  It’s a matter of practicality and necessity.

The fact that we must find ways to use these people’s passions and gifts, and in the process get them valuable job training, is indisputable.  We just can’t assume that social enterprises will be the avenue for achieving that.

Why the Social Entrepreneurship Club Feels Exclusive… Part 1

Ashni Mohnot wrote a fascinating and fairly provocative blog post at PopTech on “Who’s in the social entrepreneurship club… and who isn’t.”

The post, which I found somewhat unsettling, garnered such attention that I felt a need to respond.

Ashni organizes her post around three major categories. I’ll do the same here, addressing each in order, but in different posts.  Also, I’ll incorporate quotes from her post to give readers the gist of her arguments and tee up my response.  If taking words out of context plucks them of their intended meaning, I apologize. It’s certainly not the intent.  Readers are encouraged to read Ashni’s full post – again, here.

I. “MBA Preferred”

Social ventures, the funds and foundations supporting them, and other socially entrepreneurial organizations are in love with MBAs… I understand that the MBAs bring to the role the business acumen these enterprises value…Of course, traditional nonprofit workers will probably require some business training to work effectively in socially entrepreneurial organizations. However, MBAs will also likely require training on the social issues the organizations are targeting. It is probably no more arduous to give entrepreneurial nonprofit workers a crash course in business than it is to give socially-minded MBAs a crash course in sociology or anthropology. Why then is it comparatively tougher for nonprofit workers to enter this field than it is for MBAs?

Frankly, I think Ashni’s argument here misses the point.  Are MBA’s overrated?  Sometimes, yes.  Is requiring “MBA or equivalent experience” irrational or somehow discriminatory?  I don’t think so.

First of all, MBA programs more and more frequently require several years of work experience.  So “MBA preferred” is another way of asking for people who have both 1) knowledge of and experience with the internal workings and operations of for-profit organizations and 2) some advanced training in business-related theory and practices.  This is a hugely valuable skillset for a small and growing business and is not something acquired through a bit of training – it takes years.

Secondly, MBA’s will generally have a much broader base of business knowledge to work from than a typical college grad or someone with only non-profit experience. But what’s often more important than “business acumen” is the fact that they may bring a reasonable level of expertise in a niche area that a social enterprise requires.  Knowledge of finance and financial modeling is a good example.  While these are trainable skills, they are 1) seldom taught in non-profits (at least in my experience) and 2) it would be both foolish and wasteful for a growing social enterprise to hire someone without this experience in the hopes that they could just pick it up.

But what about the knowledge of the social issues?  I have two responses along those lines.  First, one of the beauties of organizations is that they allow specialization. If my work in consulting has taught me anything, it’s that only particular people in particular jobs actually require deep knowledge of the customer issues the company handles.  People can be enormously valuable to the organization for the technical and general management skills they bring (VP IT, Director Marketing, HR Generalist, Financial Analyst), even if they don’t know boo about the subject matter.

Finally, and on a personal note, as someone who has a degree in sociology, deep knowledge of particular social issues, and who has spent the last four years in business development and consulting roles in the for-profit sector, I can tell you that learning “business acumen” is nothing to take lightly.  It’s easy to dismiss this skill set, but the combination of legal, marketing, business development, strategy, people management, finance, and other specialty knowledge that is required to build business acumen makes business administration a very complex profession.  It should be taken as seriously as, say, learning nursing or mastering a fine art.

So where does that leave those without MBAs or similar experience?  What about people with non-profit backgrounds? That’s a good question.  Without a doubt, there are hugely valuable skillsets to be leveraged there, as well, but to what extent and how will depend on the social enterprise, I think.  What we do know is that a desire to make a social impact may be a coveted, transferable value, but it’s not a transferable skill.

My First Blog Post on SocialEarth.org

I’m proud to have my first blog post up on SocialEarth.org!

SocialEarth is an up-and-coming media dedicated to the promotion of social innovation and social entrepreneurship.  They are doing fantastic work, and I’m excited to be taking part.

Here’s a link to the post, “Making a Profit: A Great Problem to Have.”  Check it out and leave comments!

Wal-Mart!?? Wait, what?

That’s right.  The business profiled yesterday is Wal-Mart.  Apparently, though, this didn’t really come as a surprise to those brave enough to venture a guess.  I must be far more transparent than I had thought.

Anyhow, whilst I await my severe flagellation from the anti-Wal-Martians, here are those bullets again, with some specifics added.

• Mission to serve customers who have not traditionally been beneficiaries of the innovations and successes of the broader economic system
  • Wal-Mart’s initial mission was to serve rural communities that were in many ways excluded from the mainstream economy
• Obsession with providing the greatest value to customers at price points they can afford
  • There mission statement is, “Save money. Live better.”  Finding ways to provide quality goods at the lowest possible prices is ingrained in the culture.
• Meritocratic work environment that puts results and work ethic ahead of shining academic credentials and other factors that are more susceptible to “privilege.”  (The organization has consistently rewarded highly capable and hard-working individuals regardless of their level of formal education.  Much of the company’s leadership is made up of these individuals.)
  • Many executives and middle managers started as store or distribution center employees.
• Works feverishly, both internally and externally, with industry groups and suppliers,  to make improvements in “green-ness” of both internal operations and its supply chain
  • This has been a more recent push, in part thanks to Adam Werbach‘s efforts.
• Has achieved amazing financial returns and successfully grown and scaled without sacrificing commitment to its original mission (see first bullet); puts some of those profits back into the communities it serves through philanthropic structures
  • Wal-Mart’s financial success is self-evident.  What is less well-known is that both Wal-Mart corporate’s giving program and individual store managers are allowed discretion in putting money back into their communities.

Now, don’t get me wrong.  Wal-Mart should by no means be considered a darling of the social enterprise movement. Throughout its history it has made a number of questionable decisions, including but not limited to:

• Providing uncompetitive wages and zero health benefits to store-level employees
• Until recently, writing off green practices as unpractical and unprofitable
• Using its hegemonic position to place extreme pressure on suppliers to engage in unsustainable business practices
• Indulging Americans’ insatiable appetite for consumer goods

I’m sure the list could go on, but I’ll stop there.

The point of this exercise is not to lift up or cut down Wal-Mart.  The point is to be provocative and make a point.  Actually, a couple of points:

• Through scale, BOP businesses can achieve both social impact and financial returns.  And achieving both is ok. This was Prahalad’s initial thesis, but is something that we seem to forget.
• Classifying companies as social or not is inherently grey business, perhaps undoable, and maybe even undesirable or counter-productive.
• Any self-proclaimed social business that makes it big will, at some point, be characterized as a sellout.  Big companies, even those with the best of intentions, ultimately make some missteps.  Also, their dominant position comes to be resented and viewed negatively by certain groups.  If you’re a social entrepreneur with larger-than-life aspirations, be ready for this.

Ok, now I’m ready for my flagellation.

One Amazing Social Business You Haven’t Considered!

Thinking through what makes a business “social,” I started putting together the following “stats” for one company that you may or may not be aware of.  As I compiled the bullets below, I was blown away by the success of this company in both providing a social good and generating strong financial returns.

X Company has:

• Mission to serve customers who have not traditionally been beneficiaries of the innovations and successes of the broader economic system
• Obsession with providing the greatest value to customers at price points they can afford
• Meritocratic work environment that puts results and work ethic ahead of shining academic credentials and other factors that are more susceptible to “privilege.”  (The organization has consistently rewarded highly capable and hard-working individuals regardless of their level of formal education.  Much of the company’s leadership is made up of these individuals.)
• Works feverishly, both internally and externally, with industry groups and suppliers,  to make improvements in “green-ness” of both internal operations and its supply chain
• Has achieved amazing financial returns and successfully grown and scaled without sacrificing commitment to its original mission (see first bullet); puts some of those profits back into the communities it serves through philanthropic structures

So what is the company, you ask?

I’ll post the answer tomorrow (Friday).   In the meantime, place your bets in the comments below!