Why we've Broken Up with Social Enterprise

If you’ve ever experienced a break up, you’ll probably know how we feel right now. We began our relationship with Social Enterprise full of excitement. We saw our shared future together – it was the manifestation of all our hopes and dreams for a better world. We believed that together we could achieve so much more than we could on our own. But after a seven year relationship, the itch has truly kicked in. We’re breaking up. And to be honest it’s because we’re disappointed with Social Enterprise.

It’s hasn’t been easy, and we are feeling pretty heartbroken (there may be a tub of chocolate ice cream coming out tonight!) that Social Enterprise didn’t hold up their side of the bargain. But we’re realists, and we now know that there was a mismatch between our initial hopes and dreams and what Social Enterprise has ended up being.

So what did Social Enterprise do wrong? There were two key breaking points for us.

“Whether it is social enterprise or another term, at the heart of it for me is that holistic invitation and the profound belief that… when you are purpose driven you will be profitable and you will get there".

— Olivia Maclean, panellist, General Manager of Mission Development at Baptcare

The first is that Social Enterprise is increasingly self obsessed and inwardly focused. For some people this is an obsession with the idea of social entrepreneurship, or being a founder. We believe that Social Enterprise has lost some of its initial reason and motivation, and it’s become more about that label of being a ‘Social Entrepreneur’. Obsessing over definitions that are unhelpful, drives limited thinking and limits the impact that we can really be part of creating. Constant naval gazing limits collaboration.

“What these terms have been helpful in doing is to reframe the conversation and get people thinking differently outside their normal silos of activities. And I think that is all that is happening here. I think the social enterprise term has passed its use-by date.”

- Christopher Thorn, panellist, Partner in Social Finance, Impact Investment, and Philanthropy at EY

The second, is the obsessive focus on profit, and what Social Enterprises do with it.

Social Enterprise too often breeds an obsession with labels, and makes entrepreneurs feel they can only make a difference through their profit distribution. For us, this is unsustainable, and totally misses the point. There is an underlying laziness in finding a nice, flashy term that you can call yourself, rather than do the work to figure out how your business is actually doing good in the world.

“If you limit the good you can do in the world, to what you do with your profit, or even worse, what you do with a percentage of your profit, you have completely missed the point”

- Bessi Graham

Social Enterprise for us became a partner who lost his way. Social Enterprise lost sight of what it originally set out to do, which was to work to create better social or environmental outcomes.

These obsessions and definitions have trapped Social Enterprise in the very problem it was trying to escape– the scarcity mindset that plagues the charitable not-for-profit space. There are already enough organisations competitively fighting over shrinking pools of capital in a philanthropic and government space. We don’t need more grant reliant organisations – we need enterprises with sustainable, high impact business models – and that’s what we would call a business that’s doing good and making money.

"I know a lot of people who work and come up to you with big ideas and will talk about being a social enterprise and I would try to go one layer deeper to the business model and normally it didn’t exist!”

— Eyal Halamish, panellist, co-founder and CEO at OurSay

We thought that Social Enterprise would open up new pools of capital. But by trapping Social Enterprise in the definition of a grant-reliant-not-for-profit-with-some-kind-of-trading-that-reinvests-or-redistributes-part-of-its-profit, it’s still in the same category. When you can’t access broader pools of capital – how is that different from operating as a charity? Why create a label and call yourself something else, if it doesn’t actually change the game of where you play or how you play?

So what does this break up mean?

“The idea of breaking up with social enterprise is in no way a breaking up with those people who call themselves a social enterprise. But social enterprise as an idea has come to a place where our relationship doesn’t work anymore”

- Bessi Graham

We promise, we won’t be changing our phone number, we’re not being overly dramatic, we can still be friends. We’re not changing who we are as an organisation – TDi remains committed to the vision of bringing together doing good and making money. We will continue to work with groups, whatever they call themselves, to identify opportunities to build sustainable business alongside social or environmental impact. What we are interested in, is the impact you’re trying to have in the world – regardless of your legal structure.


Exploring the Tension between 'Doing Good' & 'Making Money'

This blog was written by TDi’s Pacific Investment Readiness Program Lead, Anna Moegerlein.


TDi exists to awaken the possibility of doing good and making money; this deeply motivates us and shapes how we work with businesses and not-for-profits. However until recently, I didn’t realise how difficult this can be, and how deep my own dualism often runs.

Socrates, Plato and later Descartes held that the immaterial mind and the material body are two completely different types of substance. For nearly 2,500 years this dualist thinking, deeply rooted in Greek philosophy, has more often led us to compartmentalise and separate things, rather than acknowledging integration and interdependence.

We can see this today in the way our education system is structured, with the liberal arts separate from the sciences and commerce; or in how see ourselves as separate from the natural environment, as if we exist independently from it; and we see it in how we separate our profit-making from ‘doing good’ in business.

The thing is, TDi’s work in the South Pacific is teaching me much more about integrated business than I ever could have discovered in my own culture. Last month, we went to Samoa to set social outcome metrics for an impact investment. We had been referring to our trip as a ‘social measurement trip’. But the trip turned out to be much more than just agreeing on social indicators. Our interviews with farmers revealed a lot more about the health of the business and our investment than just expected social returns. It opened up a whole world of risk and opportunity. Our conversations over two days were the best due diligence we could have done on the business.

For the last 5+ years, TDi has been focused on building blended value business models; businesses that – by design – are scalable and do more good as you scale them. However, we have still been unhelpfully falling in the trap of associating the ‘social’ part of our work primarily with impact measurement. We are now trying to change our language and practice to something more integrated. We are looking at risk and opportunity, which is driven by both financial and social factors. We are trying to ensure the social analysis is integrated with the business and financial analysis, rather than sitting as the final tab on the spreadsheet.

While not every business in the South Pacific is committed to supporting community outcomes, Polynesian and Melanesian culture often supports the idea of the two going hand in hand – with the ‘social’ being embedded in the business from the outset. I recently asked a Samoan colleague if he thought a local business owner took social impact seriously. He found it an odd question and answered that since the business owner is Polynesian himself, he would of course be committed to community development.

I wonder if there is a word with a different etymology to the English word ‘business’ (which has its roots in busyness and anxiety). I haven’t found it yet, but it seems we need a better word to describe the possibility of integration, of doing ‘do good and make money’. If you know of one I’d love to hear it.


Charity's Dead- So What Next?

Charity, as we know it, is dead, but there’s a new alternative to solve the world’s problems. A blog by our CEO Bessi Graham that initially appeared in Probono in August 2016.


This is going to be a difficult pill to swallow for many, but it is time to accept that the charity and philanthropy models as we know them are unfortunately not going to solve the world’s problems.

If they were, then the range of complex social and environmental challenges we face would be solved by now.

The same goes for traditional aid and development approaches. Despite our very best efforts and intentions, the current approaches fail to deliver either the social outcomes we desire, or a sustainable method of funding that ensures the ongoing provision of products and services.

"It’s time for a new model. It’s time to shift our mindset to one that is built on a premise that might upset your worldview".

You can do good and make money in the same business model. It’s called blended value – the delivery of both a social or environmental return and a financial return, without compromising on either.

For people operating in a world of black and white, where it’s either profit or Not for Profit, or doing good versus making money, this alternative worldview is a difficult one to accept. But accepting it is the critical first step we need to take to enable the design and delivery of business models that will change the world.

Once we’ve accepted this new worldview, it’s time for another (also hard) critical step – to stop thinking of social enterprise as a silver bullet.

Despite social enterprise being a buzzword, which can get as annoying as “innovation” and “disruption”, more often than not people simultaneously misunderstand and limit social enterprise.

Not for Profits and others in the social sector are excitedly discussing social enterprise, and how it will magically fill their funding gaps and save them from certain doom in a changing funding landscape. However, when you scratch beneath the surface many are using the term social enterprise to refer to a grant reliant Not for Profit that has “some kind of trading”. There’s nothing new, innovative or agile about that, and it’s certainly not sustainable.

“We’ve loved working with TDi so far, and there’s still plenty we can do together.”

- Peter Allen, CEO of Ethical Property Australia

At the same time as seeing social enterprise as the potential saviour of the Not for Profit sector you’ll hear comments like, “There’s no business model for doing good,” or, “We’re dealing with a segment of society that could never pay a commercial rate for our services so we will always need philanthropy.” However, instead of continuing to drain grant dollars out of a limited pool, social enterprises should focus on building a commercial model that will make them less grant reliant, thereby freeing up grants for fledgling enterprises who are in the grant reliant stage.

So why do we continue to believe that doing good and making money are mutually exclusive? Why are we so uncomfortable with integrated models that blur the lines and get us closer to cracking into new territory; on both our ability to make a dint on the social and environmental challenges we’re trying to address and on opening up new pools of capital that were previously unavailable to the social sector?


Anthea's Blog About Finding Opportunity in Adversity

I love hearing the stories of social entrepreneurs; their stories of courage and passion, stories of overcoming obstacles and creating something that will deeply affect someone else’s life. Don’t get me wrong, I don’t think everything or every idea is a winner, I’ve had my fair share of the opposite. When everyone else in the room is heralding the newest hero in social impact, sometimes I’m just not on the same page. It’s the same in reverse, sometimes all I hear in a room is “no”, but I come out seeing a great opportunity. I often get asked, how am I able to hear a different story?

The truest answer I have is that I use my gut instinct. When people say something isn’t possible, I can often see and feel an opportunity that will take us somewhere. As I’ve gotten older and had to think more deeply about finding opportunities and how to teach others how to see through adversity, I’ve realised there is some method alongside my seeming madness.

I think there are four attitudes we can approach life with that allow us to see opportunity where others see risk and difficulty.

"The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty"

— Winston Churchill

Curiosity

I’m deeply curious and have never lost this. As children we are naturally curious and constantly asking two key questions ‘why?’ and ‘what if?’ Unfortunately we have this beaten out of us by the time we’re about eight or nine years old. But the ‘why?’ question is crucial, it leads us to insight and understanding. It helps us discover how things work and what possibilities might exist. Curiosity keeps our mind engaged to work out the implications.

Being prepared to jump into the unknown  

My preparedness to go into unknown places has lead me into all sorts of troubling situations, including sleeping on the floor of a rat-infested barn and being shot at in a market place in Port Moresby. But, it has also led me to some of the most wonderful places. For example, the rat-infested barn lead to the establishment of a midwifery program in Cambodia that over the past ten years has influenced the practice of literally thousands of Cambodian traditional birth attendants.

The truth is, I often don’t know exactly where an opportunity will take us, and where we’re going to land. It’s in these moments we need to trust our instinct, curiosity and lived experience to create a path forward.

"Ideas alone don't change our world for the better. Ideas that inspire action do"

- Simon Sinek

Unlearning

We live in a vast new world that is changing at the fastest pace in human history. Our ability to not only learn, but I think more importantly to unlearn, is paramount. There is an old saying that wisdom isn’t about what we’re prepared to learn, but instead about what we’re prepared to unlearn. The problem I see is that we get anchored to the wrong things; we often get anchored to the ‘how?’ and the ‘what?’ instead of the ‘why?’ We need to be continually unlearning our ‘how’s and ‘what’s but our why is what centres us and keeps us on the right track.

Reflection 

Taking time to stop and reflect on all of the above is critical to us seeing new ways. Reflecting on bringing together our ‘why?’ and ‘what if? questions, thinking about where I need to jump into the unknown and where do I need to push my ‘what’ and ‘how’ to unlearn old ways and discover new ones.

Too many leaders act with such certainty; what if we took the time to discover new pathways to solve problems from a different vantage point? Just maybe we will see possibilities where others see impossibilities, to solve problems where others have given up.


Creative Ways to Refresh Your Business Model

This blog was written by Isaac Jeffries, an associate of TDi. 


Designing new business models is exciting – conversations full of optimism and intrigue, especially when you get the gut sense that this idea is a winner

It’s important that we don’t fall in love with our first idea. Yes, it’s a good idea, and there are several aspects that will probably succeed. But an idea being exciting does not mean that it has earned permanence.

It’s more likely that this idea contains the DNA of a highly successful model, but it needs to go through some refinement in order to get it out.

What we should talk about is persevering with the essence of the business, whilst letting go of some particular details.

It’s called “Pivoting”

Keeping one foot planted on the ground, then moving the other around to find a better position.

“An awful lot of successful technology companies ended up being in a slightly different market than they started out in. Microsoft started with programming tools, but came out with an operating system. Oracle started doing contracts for the CIA. AOL started out as an online video gaming network.”

- Marc Andreessen, Entrepreneur

Pivoting is tough to swallow, because it starts by accepting the idea that:

“We won’t survive where we are, but we might thrive somewhere slightly different”

This comes with the excitement of future success – there are several ways in which we can pivot, and there’s a good chance one of them will work if we think this through.

However, it requires a risk seeking disposition – a willingness to try something that might not work.

Here are some useful questions to prompt your thinking:

What if we had to offer the same value proposition to the same customer, but through a different product/service?

What if we had to offer the same product/service to a different customer segment – what would be different about the value proposition?

What would happen if we gave our core product away for free? Where else would we make money?

What if our service delivery had to move to an entirely digital platform? How could we serve customers without ever meeting them in person?

What partner activities could we do better ourselves?

What headaches could we remove through outsourcing? Which resources and activities could be palmed off?

If we wanted to massively increase prices tomorrow, what would need to change within our customer segments and service delivery? What would a premium model look like?

What problems will our customers be concerned about in five years’ time?

You’ll be surprised by the opportunities that sit slightly to the side of your idea.

Better yet, you’ll be surprised at how a small change can open up a whole new market, and yet other drastic changes may not diminish your value proposition at all.

Remember, experiments are your best friend. If your gut instinct is right, an experiment will back you up.

By being proactive, we can spare ourselves a lot of wasted energy and emotional stress, and quickly find our real audience.


Try it for yourself. Ask your team:

Are our customers validating our current business model?

If not, which parts are being validated?

Which elements (product, price, customer, design) are up for grabs in a pivot?

Using a Business Model Canvas, what would 3-4 different pivots look like on paper?

How can we quickly and cheaply test our new assumptions?

If our tests come back with good news, are we prepared to try something new?


Isaac Jeffries is TDi’s first ever employee, and has with over 180 impactful businesses around the world. He’s currently designing and building social enterprises in India, Papua New Guinea and Indonesia. He writes at isaacjeffries.com


Business Model Alarm Bells

This blog was written by Isaac Jeffries, an associate of TDi. 


Filling in a business model canvas is a means to an end – creating a company that is desirable, feasible and viable.

If there are any issues with the idea, let’s get them out on the table now – in an environment where they are easy to address, or we can convince ourselves to steer clear of a potential disaster.

Alarm bells create panic. They also save lives.

By understanding the issue early, we give ourselves the best chance of survival. Sometimes it’s a false alarm, like when your hot shower sets off your smoke detector. That’s why we approach these alarm bells with optimism and curiosity – either there’s no issue, or we get to find our weaknesses and fix them.

Here are some examples of Alarm Bells and Red Flags that should prompt further exploration.

“We only have one customer”

The issue here is that you have all of your eggs in one basket. One huge customer can kickstart a business, but they can’t be relied upon. The model needs to be appealing to a deeper market of customers, so that one customer doesn’t have unfair leverage over prices and contract terms.

If the idea is only appealing to one customer, maybe it’s not a strong idea?


“We are dependent on one staff member”

Bootstrapping is the art of improvising with limited resources, and it’s the best way to start a new business.

Over time, bootstrapping creates bottlenecks – if only one person can deliver your value proposition, then they become irreplaceable. That means the business can’t grow quickly, and there’s a great deal of risk around that person leaving.

You either need to be able to afford to recruit specialised staff, or become great at training new people in your methodologies.

Otherwise your founders can never step back from day-to-day operations, and you’ve created a job instead of a business.

“We operate a lot of channels”

It’s easy to engage with your customers on a number of fronts – email, web, shopfront, social media, package delivery, etc.

However, it is challenging to do these well.

Can you dedicate enough energy and attention to master each of your channels? If not, it’s time to start making cuts, getting back to the essential elements and over-delivering on each interaction.


“We have lots of key activities”

As above, it’s hard to be truly great at thirteen different things. Too many activities divide your energy and attention, leading to mediocrity across the board.

Ask yourself: what business are we really in?

Which activities are best done by our team, and how do we handball the others to a key partner?

“We can’t articulate why customers will choose us over our competitors”

Your value proposition needs to be more appealing than your competitor’s. If you can’t explain why your offer is better for your customers, how on earth will they reach that conclusion on their own?

Don’t forget your hidden, dangerous competitor; it’s called “Doing Nothing” and it’s both cheap and easy.

People don’t care for 10% improvements – your idea needs to be significantly better than what’s currently on offer, or else people will stick with what’s comfortable.


“We are all things to all people”

You can’t please everybody. It’s better to have a smaller, loyal customer base who love you than to try and be generally liked by the entire market.

Kevin Kelly talks about the need to have “1,000 true fans” who will be your core customer base and act as your evangelists. Find your niche and delight them.

As Seth Godin said – nobody gets a Suzuki tattoo.

“Our customers aren’t paying anything”

It’s worth remembering in life – if you use a service and don’t pay for it, you’re not the customer, you’re the product.

Yes, we need to engage and delight the end user, but we also need to thoroughly understand the motives of the person who is paying our invoice. What are they looking for? How do they make decisions? How do they measure success?


“Customers only make one purchase”

Repeat customers are efficient – by winning them once we can enjoy a stream of sales. It’s much cheaper to retain a customer than it is to bring on somebody new.

If our model doesn’t allow for repeat business, then we need to constantly engage new prospects. It also means that our customer base may dry up over time – meaning we may exhaust our market just as we approach our breakeven point.

“We can’t find enough customers to do much testing”

If you can’t find enough people for a test, then there’s either an insufficient market or you’re looking in the wrong places. Your model should respond to a real pain point – one that is shared by a large enough niche.


“We need to push uphill to make sales”

People need to want what you sell. Sure, you might need some momentum, but things should get easier over time as you find your tribe and build a base of happy customers.

If you’re always twisting arms, maybe it’s time to adjust. Seth Godin said it best – find a business you can push downhill.

“Our model relies on generosity/altruism”

Generosity is fleeting; a brief and refreshing experience for your customer, not the main basis of their decision making.

We want to pair social good with something that solves a problem for our customer. Charity is quickly exhausted, whereas self-interest stays motivated forever.

If this is our main value proposition, then we either need to dominate at customer acquisition or customer retention, preferably both.


“We have a high breakeven volume”

Life becomes stressful when it takes a lot of sales to break even. The danger is that you find a heap of customers who love you and yet you still go bankrupt.

By structuring the model so that it takes fewer sales to break even, we give ourselves the best chance of survival. It might be time to explore a switch to variable costs, renting rather than buying, and forming clever partnerships.

“Our model requires large upfront investment”

As Robert Herjavec says, you want to invest to support the sales, not to create the sales. That is, make something popular then invest to decrease your production costs. If you invest before you’re popular, you take a huge risk that you can’t afford to get wrong.

If you can’t avoid the upfront costs, at least do some serious testing to validate that there is a strong market who are delighted by your price points.


If any of those sounds all too familiar, it’s time to experiment some new business model designs. Grab a canvas or a whiteboard, and dream up something slightly mad – new customers, new value propositions, new ways of delivering your service, new price points.

Isaac was TDi’s first ever employee, and has worked with over 180 impactful businesses around the world. He’s currently designing and building social enterprises in India, Papua New Guinea and Indonesia. He writes at isaacjeffries.com