Build A Social Enterprise Strategy—The Right Way

July 22, 2016

social enterprise

In her last post, Liana Downey discussed the importance of systematic research to help organizations understand the needs of both their customers and client beneficiaries. In this final post on creating a successful social enterprise, she explains how to meet those needs by showing what works… and what doesn’t.

The question of “What works?” to satisfy unmet needs is often glossed over by passionate social entrepreneurs, eager to make a difference. In business, we assume that the need has been met if someone buys the product. It’s not quite as clear for an intervention or service, since there are often several interconnected forces at work for many issues (such as poverty, unemployment, and homelessness).

What doesn’t work

TOMS Shoes founder Blake Mycowski launched the company after a trip to Argentina. He noticed many barefoot children, whose families could not afford shoes, were contracting hookworm. The original TOMS shoe came with a promise to donate one pair of shoes to a needy child for every pair bought, propelling the for-profit TOMS into the public arena. This resulted in donations of more than 35 million shoes. While this seems like a great success, critics raised a couple of issues.

Don’t ignore the local market

When goods or services are provided for free, any local market that might have existed is undermined. The local shoe manufacturer’s product suddenly needs to compete with free goods. Economists have long framed this practice as a dumping of goods. For this reason, the practice is illegal in many countries.

Don’t skimp on research

Providing shoes may not have been the most impactful way to combat hookworm, as its spread can often be traced to untreated sewage. Numerous development experts derided TOMS and its efforts. One of the company’s original biggest fans—social impact investor Steve Widmer—reconsidered, saying: “I have matured to believe that following the heart to fight poverty is a terrible idea.”

Getting it right

TOMS started with an intervention that addressed a symptom of poverty, but did not go further to identify a broader array of possible solutions. In response to criticism, the TOMS model has been adapted substantially. It is now more sophisticated, to support local job creation and training.

What DOES work

For the past 30 years, Greyston Bakery has helped many people out of poverty by using a unique Open HiringTM Model. Today, this leading social enterprise employs more than 130 workers, and serves more than 2,200 community members annually. But getting the strategy right took a lot of careful reflection and design.

Find the root cause

In the early 1980s, Bernie Glassman set out to understand the Bronx. He discovered multi-layered and complex issues: lack of affordable childcare made it hard for many parents (especially single parents) to work. Without a steady income, housing was out of reach, and homelessness was a common outcome for many of them.

Develop a broad array of programs

Greyston’s strategy is more than a business model—it offers the hard-to-employ a new chance at life. Greyston connects employees to not just a job, but to a range of services to help them succeed in life, such as affordable housing, low-cost childcare, health services, education, and more. What started as a modest bakery has grown into an organization that continues to support thousands of Yonkers residents.

Three steps to creating a powerful social enterprise

To maximize impact and create a powerful strategy for your social enterprise, start by getting really clear on who your customers and client beneficiaries are. Invest time to understand the unmet needs of both groups. Research and prioritize the approaches that are actually shown to successfully meet their needs. Once you’ve defined these elements tightly, decision making is simplified.

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Leading a successful social enterprise requires out-of-the box thinking. Explore AMA's leadership resources for inspiration behind your next strategy.

About The Author

Liana Downey, Stanford MBA, is a global strategic advisor, speaker and author of Mission Control: How Nonprofits and Governments Can Focus, Achieve More and Change the World (Bibliomotion, May 2016). Liana is a former leader of McKinsey’s social sector practice, and lectures at NYU’s Wagner Graduate School of Public Service. You can connect with her @ldandassociates.

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