The very word “technology” has a certain cold, hard ring to it. Say the word aloud and people conjure up images of computers, machines, and robots. They think about plastic and metal and wires. Yet technology also has a softer side. Telegraphs and then telephones have helped people bridge the miles between them. Social networking sites ring the world. New York Times columnist John Markoff wrote about a new type of non-profit organization that has arisen — they are called “social enterprises,” with the emphasis on “social” [“When Tech Innovation Has a Social Mission,” 13 April 2008]. Markoff notes that successful tech companies are often run by leaders who are a combination of social technologists and industrialists. The social technologists, he reports, are the people most likely to turn to social enterprises to find career satisfaction.
“Steve Wozniak built the original Apple I to share with his friends at the Homebrew Computer Club, but it was his business partner Steve Jobs who had the insight that there might be a market for such a contraption. Indeed, for decades, Silicon Valley has been defined by the tension between the technologist’s urge to share information and the industrialist’s incentive to profit. Now a new style of ‘hybrid’ technology organization is emerging that is trying to define a path between the nonprofit world and traditional for-profit ventures. They’re often referred to as ‘social enterprises’ because they pursue social missions instead of profits. But unlike most nonprofit groups, these organizations generate a sustainable source of revenue and do not rely on philanthropy. Earnings are retained and reinvested rather than being distributed to shareholders.”
These companies are a little like Muhammed Yunus’ Grameen Bank which makes profits so that it can help even more poor people. The goals of some social enterprises aren’t quite so lofty, but they still believe they offer a public good.
“The new companies, like thousands of Silicon Valley start-ups before them, typically begin as small groups of intensely motivated people dedicated to the goal of building a product or service. The best-known examples are efforts like the Mozilla Corporation, which maintains and develops the Firefox Web browser, and TechSoup, an organization that was started two decades ago to connect technology experts with nonprofit groups. It now distributes commercial software to nonprofit groups in 14 countries. (Mozilla’s mission is to preserve choice and innovation on the Internet, which it considers a social good.) By most measures both companies, with hundreds of employees, qualify as vibrant businesses. Each has revenue in excess of $50 million annually. Moreover, there is also a range of smaller organizations, like the Internet Archive in San Francisco, with smaller but sustainable revenue streams. Significantly, an ecosystem is emerging that involves support groups like the Electronic Frontier Foundation, which provides legal services, and the Internet Systems Consortium, which plays the role of an independent Internet service provider for the community.”
Having an “ecosystem” of support is important for any business. It’s one of the reasons that I’m always looking for great companies with which Enterra Solutions® can partner. As Maxi Priest wrote in his classic song Wild World, “A lot of nice things turn bad out there. Oh baby baby it’s a wild world. It’s hard to get by just upon a smile.” For the moment, however, there are a lot of smiles in the social enterprises world.
“‘There is a lot of discussion taking place right now about a whole new organization form around social enterprise,’ said James Fruchterman, president of Benetech, a social enterprise incubator based in Palo Alto. ‘Many of these efforts can make money; they will just never make enough to provide venture capital rates of return.’ Brewster Kahle, who has founded a number of successful Internet companies, as well as the nonprofit Internet Archive, said: ‘If we do this right, I think there is momentum here. The next major operating systems company might be a nonprofit.’ … Mr. Kahle says he is developing a set of principles that he hopes will help formalize his idea that there is a middle ground between the technologists and the capitalists. He ticks off operating guidelines like transparency, staying out of debt, giving away information and refusing to hoard.”
Thinking that the next major operating systems company could be a non-profit is pretty ambitious thinking. That is exactly what I would expect from a successful entrepreneur — entrepreneurs never think small. The success of social enterprises, however, is not assured. Markoff reports that questions remain about whether most social enterprises are sustainable over the long haul.
“Nonprofits with revenue are not new or restricted to Silicon Valley, and there is a great deal of debate over whether they offer a sustainable approach. The new stream of technology-centric and successful nonprofits, however, appears to be driven in part by a set of microelectronics technology trends that have sent shock waves through many industries, from publishing to music and movies. ‘Computer technology and the Internet are lowering the cost of doing business,’ said John Lilly, the chief executive of Mozilla, the Web browser developer that is being subsidized by advertising revenue from the search engine business. That blends with the strong sense of social purpose held by a number of the best and brightest in Silicon Valley. ‘We went through all these decades where we had nonprofits that thought business was evil and sustainability was irrelevant,’ said Debra Dunn, an associate professor at the Hasso Plattner Institute of Design at Stanford who advises social entrepreneurs. ‘Now there has been an influx of business thought. People are saying, “I have enough money and I care.”‘ Still, most technology-oriented social entrepreneurs acknowledge that the hybrid model is by no means a one-size-fits-all approach, and there is significant debate about how far it can reach. Moreover, the approach hasn’t always worked.”
There seems to be a growing interest in social enterprises, but as Professor Dunn noted, the successful ones are backed by people with a social conscience and “enough money.” The future of social enterprises, therefore, seems to rest in a pool of socially conscience wealthy entrepreneurs. That’s not a big pool from which to draw.