Book review: Mission + margin = successful social enterprise
By Kevin Lynch and Julius Walls
Berrett-Koehler Publishers, Inc.
I crashed a pretty cool meeting the other week. My employer was hosting the inaugural get-together of the Hamilton Social Enterprise Network.
The meeting started in a boardroom, but strong turnout prompted a move across the hall to a bigger venue.
The place was packed with folks who were running, ramping up and ruminating about money-making social enterprises. There was keen interest, lots of discussion and some healthy debate around defining this new breed of business.
Ask authors Kevin Lynch and Julius Walls for a definition and they'll tell you a social enterprise is a business whose purpose is to change the world for the common good.
"Business is a vehicle of incredible power," say Lynch and Walls, who are changing the world on the strength of T-shirt and gourmet brownie sales. "It can be used for the good, it can be used for the bad or, as is most often the case, it can simply be used selfishly for the merely mundane. We have to change how things are done. We have to, and we can, harness this power for the good. The opportunity is great because the need is great."
Lynch, a former advertising executive, is president of Rebuild Resources Inc. The $2.2-million social enterprise based in St. Paul, Minn., helps chronic addicts and alcoholics find a path to sobriety through spiritual recovery and transitional employment. Rebuild's operations include a custom apparel and promotional items business.
Walls is CEO of Greyston Bakery in Yonkers, N.Y., and senior vice-president of the Greyston Foundation, The bakery, which serves industrial and gourmet markets, hires and trains whoever walks through the door and invests 100 per cent of its profits back into the foundation's housing, health-care and AIDS hospice projects.
Rebuild's been in business for 26 years and it's 23 years and counting for Greyston.
That's an impressive track record given that 80 per cent of businesses fail within the first five years.
Social enterprises face the same challenges as traditional businesses plus a host of other pitfalls such as unwarranted optimism, the failure to cut losses and a mistaken belief that a mission can prevail over reality.
"These factors operate so powerfully that they often become almost a part of the DNA of social enterprises.
The passion of purpose can blind one to the hard, calculated decisions that must be made to grow a business."
Even the most compelling mission won't matter if social enterprises inefficiently serve up lousy products that can't compete with traditional businesses on price, quality and service.
"Don't expect customers, even those who most keenly support your mission, to buy if it hurts. People will not accept any degree of product inferiority or, frankly, even parity, just because of your social purpose."
So what's the formula for success?
Do all the right things that a traditional business does.
Avoid social enterprise traps.
Become adept at balancing impact and profit and managing the dynamic tension between the demands of the business and the imperatives to serve the common good. And grab points of leverage that are unique to social enterprises. According to Lynch and Walls, a compelling mission combined with a killer product equals magic in the marketplace.
"Every moving part of a social enterprise is a virtual double-edged sword of challenge and opportunity.
"If we can help you navigate around the challenges and capitalize on the opportunities, then, perhaps, you can improve the odds that your social enterprise will be among the businesses that succeed.
"Better yet, then, perhaps, you can go to scale and really change the world."
Here's hoping the next meeting of the Hamilton Social Enterprise Network is once again jammed with aspiring social enterprisers with the passion and business smarts to change our world for the better.
(Another good resource worth checking out is the Stanford Social Innovation Review)