Can we Compete with Business?

Connie Duckworth
Founder and CEO, ARZU, Inc.

how to compete

When I visited Afghanistan for the first time in 2003 with the U.S.-Afghan Women’s Council (a public/private partnership formed by the State Department to implement economic activities for Afghan women), I was struck by the impoverished conditions for women and children.

I knew that I wanted to leverage the private sector practices I learned through my 20-year career at Goldman Sachs, where I was a Partner and Managing Director, and utilize employment opportunities for women in Afghanistan.

My goal was to create sustainable solutions in a country destroyed by over 30 years of war and constrained by cultural limitations on the freedom and empowerment of women.

From that visit I also knew that the path to peace in Afghanistan can only be found in sustainable, local, low-tech, low-cost, entrepreneurial, and economically based solutions. Soon after, ARZU STUDIO HOPE was born.

ARZU which means, "hope" in Dari, is an innovative model of social entrepreneurship– organized as a 501(c)(3) non-profit– that empowers destitute but highly-skilled Afghan women by providing fair-labor, artisan-based employment and access to education and healthcare in remote rural provinces where little opportunity exists.

Beginning in 2004 with only 30 weavers, ARZU has since developed into a thriving social business enterprise, impacting the lives of tens of thousands of villagers due to the ripple effects of broad-based community development programs. Women artisans are employed to weave high-end, award-winning ARZU STUDIO HOPE rugs and chic, affordable Peace Cord bracelets.

Central to ARZU’s approach is our Social Contract with weaver families. ARZU agrees to pay women the market rate for weaving plus up to a 50% quality incentive bonus. In exchange for the extra income, families must agree to send all children under the age of 15 to school full-time, to allow women in the household to attend ARZU literacy classes and to allow ARZU to assist pregnant women and newborns in obtaining pre-and post-natal care.

The result: a livable income, education, health care and, ultimately, an investment in a peaceful future for Afghanistan.

Traditional non-profits rely solely on philanthropy (grants and donations) and face the classic problem: when the funding stops, the projects stop. ARZU is different: our objective is to become self-funding, and therefore economically sustainable, from the export and sale of our fair-labor artisan products.

The cornerstone of ARZU’s innovative and holistic model is artisan-based employment that empowers women and prohibits child labor. All net proceeds from the sale of rugs and Peace Cord™ directly fund ARZU’s innovative grassroots programs that drive transformational change.

While a for-profit business measures ROI by its return to investors, ARZU defines ROI as the return to beneficiaries in the form of income and vital social programs providing access to education, healthcare, clean water and community development. ARZU’s earned income from rug and Peace Cord™ sales now covers 50% of all operational costs, including production, distribution, social benefits and community development projects.

As ARZU strives to achieve a 100% earned income model, I am confronted with the challenging reality: can a for-benefit company with a small budget, and even smaller staff, compete effectively with for-profit competitors with significantly larger resources? This query seeds more questions:

What product characteristics are critical in order for a social-business to compete in a world of mass-marketed products?
How can a for-benefit company with little budget effectively use social media and traditional marketing techniques to build its brand?
How should a for-benefit define success? Should it be in scaling to serve the largest number of beneficiaries? Or is success measured by achieving economic sustainability, even if this means limiting the scope of new social projects?

What do you think? Join Connie Duckworth, with ARZU Studio Hope, and chime in on the comments. Or Tweet her @ArzuStudioHope or @ckduckworth.

Jeff Mowatt

Love, Respect and changing capitalism

Hi Connie,

Your article couldn’t have cone at a better time, as I hope you’ll see from what I have to relate.

In 1997 my colleague Terry decided to use social media as it was then, to seed an idea about an alternative to capitalism and we met on line in 1999 when discussing Dickens’ Ignorance and Want Allegory from A Christmas Carol.

In 2003, social media alerted me to his fast for economic rights and it was that which determined the creation of our social business in London the following year. Social media was used to convey his message about debt and the war in Iraq to his senator, John Edwards.

By the end of that year he was in Ukraine, alongside activists, blogging up an Orange Revolution and researching a development initiative which the social business funded.

To your questions, as he said in the beginning it’s a matter of operating in the traditional sphere of free market enterprise. Ours for example is a software development business.

We use social media in most of its forms as a low budget organisation. If you’re a social business, we have a Linkedin group for that with 825 members.

In our original treatise, now a manifesto for people-centered economics we said this about measuring impact, in human terms:

"Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings. Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion."

Perhaps the greatest impact of social media however is the ability to speak truth to power, on war, love, respect and changing capitalism and today is as good a day as any to repeat the message:

"Welcome to our brave new world. Except it’s not so new: learn to love and respect each other first, especially the weakest, most defenseless, most voiceless among us, then figure out the rest. There aren’t other more important things to do first. This message has been around for at least two thousand years. How difficult is it for us to understand?"

http://www.ecademy.com/node.php?id=171835
Chavi

The Question

Your questions could apply to any small business. How does any newcomer to an industry compete with veterans with more money and more resources?

It would seem that really needs to be asked is can a for-profit with a social objective be profitable? Is it possible for an organisation be financially self-sufficient and meet its social objectives?
- DanielBassill
  
  Can there ever be enough profitable for-benefit companies
  
  I’ve been part of Social Edge discussions for more than five years so let me say "thank you" and Happy Holidays to everyone who organizes these and takes time to offer comments.
  
  I would like to expand on Chavi’s question. I think we’ll always find examples of some for-profit companies with social objectives being profitable. However, with so many social, economic, health, etc. issues spread around the world, and with most problems being of a complex nature where many different solutions need to be in place and funded for many years, can there ever be enough for profit businesses to cover the world’s demand for new solutions?
  
  Will we see the growth of a group of for-profits who act as intermediaries drawing needed resources to entire universes of other organizations who are trying to do social good, but who don’t have the ability to generate enough profit or ROI to attract enough resources to do the work they are trying to do as well as it needs to be done?
  - Jeff Mowatt
    
    Can there ever be enough profitable for-benefit companies
    
    Hi Dan, You identify some of the issues which have been a problems for us. We’ve survived against enormous obstacles yet have never really been able to generate the level of earnings needed. Other forms such as B-Corps and L3C are growing in numbers and in the UK there are several thousand CICs.
    
    Ironically it was the inability of non=profit solutions to tackle the problems of the world which had been part of the case argued for the ‘profit for purpose’ approach.
    
    What we’ve seen in 2011 is the ascent of ‘creating shared value’ as advocacy from mainstream business, yet little indication of their engagement of for-profit social enterprise in their supply chains. I’m not entirely convinced that they really want to find them.
    
    An aspect of competition which Connie hasn’t identified is where public funding is used to compete. I’ve seen this locally, where EU funding goes to a for profit without social objectives to compete with our income generating activities.
    
    The for-profit intermediary which provides funding resources to seed other social enterprise is the approach which will be found in most of our work. One example was for this to be deployed to leverage community owned broadband cells which would invest 50% of profit into seeding social enterprise and conventional micro enterprise via intermediary CDFI funds.
    
    http://socialbusiness.socia…esponsible-business_74.html
    
    The formal model proposed for this was that of a Community Benefit Society:
    
    http://www.businesslink.gov…77475850&type=RESOURCES
    - DanielBassill
      
      Can there ever be enough profitable for-benefit companies
      
      Jeff,
      
      I’m trying to find intermediaries who are building databases of organizations focusing on same social purpose but in different parts of a city, or the world. Such groups can be mapped to show where they are and provide links to their own web sites. I’ve piloted this at http://www.tutormentorprogramlocator.ent
      
      While this information needs to be constantly updated and expanded any one can take on the "intermediary" role and try to support the growth of the entire sector, or of groups of programs within the sector. Furthermore, leaders who are engaged can, and should, be leaders who try to engage other leaders because no single intermediary can do everything needed to support an entire sector that may be spread throughout the world.
      
      This article talks about "tipping points". If intermediary leaders are thinking of ways they can take these roles all of the organizations within the sector would be better served over the long term. http://www.scribd.com/doc/7…from-1st-grade-to-first-job
      
      This can be done for a profit motive, an ego motive and/or a legacy motive.
- Kristen Mozian
  
  The Question
  
  Chavi, I agree with your comment that these are questions any new business must face. With that said, the social component of social enterprises can be viewed as a competitive advantage; however, too often I see social enterprises boast their social mission all over their website and you can’t even find the business they are in (selling coffee, making jewelry, etc.). Social enterprises need to take cues from small businesses – their business should have competitive advantages that any buyer would want to purchase regardless of the underlying social mission. Moreover, for social enterprises to become a thriving business there should be a shift from value pricing and work towards lowering price points to open up the market to more consumers. I know that is a tricky line since social enterprise mission’s are expensive to run, but there needs to be a way to open up the market and create an economies of scale – better collaboration is one solution.
  
  Concerning how social media can be used to build a brand. Social enterprises will not get a return on their social media efforts with a couple of Tweets here and there and one giant blog post; it takes a social media strategy to get the return everyone raves about. The notion that effective social media campaigns can be done for little money must be abolished. Like Connie mentions, social enterprises are up against businesses with much more resources and most likely now have a Community Manager to manage all of their social media efforts. Social enterprises can’t afford not to have a Community Manager or at least a staff person who dedicates the majority of their time to social media.
  
  Concerning measuring success. The industry’s focus on scaling efforts seems to me like a band-aid approach to solving the world’s toughest problems. Instead of spreading services as far as possible, it might be more impactful and sustainable for a social enterprise to dive deep into a community and to tackle the multi-faceted problems a community faces. Arzu is a great example of not just focusing on providing weavers with an income but also focusing on education and pre-and post- natal care.
Deborah Becker

Competing with traditional business

I may be a little late to comment on this question, but it was so relevant to my own work that I really wanted to respond. I also work with a social enterprise that is similar to ARZU. Ours is Oxlajuj B’atz in Guatemala. You can check out our model at http://www.thirteenthreads.org. We work with indigenous women in approximately 20 different villages at a time. It is considered an empowerment organization, but ultimately the goal is to alleviate poverty. As in ARZU,The women’s primary source of income is from artisan products and my work with the organization is two-fold: 1) to help it become a more sustainable social enterprise and 2) to work with selected villages on an asset-based sustainable development process.

I have often thought about the questions that Connie raises, because in addition to the problem of whether the women can ever compete in the global market place is can they really make a livable income by working in such a time-intensive task? Even at a fair-trade price, the women still live close to poverty (although not in extreme poverty as determined by the UN). I don’t think small, local enterprises can ever compete with the mass-market products. And, personally, I’ve decided that doing so is not what is important. If we believe in or support the concept of sustainability, then we want to create new business and market models that are based on social, environmental and economic needs. When I work with a village on the asset-based development process, the community members look at what factors make up a good quality of life and which of those can be produced or delivered without a cash expense, e.g., you don’t need income to pay for heat or electricity if you’re using solar technology, etc. So the income needs are based on what the village can’t produce and the products they create are constantly being developed from an awareness of what assets they can use as resources and an understanding of what markets those products can be developed for.

Instead of relying on solely on social media, we try to build one on one relationships between people in the developed world and the women here through 10 days tours of their villages, volunteer internships and cooperative product development. Then our best marketers are our connections in the states (or Europe).

Success for the women must be defined by the women. Their culture feels success in a completely different way than the westernized world. Success for the organization would be the capacity to continually strive to achieve its mission, without the stress of wondering whether they will survive another day.

I’m interested in continuing this discussion because it is an evolving concept. I’m especially interested in community based business development ideas that are profitable.