As per the title of your book, you believe that we are in the midst of a ‘solution revolution’. Describe what you see happening.
It has become clear to most people that we can’t rely on government alone to tackle wicked problems such as climate change, poverty and crumbling infrastructure. My Deloitte co-author William Eggers and I set out to explore the growing space that exists between government performance and citizen expectations, and how society is working to close the gap. We found that there is a new, more collaborative economic system emerging that has a distinct ‘solution orientation’ around solving big problems. We call it the Solution Economy, and the players include business, government, philanthropy, and social enterprise. The grass-roots citizen- powered movement plays a key role, as well. Everyday citizens now have the ability—through the Internet and social media—to get involved and take on big problems.
The way the Solution Economy players approach problems is very different from the way governments have historically operated. In particular, the people involved fully expect to be able to make an impact in a reasonable period of time. By erasing private-public sector boundaries, the ‘Solution Economy’ is unlocking trillions of dollars in value.
Organizations that mix profit making with a social mission fall into two categories: social enterprises and market innovators. Please describe the difference between the two.
Social enterprises address a community or social need through a business. The goal is for the business to eventually be self-sustaining, but in the early days, trade-offs are usually accepted with respect to financial return. That is not to say that an altruistic agenda precludes sound business savvy. Seattle’s FareStart is a good example: this catering company and restaurant is staffed by cooks hired through a job placement program. It has flourished, supporting the delivery of more than five million meals to the disadvantaged. They also launched a café to train young baristas, combating the city’s high rates of youth unemployment and homelessness.
Market innovators, on the other hand, specifically set out to address unmet consumer needs, filling a gap in a previously-untapped market. A prime example here is Unilever, which has been introducing its products into markets at the bottom of the pyramid in recent years. It started Project Shakti as part of its efforts to introduce Lifebuoy soap in India. This initiative is focused on enabling entrepreneurship in rural India and increasing awareness of the importance of hand-washing, with an end goal of reducing infant mortality.
Increasingly, the distinction between social enterprises and market innovators is going to be harder to make. The lines are often blurred, as in the example of Project Shakti, which is a market-innovation approach embedded with social benefits. Another example is what Safaricom—one of the leading integrated communications companies in Africa—is doing in Kenya. A huge percentage of Kenyans didn’t have access to banking in any form, so Safaricom filled a need while also having a tremendous social impact: with their M-Pesa mobile banking phone app, people can now conduct business and receive entitlement payments, amongst other things. Thanks to this initiative, over 17 million subscribers now have access to financial services. Safaricom extended its basic service offering to serve an unmet need, and while they didn’t set out to be a social enterprise per se, this initiative is providing significant social benefits to its users.
You call these companies ‘multirational multinationals’. What does it take to become one?
The distinguishing feature, as in the case of Unilever and Safaricom, is the idea of embedding social good into your business strategy. These companies take corporate social responsibility several steps beyond philanthropy in an effort to really understand their footprint in a community, in a country, and on a global basis, and how that can be addressed as part of their business strategy.
These organizations operate on the understanding that caring solely about profits is no longer rational in this new economy and that in the long run, this is actually a liability. Multirational multinationals embrace this idea and understand that relegating socially-minded activities to the sidelines ignores the tremendous (positive and negative) impacts that a company’s mainline operations can have.
For instance, if you’re going to sell hydroelectric power in an emerging market, how could community-based groups come into the picture? Are you leveraging different forms of capital, whether through not-for-profit or international development networks? What is your partnership model? Increasingly, we are seeing corporations partner with civil society organizations, other businesses or international donors. Increasingly investors and shareholders are starting to look for these things as part of a company’s business sustainability.
What does it take for these types of models to achieve scale?
When larger societal issues are seen not as ‘charity cases’ but as actual market opportunities, the actions taken are automatically more scalable and viable over the long term. Many of these organizations are creatively applying or re-combining technologies, and in doing so, they are eliminating trade-offs and producing dramatically better results for a lower cost. As such, they tend to be ‘built for scale’, with the potential to reach thousands—if not millions.
Kiva.org is a great example. It’s a platform set up by a couple of Americans where everyday citizens provide loans to social entrepreneurs and small businesses around the world. In just half a decade, it has raised half a billion dollars for a million entrepreneurs in more than 70 countries. In this case, scale is fueled through conscious consumers and everyday citizens who are interested in doing good.
[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management]