Tag Archives: Social Enterprise

Struggling business or highly effective development effort? A social enterprise dilemma.

Developing 0.750–0.799 0.700–0.749 0.650–0.699...

Social venture and global competition

Suppose I told you about an investment opportunity with an outsourcing business based in a developing country. They’re the first of their kind in that country, which is an unknown in this particular industry. Furthermore none of their local employees speak English natively, and so all must study English and do their best in working with English-speaking clients on projects that are usually in English. Oh and by the way, this business’s main competitors are based in English-speaking developing countries with a history in the industry, and much more developed base of management talent. Would you like to invest?

Now let’s say I told you about an opportunity to support an innovative nonprofit
that provides top-notch training to underprivileged people in developing countries, and provides them three times their prior salary—plus benefits—to work in teams working on real projects, for real clients? And furthermore, after three to four years of work experience, employees are able to find even higher paying jobs, paying three times again what they made during training. Oh and by the way, this organization takes every dollar you donate and stretches it to be three dollars of impact, because of the income generated by the real world projects that are the heart of this training program. Would you like to invest?

Social enterprise, at the outset, is a great story to tell: running a real business that provides training and employment opportunities for disadvantaged people. But such businesses face the real-world challenge of competition from regular, for-profit businesses. When it comes to a local business, such as a restaurant, where the “delivery of value” is necessarily local and in-person, such social enterprises have a relatively even playing field on which to compete.

However when it comes to a global business, the playing field can be much more uneven. Whereas a competitor to a local restaurant faces similar costs for rent, personnel, and materials, a competitor to a global outsourcing firm might enjoy better English skills, a more highly educated talent pool, along with the ability to recruit highly skilled senior management locally, instead of from abroad.  Thus it can be very challenging to compete, sustainably, against such advantages.

So does this mean businesses shouldn’t set up shop in said developing country, because of those disadvantages? It depends on the goals and expectations of the business.

If the goal is to make bottom-line profit, then it doesn’t make sense to  “fight the current” on such a critical point such as the talent pool. You’re going to have to spend extra money to make up for the education system and bring people up to speed. Plus, to ensure that your organization can compete in the global space, you’re going to have to pay good money to hire for key strategic positions, whether you are hiring from the limited pool of locals, or you’re bringing in expats.

But if the goal is development, then the very sources of these disadvantages gives the justification for investment in such a social business. Because through such investment, the “disadvantaged” developing country can start on the road towards building a globally competitive talent pool. How else are they going to do it? Furthermore it’s a fair bet that in a country which has had much less investment in the talent pool, there are a lot undiscovered—and highly motivated—people looking for an opportunity. And this spark of enthusiastic hidden talent can be a real advantage for a business.

So yes, such extra costs to running a social venture in a “competitively disadvantaged” country make for a challenging business opportunity. However as a development opportunity, the ability to create a lively new industry that trains locals in relevant global skills can make for a highly impactful, highly relevant social investment.

The key question to me is, will traditional funders of development efforts have the insight and the courage to support a business-looking engine of economic development for the disadvantaged?

And at the end of the day, does the “developed” world actually welcome the competition?

How Understanding Market Power Can Multiply Social Impact

How can we prepare workers in social enterprises to continue to get good wages going forward, when they enter the open job market? To me, skills-based market power is the way to go.

So just what is this market power? It could come from a coordinated group action to limit competition and maintain higher wages. Or it could come from skill, where the workers have an uncommon ability to deliver value to the market.

Let’s consider this case of worker-based market power more carefully. If the worker’s skill is uncommon and valuable, then there’s truly a negotiation to be had with the employer. The employer needs the worker to deliver the product or service, and it isn’t easy to find enough qualified workers, thus workers are able to demand higher salaries, and the employers know that finding replacements will be tough, and so they value the working relationship more highly.

Now look at the case of employer market power. If the worker’s skill is easy to find then the employer will have a lot of people to draw on, and this will drive down the wage. To make matters worse, if the skill is not particularly valuable, the employer will tend to invest even less in the working relationship, and be more likely to engage in short-term employment arrangements. In other words, workers get the short end of the stick.

Consider the case of Friends International, that among other things trains disadvantaged youths to be cooks in restaurants. Being a savvy organization, they are acutely aware of the challenges that their employees face when they look to find their next job after working for Friends. And thus they strongly encourage their cooks to stay with Friends long enough to master both Cambodian cuisine, as well as Western cuisine, because they know that cooks who are competent at both are in much higher demand in the market. Rather than simply flooding the market with more “run of the mill” cooks who will lack market power, they create much greater social impact by training employees to that higher, harder to achieve level of skill.

Thus I propose that smart social enterprises must be aware of the dynamics of market power. They should consider how to orient their training and job opportunities towards professions where hard-working people who invest the time and effort can develop market power, and enjoy the benefits.

From farmers to information workers: DDD Battambang brings IT jobs to the heartland

Rice farming in Cambodia

Potential information workers?

Last November I was in Battambang, Cambodia facilitating public speaking workshops for the local management staff of the local Digital Divide Data (DDD) office. Although DDD has several other offices, the Battambang office is the only one located in the countryside, and as such is very interesting from a development point of view.

Much of staff comes from the countryside, either around Battambang or from neighboring provinces, and thus grew up in a farming family. People from these backgrounds typically have limited employment options. They are faced with either continuing the family business in farming, finding a factory job, or moving away from family in search of employment. But for high achieving people these aren’t great options.

Furthermore my informal conversations revealed that farming just “ain’t what it used to be” in terms of its predictability and profitability as a business. Say what you will about climate change—the farmers are noticing changes that are directly impacting them, making farming a riskier and more complicated venture. Plus I have to wonder how lucrative small-scale, small investment farming can be on a sustainable basis, with farm products being sold more and more as a global market.

As I was travelling between Phnom Penh and Battambang I noticed a few factories along the way in rural areas. And yes, while factories are a way to employ a large number of people, they aren’t going to properly tap into the latent talent that is in the community, looking for an outlet.

And moving to the big city, while it may sound promising, is a decidedly mixed bag for many people. Consider that in a family oriented culture such as Cambodia, it’s particularly tough to leave family behind and move away to a big city where accommodation is expensive and where the traditional family safety net isn’t there. Nonetheless your smartest folks, who would be natural community and family leaders, will be that much more likely to move away from the countryside to the big city in search of employment opportunities. The result is a brain drain.

Now in this day and age of technology and remote working arrangements, in theory it ought to be possible to locate outsourcing centers in rural areas. There should be an opportunity to tap into attractive cost structures and a smart, motivated, untapped workforce.

But there are barriers to overcome. How would one jump-start the talent pool, in order to get such an organization off on the right foot? What special challenges would come up from training a rural workforce? And would international clients be comfortable trusting work to a location that was difficult to visit?

And yet one way or another, DDD Battambang has managed to overcome these hurdles and create a thriving rural BPO office in the countryside of Cambodia. It’s quiet, it’s peaceful, there’s fresh air. It’s a pleasant place to live.

I think this is just the beginning—rural BPO could have a big impact for many other places, and other services as well.

 

From farmers to information workers: DDD Battambang brings IT jobs to the heartland

Last November I was in Battambang, Cambodia facilitating public speaking workshops for the local management staff of the local Digital Divide Data (DDD) office. Although DDD has several other offices, the Battambang office is the only one located in the countryside, and as such is very interesting from a development point of view.

Much of staff comes from the countryside, either around Battambang or from neighboring provinces, and thus grew up in a farming family. People from these backgrounds typically have limited employment options. They are faced with either continuing the family business in farming, finding a factory job, or moving away from family in search of employment. But for high achieving people these aren’t great options.

Furthermore my informal conversations revealed that farming just “ain’t what it used to be” in terms of its predictability and profitability as a business. Say what you will about climate change—the farmers are noticing changes that are directly impacting them, making farming a riskier and more complicated venture. Plus I have to wonder how lucrative small scale, small investment farming can be on a sustainable basis, with farm products being sold more and more as a global market.

As I was travelling between Phnom Penh and Battambang I noticed a few factories along the way in rural areas. And yes, while factories are a way to employ a large number of people, they aren’t going to properly tap into the latent talent that is in the community, looking for an outlet.

And moving to the big city, while it may sound promising, is a decidedly mixed bag for many people. Consider that in a family-oriented culture such as Cambodia, it’s particularly tough to leave family behind and move away to a big city where accommodation is expensive and where the traditional family safety net isn’t there. Nonetheless your smartest folks, who would be natural community and family leaders, will be that much more likely to move away from the countryside to the big city in search of employment opportunities. The result is a brain drain.

Now in this day and age of technology and remote working arrangements, in theory it ought to be possible to locate outsourcing centers in rural areas. There should be an opportunity to tap into attractive cost structures and a smart, motivated, untapped workforce.

But there are barriers to overcome. How would one jump start the talent pool, in order to get such an organization off on the right foot? What special challenges would come up from training a rural workforce? And would international clients be comfortable trusting work to a location that was difficult to visit?

And yet one way or another, DDD Battambang has managed to overcome these hurdles and create a thriving rural BPO office in the countryside of Cambodia. It’s quiet, it’s peaceful, there’s fresh air. It’s a pleasant place to live.

I think this is just the beginning—rural BPO could have a big impact for many other places, and other services as well.

 

Enterprise as Animal: Survival of the best learners

Warning!!!...Tiger in training...:O))

Investing in the future

A few days ago I wrote about the idea that as technology becomes more available to the developing world, the price points for BPO services will erode–customers will demand and get lower prices. Good for customers, bad for providers. So what is an existing BPO provider to do?

To answer that question, I propose that we look at an enterprise in a different way. A conventional view of an enterprise looks at the output, what it produces; in other words “enterprise as machine.” But a more interesting way to look at an enterprise considers how it grows over time, in other words “enterprise as animal.” Yes, that animal still “does things” however it’s also continuously growing, changing, and replenishing its existing cells.

In the case of a BPO social enterprise, what would this animal metaphor look like? Consider that a social enterprise in particular has an ongoing flow of people joining anew and “graduating,” leaving for other companies. That graduation is a victory for the social enterprise, and yet it also comes at the cost of talent walking out the door. That talent then needs to be replenished.

Thus we can consider–how efficiently can the organization replenish the talent that graduates and moves on? Does the rate at which newcomers learns go up, go down, or stay about the same? Here’s the thing: it actually needs to continually go up, and here’s why.

Recall the idea that the price points will erode even more quickly going forward in the BPO space. This means that BPO enterprises need to become able to do more and more complex work, in order to stay ahead of the “low price” BPO market. But now with a social enterprise, where you have talent graduating, you have to be that much better at climbing the curve, and training the new people who come in.

So what does this mean? It means that for a BPO social enterprise to thrive, it needs to become really good at learning and improving. The status quo is no good in a world that continues to move. I was chatting with Alpa Agarwal of Microsoft recently about this, and she reminded me that this is the way of business–the world keeps moving.

Thus the enterprise needs to prioritize learning, and get really good at climbing the complexity ladder fast enough to stay ahead of the low-end commodity curve.

Granted, this idea assumes that the low-end will keep climbing; most likely there are barriers at specific points in the complexity curve that will slow down or entirely prevent many new players from entering. Nonetheless, the successful BPO must either figure out how to pass enough of these barriers to have good price points, or they will be in a tooth and nail price based fight for survival. Learning never looked so good.

The social enterprise end game must be outplacement

Phnom Penh is home to several social enterprises. I’m very much enjoying visiting them, meeting people who work there, and thinking about how this handful of enterprises fits into the bigger picture of business in Phnom Penh.

It seems to me that the “start game” for social enterprise is much easier than the “end game.” In the start game we can hire people, train them, treat them well, pay them well—possibly out of line with general market pricing. We do this because we can, because we  believe it’s a good idea and more “profitable” for the society as a whole.

However assuming that the whole economy isn’t going to turn into a “social benefit economy,” but will continue to largely be driven by  bottom line profit, we need to consider a few things:

  • There will never be enough of these special opportunities to be trained by and work for social enterprises–demand will outstrip supply.
  • The end game for a social enterprise needs to basically be about outplacement. Although yes, there is some room in a social enterprise for internally developed management and leadership, that ought to be relative small compared to the much larger number of people moving through the organization.

But consider: if said employee couldn’t get a fair wage before going through a social enterprise’s program, what’s to say that they are going to be able to get a livable wage after? Thus smart social enterprises need to consider how they will set people up to have market power, to get a good wage, especially in a developing country where that can be hard to achieve.

I think that skills based market power is the way to go. Thus to the extent that these social enterprises in Cambodia can set up their workers to gain market power,their “outplacement” will be that much more successful for them.

What do you think? What else must a social enterprise consider in how it fits into the bigger picture of the broad world of business?

Helping Talent Bubble to the Top

I had the pleasure of meeting Socheat at Digital Divide Data. He joined DDD 9 years ago as an operator, and today as an HR assistant is clearly a DDD success story. I first got to know Socheat through his dedicated participation in the communications workshops that I led for the DDD Phnom Penh office. And it was on the way to visiting the home of Bunthy, a DDD operator, that Socheat told me of his journey to DDD.

Socheat’s parents, like many of his generation, were displaced by war and moved around several times. With the economy in tough shape, Socheat was sent to Phnom Penh to try to find work. And he did, as a security guard. His ease with people and responsible nature helped him land this job, which by chance was at an English school.

Now here’s the really interesting part. You might guess, correctly, that the security guard job at the English school was a key launching point for Socheat to learn English and one day join DDD. But what surprised me was that the other four security guards did not learn English—they played soccer while he was learning.

Every chance that he got, Socheat would look over the wall at the classroom and strain to hear as much as he could. He’d take notes and do his best to learn. Fortunately a kind teacher noticed his efforts and invited him to sit in on the class whenever he had a chance.

Socheat took on this opportunity with gusto, and pushed himself to learn and use new vocabulary, writing 7 sentences for 5 new words every day. And in so doing he laid the foundation for his future success.

One day Socheat heard about DDD from a friend—he didn’t know what they did, but heard they were hiring. Unfortunately he had been given the wrong address however he searched for four days until finally he found the office.

The rest, as they say, is history as Socheat rose through the organization into his current position as assistant HR manager. I can attest, as well, that his English now is great—it was a real treat to have him helping me on the home visit.

Now this story leaves me wondering, what is it about Socheat that made him different from the other guards, in his energy to study English and better himself?

Any ideas, about what makes some people like Socheat decide to rise above the crowd and distinguish themselves? If so, please share your thoughts in the comments section.

The thrill of releasing untapped potential: An alternative come-from for social enterprise.

As I get more and more familiar with the non-profit space, I’m becoming more aware of a way in which my core motivation for being in the field seems to be in the minority. Let me explain.

A typical description of the motivation for non-profit causes can be found in the classic SSIR article Social Enterprise: the Case for Definition by Roger Martin and Sally Osberg. About half-way into the article they lay out a very well-articulated three-part definition for social enterprise. It was the first part of the definition that really caught my attention and pushed me to think about what energizes me about social enterprise.

Part one of their definition is as follows:

We define social entrepreneurship as having the following three components:

(1)    identifying a stable but inherently unjust equilibrium that causes the exclusion, marginalization, or suffering of a segment of humanity that lacks the financial means or political clout to achieve any transformative benefit on its own;

It was the word “unjust” that I reacted to. Underneath the word “unjust” I project that there needs to be a villain who is intentionally creating this justice, and a victim who bears the weight of this injustice. And I’m sure that there are many situations where this is clearly the core dynamic that’s going on.

However I propose to you that there are also a number of other important situations where poverty is happening because of less intentional and less nefarious circumstances. Furthermore I propose that the angry energy that often goes hand in hand with social justice isn’t the only way to bring about change.

In fact I speculate that in some situations, a come-from based on anger would make it that much more difficult to hear and understand all players, making negotiation difficult. Thus it’s critical to size up a situation and consider “which frame will best serve this challenge?”

So I think it’s very fair for somebody to push me on this with, “okay so if social justice isn’t what motivates you, what is?” To put it very simply, what excites me is untapped potential. I believe that in these populations of impoverished people, there is a lot of hidden talent and capability. One can look at India for example, and how in spite of the many challenges, a lot of talent bubbles up into the information economy. It gets me thinking about what untapped talent there must be in rural Cambodia.

Along these lines there is a very exciting idea in the field of talent development which says that a person’s innate ability to manage complexity is something that is deeply embedded in them—as deeply embedded as their eventually height. But even if someone hasn’t had much education, nor have they had much work experience, their inner capability to manage complexity will continue to develop as they age, and will be ready to go when the opportunity arises.

So if this idea is true, it means that there is this gold mine of talent sitting within underdeveloped countries like Cambodia. These people simply need guidance, best practices, and opportunities in order to take their rightful place on the world stage and play in the global economy.

Granted, I’m not saying that every farmer out in the countryside is going to become an amazing programmer or a world-class project coordinator. This isn’t the case in any country. But I am saying that there are some kids out there who absolutely have the potential to do fantastic things on a global scale. If we can identify these people and we can get them on the path to entering the world stage, then they can transform their own lives, the communities which they come from, and the countries within which they live. That is incredibly exciting to me. And in fact this is precisely what DDD is doing in Battambang, Cambodia.

Thus while for some people the social injustice frame is a motivating one, for me personally I find the untapped potential frame to be thrilling and motivating. I have nobody to save, I have nobody to rescue. I simply want to go out and find people who are my intellectual peers, and help them get to where they belong on the world stage.