The Real Role of the B-Corp

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This week I attended the B-Corps Handbook book launch at the offices of Hanson Bridgett in San Francisco, the law firm instrumental in lobbying California to institute the Benefit Corporation legislation.

As a marketer myself, I don’t know that I’ve ever found myself in a room with so many lawyers – and I have to say it was heartening.  If lawyers in California think this topic is important,  it indicates that the infrastructure for the B-Corp certification is in the early stages of hitting its stride for becoming more than just a marketing initiative, but a substantive opportunity to influence the business community it is targeting.

The B Lab – founders of the B-Corp – launched 7 years ago to critical acclaim. Critical in that the market was flooded with sustainable certification symbols such as USDA Organic, LEED and Energy Star. Acclaim in that B-Corp took a much more holistic and lasting view of business’ propensity for net-positive effect, evaluating fundamental operational standards and also putting people into the equation. It is an agnostic certification process for any business that wants to take a values-led approach to doing business differently.

Twenty-seven states have now taken note of B Corps’ lead and passed Benefit Corporation legislation. (Note: the two are separate entities, one is a certification to receive a marketing benefit and one is a legal framework aligning shareholders and management to protect a company’s mission incorporating social benefit and prioritizing revenue distribution accordingly).

The real value behind B-Corps is not simply in its exhaustive process to evaluate a business’s operational policies as they reflect mission, community, employees and environment, but the POV that becoming a B-Corps extends to prospect customers, clients, partners and the supply chain in which the business operates. As one participant thoughtfully noted “It would make me evaluate prospect clients through a whole different values lens. I have the ability to work with many clients but this would help me know I’m having an even larger effect with like-minded businesses”.

B-Corp has stated that it hopes to become irrelevant and Benefit Corporation status is one step in that direction. However, B-Corp’s work is hardly done.   With only 1100 companies in 36 countries officially signed on, the evangelism has only just begun.

Social Benefit as Business Innovation Lens

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Last week I had the honor of guest lecturing in John Greathouse’s Entrepreneurship class in the Technology Management Program at UC Santa Barbara. The topic of the day was where to draw entrepreneurial ideas from. I proposed that new ideas might come from using a social benefit lens.

What is a social benefit lens? To think about social benefit is to think about a product or service that would benefit an underserved population and to provide it commercially.

Let’s start with underserved populations. A good example is the underbanked. In the US alone, 60 million adults have minimal or non-existent relationships with traditional financial institutions leaving them vulnerable to over-priced services that essentially create a financial vacuum for the customer that’s tough to get on top of.   Mango was founded in 2009 as a for-profit financial institution that empowers underbanked adults by providing customized, affordable, and high-quality financial services to help them better manage and get ahead in their financial status. With a presence in 6 global markets, Mango offers low-cost, sustainable solutions that provide convenience, service, and a positive customer experience.

Mango focuses on a specific marginalized customer but there are other opportunities to use social benefit as a lens for a for-profit business benefiting society.

 Ultra Testing is a for-profit software testing business that looks to leverage the unique skill sets of the underemployed 1.5 million adults on the autism spectrum. Reasoning that software testing requires an incredible amount of focus for repetitive pattern recognition and problem solving, and with 80% of these adults unemployed, Ultra Network launched a business that meets the special social employment needs of these adults while creating a business that has a 20% higher bug detection ratio than standard testing services. It’s this efficiency that Ultra sells its clientele on, not the dual benefit that it’s solving a social issue at the same time.

By looking at social benefit businesses, there is a new more sustainable way to think about invigorating economies and the people who participate in them. Products and services with transactional prices force organizations to build businesses that must compete on product performance but will also create social value. Instead of creating charitable services to address inequities, innovating around social impact could create entirely new industries that will change the way we look at product value.

Entrepreneurs using a social benefit lens will not only stand out from the pack from a financing perspective but could create revolutionary new business models with historical significance.

What is a Social Venture?

cca_logo On Saturday night, Steve Diller, a founding faculty member of the Design for MBA program at the California College of the Arts, hosted their annual Social Ventures dinner and  invited myself,  Adam Elmaghraby, Director of Social Invention at Kumu and Leticia Landa, Programs and Development Manager at La Cocina, a business incubation program for immigrant women in the food service industry, to participate in a panel fundamentally asking the question “What is a Social Venture?”. The conversation was really interesting given the degree of participation by the students in the audience and the unique experiences of my fellow panelists.   What follows are outtakes from that discussion:

QUESTION: Broadly speaking, what is a social venture? 

A business with social benefit as a lens for developing products and services designed for transactional consumption and the single source of business revenue.  Social benefit equates to serving a population that is otherwise marginalized to the extent it is unable to realize their potential as a participant in a community’s eco-system.

QUESTION: How has it changed as a concept over the years?

Market forces have created both the demand and the opportunity for a social enterprise to become self-sustaining.  We live in a time where our social problems are more evident.  We have a talent pool who sees opportunity and in some cases have been forced into creating businesses that differ from traditional models.  Institutional aid and business frameworks (such as agricultural subsidies that effect school lunch programs and banks that rely on their fees and services as revenue sources, while simultaneously contributing to the inequality gap) are missing broad slices of the widening economic gap.  With unique and more widespread access to funding via crowdfunding platforms and venture capitalists who are looking for innovative ideas, we’ve created a market place that is supporting the momentum behind thinking about social enterprise differently.

QUESTION: Is this the future of social enterprise?

Not exclusively.  Organizations like La Cocina are leveraging their 501c3 status to provide much needed opportunities to help develop and build the skills of their clientele.  Their business model is sound in that it earns over 50% of their revenue, minimizing dependencies on fluctuating donor contributions and grants and providing more predictive growth for their programs.

QUESTION:  Provide an example of a social venture that represents the future of this type of thinking.

Revolution Foods started in schools to get health, kid-designed lunches into every kid’s day.  They serve 1 million meals a week and 80% are going to kids who are on free and reduced cost meal programs.  The lunges work within the school’s cost structure and they’ve even been able to start packing the lunches for grocery stores.

QUESTION: How central is the idea of “under-resourced” or “disenfranchised” groups of people to the idea of social ventures?

100% central.  It’s the singular lens for social wealth creation, looking at disenfranchised audiences as either labor pools or as the audience for goods and services.

QUESTION: What makes for a successful social venture?

Products and services for sale.  Understanding the needs of the target audience in developing the product.  And a relentless focus on the performance of the product or service as the key driver of purchase.  We need to act as if the target audience has a choice and engage them as much as we do with a “traditional commercial product”, like a Nike shoe or your favorite brand of lotion, to deliver consumer value.  Revolution Foods could have just created healthy lunches but their goal was to create lunches that kids liked.  One of their core tenants was “kid-designed”.  This is understanding your audience and thinking like a competitive product.

QUESTION: It could be argued that Grameen’s business models were not bullet-proof to scaling, can social ventures scale and still be effective?

New legal and accounting metrics help to protect the values and operational integrity of a company with a social mission.  However, La Cocina does not want to scale so perhaps this is not the right way to look at the impact that a social venture can have on the economy.

QUESTION:  What stands in the way of being successful?

Getting trapped in the charity mindset. Social ventures do not need to succeed simply because they have social value.  It’s important for those running the business to seek relentless performance attributes in their products.   Creating a product that is competitive is critical.

QUESTION: Where are the greatest opportunities for social ventures to have an impact? 

Domestically and abroad the answers are virtually the same.  Healthcare – programs to help people proactively manage their health issues, prevent the conditions before they start, childhood obesity, affordable nutrition and healthy habit lifestyle products that target economically challenged urban and rural populations.  Also education and job training, targeting slivers of the population that don’t have access to education,  job training and financial planning or resources.   Basically looking at fundamental areas that help return dignity and a sense of ownership over their own futures.

It was a fun night with a clearly engaged group of 4,5 and 6 year design cohorts that chose to come spend a precious Saturday evening with us.

How to Start a Startup Facebook Group

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Heat map of the regions participating in the FB group just prior to the start of the lecture series at Stanford yesterday.   What other proof do we need that a global entrepreneurial mindset is in motion?

How to Start a Startup

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Tomorrow will be Day 1 of my first Startup Course at Stanford.   Will I get credit for this? I wish. But I’ll get something better with my free online video course, an education in how the elite startup bootcamp is training their protégés and future investees from the President of Y-Combinator and a conversation with literally thousands of entrepreneurs set on changing the course of their lives and the world.

The course syllabus for CS183B is a veritable who’s who of the Silicon Valley startup world with the first class including Dustin Moskovitz, co-founder of Facebook as a guest lecturer. Perhaps that’s why Sam Altman, the 29 year old Professor elect, chose Facebook Groups as the place to convene conversation around this talk of the town course.

When I joined the Group last night there were over 15,000 members with a comment thread including 300 introductions crossing at least 42 countries (I stopped counting).   And tons more sub-groups were developing as participants voluntarily broke into more geographical groups to figure out gathering points and discussion groups.   There’s even a google spreadsheet listing the (to date) 425 global universities and 100 other group viewing locations for the online course.

Am I really ‘taking’ the course? No. But I am looking for answers to how the “experts” frame questions around challenging systems status quo, how innovative ideas are shaped and how B certification and other social benefit opportunities are addressed.

Regardless of those answers, it’s all pretty exciting and shows even more promise for the future of entrepreneurship. Kudos to Stanford for offering up this unique partnership and especially at a time when the world needs energy and ideas. As Michael Dell said at the final day of the Mashable Social Good Summit in NYC yesterday, “Entrepreneurs are the engines of the economies around the world. We need to create a culture that embraces entrepreneurs.”

p.s. for anyone interested in the pre-reads for tomorrow, they are here: Good and Bad Reasons to Become an Entrepreneur and Advice for Ambitious 19 year olds.

Priming the pump for mainstream investors

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Kiva has launched a remarkable employee giving strategy that enterprise companies like Google, HP and Deutsche Bank have taken advantage of, and with strong executive leadership, these companies have delivered significant results.

CSR programs work towards lifting morale by demonstrating support for communities in need. Traditionally, these employee activities have included out-of-office hands-on volunteer activities on personal or professional time working directly with a charity’s beneficiaries.   Kiva’s Team crowdfunding platform has created a low-risk opportunity for companies to engage employees in the act of lending. Recipients are not charity cases and the employees need not leave the office.

 Not only are the results measurable and the funding recyclable, but the experiential influence of the lending process has an end-to-end productivity spectrum that leaves the employee feeling satisfied and wanting more.  

Premal Shah, President of KIVA led a panel at SOCAP last week that gave us more details.   Ranging from $25-$75, each of these companies created a program whereby their employees could lend the maximum value. Participation has been anywhere from 43-60% with HP clocking in at 120,000 employee participants to date.   Google even created an online visual map that shows in real time, where the loan originated and the country it went to.  

Here is a CSR program with unique and real potential to unlock awareness for the value of socially beneficial business platforms.

The founder of LinkedIn, Reid Hoffman took the entire concept a step further by issuing a challenge in 2012 by providing $1M outside of his organization. Kiva was instructed to distribute certificates delivered through social media to introduce new would-be investors to the concept. Over the course of 14 months, not only was $994,000 returned to Reid but in incremental $1.2M got invested by newly indoctrinated investors and entrepreneurs received loans at 10x’s the normal rate.

Like all CSR efforts, the question is what comes next. Crowdfunding is changing financial markets and millennials are seeking to be a part of the solution.  Google invested in Oakland’s Impact HUB where Kiva Zip recipients can operate and Googlers can invest their time to assist in capacity building consultation.   CSR is a valuable company perk but where can these well-meaning efforts drive real market change?

Photo credit: Sharyn Morrow

CSR or Real Innovation

Yesterday Dan Schulman, Group President of Enterprise Growth at American Express opened SOCAP’s third day in San Francisco by talking about the company’s work to address the issues of financial inclusion for the underserved.  

 Globally 2.5 billion are excluded from traditional financial systems. One third don’t have access to bank accounts resulting in precious time and money wasted to seek out facilities simply to access cash from their own hard earned paychecks. With 2-4% taken as a service fee in addition to interest and other fees, the figure that the underserved pay was $89 billion in the U.S. alone last year.

Since the market’s collapse in 2008, financial platforms incorporating both technology and addressing inherent lifestyle challenges have been a burgeoning industry for entrepreneurs.   Backed by the Omidyar Network, Mango now has a presence in 6 countries that empowers underbanked adults by offering a complete set of online and offline services that are convenient, low-cost support lifestyle decisions that affect financial decisions.

Given the market opportunit ,the question is whether American Express’s launch this summer of the documentary “Spent: Looking for Change” produced by Davis Guggenheim and the announcement of American Express’s Financial Innovation Lab, are just CSR window-dressing or indeed reflective of a deep brand pivot within the company. For American Express, a brand that has long stood for exclusivity, this type of shift to inclusivity would be significant. But there are reasons to believe, despite the absence of a non-binding legal framework that requires both social and financial value to shareholders, that this indeed is a deep company-wide pivot.

The primary reason is that the Great Recession showed us that the status quo of our financial eco-system was essentially destroying the customer base.   The second is that the hallmark of a great brand is demonstrating a leadership position in driving marketplace change. And the third is that American Express was founded some 160 years ago as a freight-forwarding business. Hardly a brand for the high-minded but certainly demonstrative of a company that knows how to read the market and succeed.

Great brands will pave the way for sustainable business-based solutions to our growing social challenges and there is every reason to believe that American Express has been gearing up to lead real marketplace change.