Blurring The Lines Between Business And Nonprofit

The end result will be a more inclusive and sustainable global economy as business leaders learn from social sector leaders, and vice versa

Published: Aug 2, 2010

Leaders with big ideas to change the world face a tough choice early in their careers. Or at least they think they do.

If they want to make money and help themselves, they must choose the business sector. If they want to improve the planet and help others, they must choose the social sector. Historically, the paths do not cross.

But lately the line between for-profit and not-for-profit has blurred. New cooperation and competition at the interface between the sectors has led to fascinating solutions to complex global problems at the base of the pyramid.

ngel Cabrera, Thunderbird President
ngel Cabrera, Thunderbird President
The end result will be a more inclusive and sustainable global economy as business leaders learn from social sector leaders, and vice versa. Unfortunately, not everybody is happy about the intermingling of the sides.

Nongovernmental organizations sometimes question the motives of their business counterparts who profit from the poor. And business organizations sometimes question the sustainability of their social counterparts who cannot survive without handouts.

The result is an unproductive debate about whose motives are purer or whose organizational model is more effective. Those who engage in such a debate often lose sight of the bigger question: Are essential goods and services reaching the people at the base of the pyramid who need them most?

If so, then it should not matter who gets rich or who relies on donations.

Computers for the poor
The idea of using computers to bridge social gaps provides an example of the tension that sometimes arises between the sectors.

Social experiments such as the Hole in the Wall, started in 1999 in New Delhi by NIIT, prove that providing public computers to uneducated children from the slums produces surprising results. Without prodding or guidance from outsiders, children exposed to computers quickly figure out the technology and use the tools to improve their lives.
Greek-American architect Nicholas Negroponte looked at research such as this and saw an opportunity to create value at the base of the pyramid through the development and distribution of inexpensive computers for children worldwide.

As an advocate of social enterprise, Negroponte took a traditional not-for-profit approach to the problem. He formed One Laptop Per Child, a nongovernmental organization, and began a quest to develop a durable laptop computer for $100 or less.

Meanwhile, Silicon Valley chip giant Intel, inspired by these early experiences in using computers to improve education, saw an opportunity for a business solution. The result was the Classmate PC, a low-cost personal computer for children in the developing world.

Negroponte and others have viewed Intel’s for-profit venture as unwelcome interference in a promising social project. Yet these critics overlook the more important issue, which is whether or not computers are reaching wider audiences of children worldwide.

If so, then it should not matter whether the solution comes from the business or social sector. If One Laptop Per Child finds a nonprofit solution, that’s great. If Intel makes a buck doing the same thing, who cares?

Escaping tyranny
Social innovators in the 21st century need to be pragmatic about choosing the right vehicles to have the greatest impact. They should not be afraid to borrow ideas from other sectors or to forge alliances that cross traditional boundaries.

They must realize that every sector, working in isolation, faces its own form of tyranny that hampers innovation.

The government sector can set policy and collect taxes, which opens doors to innovation. But political leaders face tyranny of elections.

Re-election comes every two to six years in most parts of the world, which does not give much time for politicians to experiment with risky, long-term solutions. Voters want to see results.

Many see the business model as more conducive to innovation. Indeed, most large-scale solutions in health care, transportation, technology, agriculture and other industries come from private companies — not government.

But business leaders face tyranny of results.

Publicly traded company must deliver results to shareholders every three months. Even startup companies funded through venture capital have a clock ticking. Investors want their money returned with interest within a set period of time.

This does not leave much wiggle room to test slow-developing ideas.

That leaves social sector organizations as the best space for long-term experiments. Social sector leaders can take their time finding solutions to the world’s most complex problems, such as poverty, disease and climate change.

But social sector leaders face the tyranny of limited resources.

One Laptop Per Child will never match the research and development capacity of a Global Fortune 500 company like Intel.

Fortunately, global leaders can overcome the various forms of tyranny as they tear down the wall that exists between sectors.

Ideas developed in the social sector can be scaled up in the business sector. Hybrid systems and models can be implemented at the interface. Partnerships can be formed.

When this happens, disadvantaged people at the base of the pyramid can become clients instead of victims. They can take their place in a more sustainable and inclusive global economy.

 

[This article has been reproduced with permission from Knowledge Network, the research journal of Thunderbird School of Global Management https://thunderbird.asu.edu/knowledge-network/]

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