The business of doing good: the enterprise is the strategy

Organizations in the business of doing good are created with two intents: to make a profit, and solve a social problem. This makes them different from other kinds of businesses. The social intent adds complexity to the way these organizations measure their success. So unlike classic startup questions to kickstart thinking on new business: “can I improve on an existing business? Can I do this differently and better? Is there an underserved market?” Social enterprises’ questions are quite a bit harder because they must fit into a complex web of existing efforts to get to the right solution.

Because of this, the shape of the organization itself needs to be understood both as a way to be profitable, and as a strategy to solve a problem. The four types of institutions seeking to capture our investments are basically four different pathways to achieving some kind of social goal; the way the business makes a profit is a component of a theory of change to achieve a social aim. We have different questions about a strategy to solve a problem than we do about a profit question: am I targeting the right audiences and groups? Who am I working with in mutual support, not in competition? Who are my constituents, and are they different from my clients and my beneficiaries? If so, how? How do I take on new projects to support my strategic aims?

What’s great about social enterprise is the high degree of flexibility and agility to respond to new information. The usual story is that the success of a social enterprise happens because the entrepreneurs are able to shift their business model to market shifts, and their social metrics to new information, at the same time. This is a huge advantage that business often has over nonprofits.

From my research, it’s clear that organizations in the business of doing good can come out of year one of operations looking very different than they did going in, partly because they have to balance these two intents. Course correction comes not only from the profit and loss sheet, though it can be inspired by it. It also comes from the experience of trying to have an impact, and realizing that the problem you’ve been working to solve needs a different approach entirely. Looking at measures of impact can suddenly make a change not only necessary, but obvious.

The flexible and agile approach is not one I’d want to lose. Much has been written elsewhere about how nonprofits can get locked into a strategy, and what to do about it. But I also know that flexible/agile is hard to match up with the constraints of how we deal with social problems, where slow and steady efforts are meant to ensure nobody is left behind. Depending on how well-funded it is, a social enterprise can also have an outsized impact on nonprofits and governmental initiatives working on the same social problems (and on potentially vulnerable constituencies). So calibrating change correctly is essential not only for the social enterprise, but for the whole field in its area of impact.

So how can we reconcile the strategies and capacities of flexible, agile, slow and steady? One pathway from civil society that can help is to set up intentional reflection points over the course of the strategy’s lifetime.

• start with a solid problem identification, including defining and being honest about the limitations of what you can achieve.
• develop a theory of change to get there (there’s even a .org about that)
• bake in opportunities to get external feedback on how you’re doing — from your constituents, and your beneficiaries, who might not be the same people. If you work with underserved communities, elevate and empower their opinion of how they want to be served. Look laterally to see if your near peer organizations can give you some insight.
• find some feedback outside your echo chamber and let that feedback fight constructively with the folks inside your echo chamber
• create a regularly scheduled, well-constructed opportunity to pivot — a strategy review process, for example — that’s outside of the bottom line.
• use that to reassess whether you’re doing anything, and also whether you’re solving the right problem — and start over from the top.