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Digitally enabled Social Capitalism?

 

July 9, 2013

Future of the Social Enterprise and CSR Movements

Doug Hadden, VP Products

There has been a lot of talk about “social enterprises” and Corporate Social Responsibility (CSR). Some observers are against the whole idea of introducing social responsibility into business or business into what has been the non-profit sector. After all, didn’t capitalism win the cold war?

You know that things are a’changin’ when there’s a mad scramble to define a new category like “social enterprise”. (Is it a non-profit that takes innovation risk or is it a for-profit that has a social mission? Is it a desert topping or a floor wax?)

My view is that we are at an intersection of change that is technology-enabled. So, we’re having a bit of a problem understanding where this is going. In much the same way as we described “horseless carriages” or “wireless” or “moving pictures.”

In other words, what we think of today as CSR or “social enterprise” is really the early days of experimentation. My sense is that we have yet to reach the “Model T” stage of developing this new hybrid model of commerce.

Digitally Enabled?

How is this change empowered through digital technology? Digital technology gives organizations economies of scale through the use of open source software, social media, cloud computing and reduced communications costs. This is the lesson of the Arab Spring: inexpensive technology can be leveraged for social change. Organizations can grow from nothing.

Ideas can scale globally. Technology constraints to scale are becoming minimal. There is an explosion of on-line data that some view as “information overload”, but this democratizes information and enables innovation.

Digital provides these economies of scale whether the products or services are digital or not. (For example, we’re seeing how the new sharing economy or collaborative economy is enabled via digital.)

Outcomes and Transparency Lessons from Government Performance Management and Aid Effectiveness

I know – the stereotype is that governments and the aid “industry” know little about performance.

Yet, there has been significant innovation in determining the evidence for outcomes. This is something that is not in the business performance calculus – the private sector has an objective bottom line – profit. Business outcomes like customer retention, return on equity or net days outstanding align with profitability.

Public sector organizations need to answer the question of whether educational, health or business development outcomes were achieved in a complex environment. So, transparency and performance management techniques are emerging.

Social media and mobile are enabling feedback looks that never existed before. And, big data is enabling new forms of analysis (driven by open source innovation).

This means that any private or public sector organization can have more visibility into outcomes beyond traditional measures. To improve outcomes.

Towards a New Idea of Sustainability

Many organizations are embracing the notion of environmental sustainability. Many are supporting communities where they do business. The visibility of the business supply chain has created a new era of transparency – you force textile prices down and the connection to sweat shops and poor working conditions are exposed. The ethics of outsourcing, tax treaties, fair trade and “foreign corrupt practices” have become widely discussed.

This means that any organization that extracts an unfair amount of value at the expense of others will get exposed. This will have consequences to these organizations.

There is a recognition today, in some business circles that CSR, as it has been practiced as public relations, is obsolete. Partly for ethical reasons. But, as much about business financial sustainability. A business cannot continue to be profitable if suppliers are put out of business, if required materials cannot be renewed and if customers cannot afford to own and maintain the company’s products.

We are on the cusp of understanding the financial and environmental sustainability of entire supply chains.

Challenge in Not Digital

The emerging “Model T” of social enterprises is faced with a governance challenge:

How to achieve innovation in a non-profit model? Or: how to achieve desired social outcomes with the temptation of the profit motive?

My view is that digital technology supports design thinking, governance & compliance, agile methodologies and social feedback necessary to resolve the governance challenge.

Traditional businesses with legacy supply chains will need to adapt to this changing world. And, some of them will not change fast enough and won’t survive. (That’s a type of Darwinism that I can support).

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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