Entries in Social Business (19)


Embracing the metrics of mutuality

Back in 2011, former U.S. Vice President Al Gore and the chairman of Generation Investment Management David Blood penned a "manifesto for sustainable capitalism" in the Wall Street Journal. We find it interesting because they were really writing about how businesses could, and should, embrace broader performance metrics -- including the social, environmental, and governance areas.

In it, they argue for using the ultimate business management tool -- performance metrics -- to leverage a more effective response to global challenges than governments could muster.

Businesses cannot be asked to do the job of governments, but companies and investors will ultimately mobilize most of the capital needed to overcome the unprecedented challenges we now face.

Their five recommended actions include: 

  1. Identify and incorporate risk from stranded assets.
  2. Mandate integrated reporting.
  3. End the default practice of issuing quarterly earnings guidance.
  4. Align compensation structures with long-term sustainable performance.
  5. Incentivize long-term investing with loyalty-driven securities.

As we continue to investigate and refine the metrics associated with the Economics of Mutuality, we are eager to hear your ideas of what to look for and where to measure.

-- Bruno Roche


Social innovation traps

A recent piece in the Stanford Social Innovation Review identifies eight so-called innovation traps that prevent an organization's best intentions of developing cutting edge solutions to social challenges from being fully realized. We found it interesting that while some of the traps are related to execution and implementation, others are more conceptual, meaning that culture is the barrier that forestalls change.

The SSIR lists the eight traps as the following:

  1. Underestimating what it takes: Funders miscalculate how long innovation takes and the scale of investment required to create real transformation, not realizing innovation is rarely a quick, short-term investment;
  2. Misaligned incentives: Despite a company's desire for innovation, staff are discouraged from taking the sorts of risk necessary for fear of failure;
  3. Coming to consensus: Another risk aversion trap whereby the need for consensus often leads to funding for only the clearest, safest, or lowest-common-denominator ideas, leaving truly radical projects untried;
  4. Who's responsible for innovation: Setting up teams of innovators is a double-edged sword as members with other duties may find new idea formulation difficult, while establishing dedicated innovators could lead to a balkanization of staff;
  5. Just around the curve: Not knowing the difference between a wrong turn and a dead end, which could lead to funding going to unproductive efforts rather than a project which should be nurtured;
  6. Everything is innovative: Funders need to define their goals based on characteristics such as how transformational, original, unconventional, or disruptive an idea may be and be ruthless in their assessment of whether something is truly innovative;
  7. We fund innovation, so we must be innovative: Traditional funding methods can be used to fund innovation, while more forward-thinking avenues like crowd funding can be employed to fund conventional activities. However it's done, funders have to determine if they're looking for innovation in the field or in their processes; and
  8. Innovation is the holy grail: Discovering an innovation doesn't end the search for solutions to complex issues, while the process looks beyond the breakthroughs themselves to new insights, and networks of problem solvers that develop new technologies or strategies unforeseen by the organization.

Understanding the pitfalls facing social innovators in the public, private, and nonprofit sectors should help foster better trials and greater progress.  What do you think?


Inclusive business & managing unintended consequences

This month Tufts' Fletcher School hosted a two-day conference, Inclusion Inc., to test the idea that “the only competitive business is an inclusive business.” In this summary written by the senior associate dean of the school, Bhaskar Chakravorti, we learn that inclusive business models and strategies can have unintended consequences. According to Chakravorti, these include:

  • Pressures of public market expectations: The first unintended consequence of inclusive business has its origins in an organizational contradiction: key stakeholders – shareholders, market analysts, and even line managers whose compensation is tied to quarterly targets and stock performance – may not support a corporate decision to be inclusive.
  • Stresses along the supply chain: It is easy to imagine the pressures placed on suppliers as inclusive businesses push into market segments where the margins are thin and volumes are large. The challenge is particularly acute in the emerging markets where value chains are incomplete and the supporting infrastructure and institutions are under-developed.
  • Distortions in production: As an inclusive business creates incentives for local communities to join the value chain, resource are re-prioritized to align with commercial demands.
  • Distortions in consumption: Many of the original critiques of the movement to serve the “bottom of the pyramid” consumer made the observation that the poor will spend their limited budgets on the products that are most successful in reaching them. It begs the question at to whether more readily available products have displaced essentials from the consumption basket.
  • Challenges in scaling-up frugal innovation: Many inclusive businesses get a jumpstart through improvisation and assembling of locally available resources – often described as frugal, MacGyver – after the endlessly inventive 80s TV hero – or, in India, “jugaad” innovation. These innovations capture the imagination, attract media coverage, and, most importantly, attract resources. Unfortunately, the vast majority of such ideas have had difficulty deploying at a large scale.

We appreciate the concluding suggestion that before taking the "pill" of an inclusive business model, "it is advisable to read the label on the side-effects first and manage them before taking the pill and enjoying its many benefits." Certainly, any new ventures will bring some unexpected results and generate lessons to be learned -- but trying to understand the "side effects" in advance should improve the chances for success in the long term.

Image source: Fletcher School of Law and Diplomacy

-- Clara Shen


Charities, cross-sector collaboration, and "stealing" models that work

Corporations are re-assessing business models and moving, in some cases, to implement social business frameworks in collaboration with nonprofits. What about the nonprofit sector itself?

I enjoyed this article by Eric Stowe (founder and director of Splash -- an international nonprofit working on smart solutions to the water crisis in developing countries), advocating the need to keep social business models open source to achieve transformational scale. He provocatively suggests that chartitable organizations should promote the "theft" of their operating plans in order to foster greater, faster success.

By opening up our models, successful groups will make second-mover advantage (when a company benefits from feedback on a competitor’s earlier release) possible—in fact, probable."

It's an example of the charitable sector opening up to cross-sector collaboration, giving the opportunity for nonprofits, funders, governments, and companies to work more closely and act collectively to deliver effective solutions for global social and environmental problems.

Stowe has also shared his vision for the charitable sector on achieving sustainability through local community empowerment in his recent TEDx talk, "How To Kill Your Charity."

-- Jia Yan Toh

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