Every business is (or should be) a social business
The idea that social businesses are fundamentally different from nonsocial businesses is simply false – and yet it’s one we return to constantly. We talk about the differences between ‘’social businesses,’’ those that are mission-led and focused on social change, and ‘’nonsocial businesses,’’ those that focus on profit. But does pursuing a social purpose really require a different business structure?
As someone who works with a variety of organizations in my roles as strategy consultant, venture capitalist, professor and mentor, this question intrigues me. To answer it, I evaluated a few years’ worth of business models created and implemented by clients (usually mature businesses), early-stage companies, entrepreneurs I’ve mentored, and college students starting new ventures. The results? I found that both social and nonsocial businesses focused on making sure revenues were greater than costs, either through selling something, raising money or acquiring grants. The differences had more to do with traditional business characteristics: virtual vs. physical, product vs. service, etc.
While the social businesses in my sample focusedmore on achieving a positive impact in each of the nine business model elements (value proposition, customer segment, channels, relationships, key partners, key activities, key resources, costs and revenues) as well as the whole model, many of the nonsocial businesses also focused on the impact of each element, and, interestingly, they happened to be very successful.
All businesses are social – all companies must maintain relationships with their customers, employees and suppliers. And improving these relationships will always improve business outcomes. The historical division between social and nonsocial businesses – between ‘’purpose’’ and ‘’profit’’ – is artificial and antiquated.
I recently spoke with my friend Alex Osterwalder – someone with vast experience creating business models all over the globe – and we agreed that there’s no significant difference between the business models of social and nonsocial companies. In fact, we both thought that for-profit social businesses can have a particularly powerful impact. As Osterwalder says, ‘’The most amazing business models are those where profit and impact live in harmony. Business models can be designed where impact doesn’t diminish revenues or profit and vice versa.’’It’s time we stop talking about ‘’social’’ vs. ‘’nonsocial’’ and encourage all entrepreneurs to focus on impact in every element of their business models. We read about companies like Patagonia, Virgin and Cemex who profitably and purposefully balance doing well and doing good. If they can do it, why can’t the rest of us?
(Deborah Mills-Scofield is a strategy and innovation consultant and a partner in Glengary LLC, an early-stage venture capital firm. She also teaches at Oberlin College and is a visiting scholar at Brown University.)
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