Making for-purpose business, business as usual – Part one
8 November 2021 at 5:46 pm
In the first of a four part series, Tara Anderson and Andrew Curtis of The Dragonfly Collective get to the heart of for-purpose business models.
For-purpose business and social enterprise is catching on. Customers want it. Employees are excited about it. Investors are backing it. And the world needs it.
So what’s the next step in making for-purpose business simply “business as usual”? We have to go to the heart of strategy and understand business model design.
In this four part blog series, we will unpack the what and how of for-purpose and social enterprise business models, taking the lessons from our new internationally recognised for-purpose business model workbook.
Part one of the series explores the need to build and strengthen for-purpose businesses. Get your copy of the workbook here.
For-purpose business is here to stay
You know an idea is taking off when the buzz words around it start to emerge. Shared value. Conscious consumerism. ESG. Sustainability. Conscious capitalism. Social enterprise. Social business. B Corp. There are now even roles called chief purpose officers.
These are all forms of for-purpose business. And it’s taking off.
Corporate organisations are answering the call to make more than just profit
The corporate world is facing a transitional moment where the conversation about ethical and sustainable business is shifting from “why” to “how”.
The likes of the Economist and the Financial Times have started running stories advocating for a rethink of capitalism. Not so long ago 180 of the world’s biggest companies overturned three decades of orthodoxy to pledge that their firms’ purpose was no longer to serve their owners alone, but customers, suppliers and communities too.
According to Deloitte Insights, the main measure of success in the eyes of CEOs has shifted to the impact on society, including income inequality, diversity and the environment.
One recent example is diagnostic technology company Mologic that has just become a social enterprise. The CEO said the transition was “a deliberate, logical and natural step for a company focused on delivering affordable diagnostics and biotechnology to places that have been left underserved by the relentless pursuit of profiteering”.
As Paul Polman said recently, “for 50 years, every business leader in market-based economies has been trained in one core ideology – that the purpose of business is to serve only the shareholder… This mantra is wildly unfit for today’s world and is ultimately self-defeating. We must kill the old philosophy. The sooner we understand this, the better.
The time for change is upon the corporate world.
Charities are searching for more sustainable sources of income
From the other side of the economy, there is a growing challenge for charities to generate income beyond traditional fundraising and grants.
Global research from CAF showed that last year around a third of charities could continue for less than six months without additional support and around half said that they could last for less than a year. Even after lockdowns have eased, around three in five (58 per cent) expect to see a continued loss of income sources.
Charities in all countries had to reduce services while experiencing an increase in demand for their support. The research showed that charities in most countries see the only option as looking for alternative funding sources and generating their own trading revenue.
The time for change is upon the charity world.
The good news – there’s a solution, and it’s called for-purpose business
As the Financial Times has stated, “this is certainly a moment”. But the key question is, what comes next?
The answer lies in the grey space in between the two sides of the ideological argument – the corporate capitalist model and the traditional charity model. It’s both/and. And it’s called “for-purpose business”.
It’s time for a mash-up. Organisations with the heart of a charity and the head of a corporate. These businesses use creative market-driven strategies to tackle critical social issues.
They are hybrids. They blend the commercial logic of the corporate sector with the social impact logic of the third sector. They are the practical vehicle for building an organisation that can deliver both profit and purpose.
For-purpose businesses run like normal businesses that make a profit, but also have a social or environmental mission. The social mission is embedded right across the businesses into production processes, products, culture, and relationships with employees, suppliers and customers.
It’s their position in the grey space between the corporate and charity sector that gives for-purpose businesses so much potential.
BUT – running a for-purpose business isn’t easy…
Balancing profit and purpose in practice is really tricky – arguably much harder than running a traditional business where the main metric is profit.
The problem is that traditional corporate business models fail to deliver the purpose imperative that drives the existence of organisations in the for-purpose sector. At same time for-purpose organisations that focus on their purpose imperative can often find themselves struggling to make their business model profitable.
The world of start-up for-purpose models has often been one that embraces that slogan made famous by a shoe company – just do it! Back of the envelope, business model on a page and cartoon style start-up guides are just some of the ways this ethos has developed.
Unfortunately, this has led to serious failures. And for the for-purpose businesses that disappear, we never get the chance to learn from their experience.
How do we solve this problem? We need to understand for-purpose business models
There are already thousands of for-purpose businesses around the world. But we need more of them. And we need the existing ones to scale. For that to happen, we need to go right to the heart of strategy and understand the business models that make them sustainable.
Business guru Michael Porter told us that the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are difficult to match. It’s the business model that answers the question of “how”. It’s the lynch pin between strategy and operations.
Yet while for-purpose businesses face unique challenges and tensions that make business model development more complex, there’s an absence of “ready-to-wear” business models for reconciling the tensions between social and commercial goals.
At The Dragonfly Collective we’ve experienced the challenges of for-purpose business first hand – as directors, board members, consultants and trainers. What we found was a lack of tools and guidance around building for-purpose business models.
So, we spent two years drawing on our four decades of practical and academic experience to develop a for-purpose business model workbook. And we’re gifting it to the for-purpose sector, because we want to see the sector grow.
Unlike other tools such as the social business model canvas, the workbook provides templates and guidance behind each step of the process.
Over the coming weeks we’ll unpack specific aspects of the workbook in Pro Bono News to guide people through the process.
Let’s prove that there’s a better way to do business. Call it conscious capitalism, for-purpose business, social enterprise – it doesn’t matter. Just get started. There’s no time to lose.