Lilly Tench | Author of Good Business | An Entrepreneur’s Guide to Creating a Better World

This article is an excerpt from Lilly Tench’s new book, Good Business | An Entrepreneur’s Guide to Creating a Better World. Read the full book by picking up a copy today!

Introduction

Can business get us out of this mess?

Show up with fierce grace. —ALABASTER DEPLUME

As a society, we’ve got a lot going on right now. We’re facing a changing climate that is impacting how we grow food and increasing the magnitude and strength of dangerous storms. We’re up against staggering inequalities, racial injustice, and global pandemics. This can all feel pretty overwhelming, but it’s important to remember that there is hope; human beings are remarkable creatures. We’ve overcome major obstacles and achieved some incredible goals in our short history. We have created artificial intelligence, we have walked on the moon, we can travel across the earth in a day. Humans are powerful. Our innovation, problem-solving, and resourcefulness is powerful. And the world needs that ingenuity.

When we think of innovation, we tend to think of entrepreneurs. Much societal and cultural change has been shaped not by politicians, but by entrepreneurs. From Henry Ford and the car to the sharing economy pioneered by Airbnb and Uber, entrepreneurs have boldly re-envisioned and reshaped the way our society operates. Entrepreneurs are doers and dreamers; they see things not as they are, but as they could be. They drive new technological frontiers, create jobs, and reshape the way we meet our basic needs.

Entrepreneurs are arguably the most efficient and creative problem-solvers on earth. Today, it feels like we need problem-solvers more than ever. We already know that entrepreneurs can give us new apps, better headphones, and less smudgy lipstick. But can they help us solve the major problems that face our society? And can they do so with a business solution that also creates jobs?

The Need for Mission and Money

There is a Japanese concept called ikigai that basically translates to “purpose in life” or “reason to get up in the morning.” 1 Ikigai is defined as the intersection among the following:

• What you’re good at
• What you love
• What the world needs
• What you can be paid for

This concept resonates because of its honest depiction of human needs. It acknowledges the necessity of mission and money in the same breath.

Our society has traditionally separated the concepts of mission and profit. The two concepts use different parts of our brain, and it is hard to prioritize them both at the same time. While the two motivations sometimes sync up, they are often contradictory. Because of this uncomfortable contradiction, we tend to put mission and money safely into different compartments in our mind, our lives, and in our society. When we go home, we are generous to our family and friends, and we may even donate to charitable organizations. When we go to work, we often check our morals at the door. But separating the needs for mission and money is dangerous, not just for our own fulfillment and happiness, but for the world. This separation allows us to live a life where we are not our whole selves. It allows us to create businesses and organizations that do not reach their full potential. Finally, it allows the true pains of our society to be sidelined as our energy and innovation are poured into making new consumer goods rather than solving critical problems in the world.

Meanwhile, the critical problems are stacking up. We as a species must find a way to incentivize and focus human ingenuity on solving the core problems facing our society.

Social Entrepreneurship— A Win-Win?

In the last decade, a new mechanism for change has surfaced: the social enterprise. A social enterprise uses a market-driven approach to solve a social or environmental problem. A social entrepreneur is someone who sees a real problem in the world such as poverty, environmental damage, or resource scarcity and introduces a solution that not only helps humanity but also makes a profitable business and creates jobs.

For generations, people have believed that you had to choose between making a good living for yourself and your family and making a difference in the world, but social entrepreneurship tells us otherwise. Since the concept of social entrepreneurship was introduced, our society has latched onto the idea with gusto. There are now at least eighty universities that teach courses on social enterprise and entrepreneurship. There are hundreds of social enterprise accelerators, support associations, summits, and conferences. A recent report by Deloitte described the social enterprise as “a profound shift facing business leaders worldwide.”

In theory, social enterprises make a lot of sense. Businesses are founded on discovering a problem and creating an innovative solution— why not focus on the major problems in our world and solve them with a business solution rather than a political or philanthropic one? Social entrepreneurship sounds like a win-win solution, so why aren’t all businesses social enterprises? Because the reality of social entrepreneurship is more complicated.

The idea of entrepreneurship is often glorified, but being an entrepreneur is much more challenging. Entrepreneurship is hard, it is lonely, and truthfully, it rarely succeeds. Around the world, over one million new businesses start each year, but only 50 percent survive the first five years of business. If being an entrepreneur is challenging, being a social entrepreneur is even more so. On top of all the ordinary challenges of being an entrepreneur, social entrepreneurship comes with its own unique batch of complications. Often, the people who directly benefit from a solution aren’t the same ones that are willing and able to pay for the solution. How do you create a business model that serves both groups? Measuring impact is its own can of worms. How do you measure something as nebulous as impact? How do you select which environmental and social metrics are most crucial? How do you capture the important stuff without measuring your mission to death? And finally, what do you do when your impact goals conflict with your other priorities, such as your bottom line?

I wrote this book because I believe in social entrepreneurship. I believe it can deliver effective solutions to many of the most staggering problems our world faces today. But I also believe we need new tools. We can’t keep doing business the way we always have and expect different results. We need new business models, new technologies, new strategies for measurement and motivation, and a new brand of leadership. We need bold and creative leaders with strong values who can prioritize both mission and profit within the same model. Are you this kind of leader? Or do you want to work for this kind of leader? If your answer to either of these questions is yes, then this book is for you. This book will introduce tools and models used by successful and innovative social entrepreneurs, with the goal of empowering the next group of leaders who will change how the world thinks about business.

What Makes an Enterprise a Social Enterprise?

So what is the difference between a social enterprise and a regular enterprise? Most businesses are fulfilling some sort of need, or they wouldn’t have any customers. Where does a normal business cross the line into becoming a social enterprise?

There are certifications out there, such as B Corp, that label you as a social enterprise to the world. While this might be useful for communicating your impact goals to others, you don’t have to have a certification to integrate environmental and social impact into your business model. To me, a social enterprise is defined by three things:

1. Function / Impact: The core function of your business must result in a positive social or environmental impact (even though the term is “social” enterprise, environmental impact counts too— all humans depend on the environment after all!). The “core function” aspect is key: this means that the primary operation of the business must result in positive impact in an ongoing way; a business cannot make a one-time contribution to a social cause and consider itself a social enterprise. However, if a percentage of the profit from every product sale goes to a social cause, the business could potentially identify as a social enterprise because the impact is tied to the core, ongoing function of the business.
2. Intention: Intention matters, perhaps more than anything else. Is positive impact a fortunate by-product of running a profitable business? Or is it part of the core purpose of running the business in the first place? This may seem unfair— why would it matter if the business means to make a positive impact or not, as long as it does? It does matter, though, because mission and money will not always sync up. There will be forks in the road where a business leader must choose between their mission and short-term profit, and if the intention to better the world through the business is not a priority, mission will not drive the business in a long-term way.
3. Measurement: What a company measures shows what they truly prioritize. A CEO would never tell shareholders that they intend to increase profits by “the amount that feels right” in the next quarter; they measure and project profits to the cent because profit is a priority. Mission will never be held equivalent to profits until it is measured with equal precision. A business must determine which metrics truly matter to their success. For a social enterprise, these metrics must include their mission.

More Good, Not Just Less Bad

A term that has been commonly used to discuss environmental impact for many years is “sustainability.” We might even have become so used to this term that we don’t think much about the origins of the word and what it actually means. The definition of “sustainable” is “able to be used without being completely used up or destroyed.” For our earth and species, this means to keep living without depleting our natural resources so much that our species can no longer endure. While this is important, it’s not much in the way of goal-setting. “To sustain” is not the most aspirational choice of words. However, this term and way of thinking have aligned pretty well with how we’ve thought of environmental impact, particularly in business. The goal has not been to create no toxic waste— it’s been to create less toxic waste. However, if we’re really going to improve things, we need to think bigger than this. We must think of social enterprise as a model to create real solutions through business and actually make things better, rather than as a way to run businesses that aren’t as bad as they could be. In short, we must strive for more good rather than less bad.

Social or Environmental Impact?

You’ll notice that throughout this book I will talk about both social and environmental impact interchangeably. To me, they are the same. Environmental and social impact are inexorably linked. We live on the earth, so far with no alternative, so what happens to the earth happens to us. Toxins in the air mean more health problems, usually for our most vulnerable populations; water shortages and soil depletion mean food shortages for a growing population; rising sea water means thousands of destroyed homes and climate refugees. . . . I could go on, but I won’t, because this book is about solutions! The point is that I focus on positive social and environmental impact in this book. I talk primarily about environmental impacts in some sections, and focus mainly on social impacts in others; but to me there is no real difference between the two.

This Is Not the Only Book You’ll Ever Need to Read

I’ve seen some book jackets exclaim, “This is the only business book you’ll ever need to read.” That’s not the case here. This is not, in fact, the only book you’ll ever need to read. This book is not meant to teach you everything you’ll ever need to know about social enterprises. It is meant to help you think strategically about how social and environmental impact fit into your unique business model and value proposition and to give you the tools to take the next steps and find the additional resources you need to implement strategies. It will not, unfortunately, teach you everything you need to know about any one topic, such as sustainable manufacturing. This would need to be a much bigger book for that, and then you wouldn’t be able to read it on your commute or carry it in your bag, so really, you should thank me.

How to Use This Book

This book is meant to be an experience, not simply a book you read cover to cover. You can read it straight through, of course, but I’d rather you read it in the order and cadence that makes the most sense for you so that you get the advice and experience that is most relevant to your business or idea. If you skipped something that seems interesting, you can always go back and read the sections you missed.

In each section you will find examples of social entrepreneurs and businesses and the ways that they have integrated impact into their business models. To depict the business model of each company in a visual way, I have developed Business Model Maps that depict the various stakeholders and customers, the actions taken by each, and the flow of value, resources, and money. There are many tools to depict a business model. The Business Model Canvas, for instance, is a well known and useful tool that I have used often when working with entrepreneurs. However, what I like about the Business Model Map is that it shows movement throughout a business model and demonstrates, at a glance, the complexity or simplicity with which a business model functions. You will see that some models have money flowing to the business from multiple sources and depend on the involvement of many stakeholders, while others have a much simpler and straightforward model. As you read these examples, consider what these models tell you about the vulnerabilities, logistical complexity, and strengths of each business. See if you can determine opportunities for increasing positive impact or decreasing negative impact that the business has not yet identified or acted upon. Most of all, think about what you can learn from these businesses so that you can contribute to the next wave of social enterprises that will shape the world.

Read the full book by picking up a copy today!