In a recent article I read, the author, Yotam Ariel, tries to offer a social entrepreneur working in solar lamp distribution an opportunity to cut his costs by half by arranging for bulk-buying with other solar entrepreneurs to reduce the unit cost for each manufacturer. The entrepreneur refuses, citing that he would rather not help his competitors to “free-ride” off of his (bigger) purchasing power.
Hence, the author wonders why it is that people with similar social missions are still hesitating or outright refusing to share resources. What fears or concerns motivates them to do so? What speaks in favor or against collaborating with other social entrepreneurs? How much competition do we need among social businesses?
Good questions in my book! I wonder what you think after indulging my thoughts for a moment…
I was intrigued by Yotam Ariel’s example to say the least. It begs a set of bigger questions, in my opinion. First, how does the nature of competition differ in social entrepreneurship to that of traditional businesses? Second, how much collaboration should exist between like-minded social entrepreneurs with the same mission? In other words, what are the legitimate concerns against collaboration in the sense of sharing resources?
On the first question, it would seem that the main difference between traditional and social entrepreneurship is that in the latter the ultimate goal is not to maximize financial profits but to achieve certain socially or environmentally beneficial outcomes. All those academic papers on “coopetition” aside, fundamentally the assumption in traditional business is that my competitors’ gain in market share or profits comes to my immediate loss. But in social entrepreneurship, if the real goal of a firm’s existence is to reduce poverty in a given region, for example, then it would seem that another firm’s “gain”, such as a larger number of customers, should not be seen as “my loss”. How could it be my loss, if I want the same goal to give them more access to solar lamps? If my social motives were genuine, shouldn’t I be mostly indifferent if my end customer carries mine or my competitors’ solar lamps, as long as they carry one and can throw away that poisonous kerosene lamp?
My immediate suspicion for someone seeing this circumstance as their “loss” is an unhealthy ego (see a previous post on this topic). In other words: why would I want to share the glory of social entrepreneurship with some pesky meddling competitor if I can put on my glossy annual report the larger number of people “helped”? Also, the issue of control becomes important in this case. Someone else may not do things exactly like I would like them to be done in terms of branding, design, features, etc. so it would be better that MY products go to the village instead of my competitors’.
Another reason for not cooperating would be lack of trust in the competitor abusing or misusing information about my organization. What if we share contacts and leads and she simply takes them on as her own? What if we share technological insights and she takes my IP? So this leads to the second question about how much collaboration is healthy vs. unhealthy.
Allow me to side-step theoretical critique here and get straight to my point, which goes like this: the question of competition vs. collaboration should honestly only be interesting to those social entrepreneurs who don’t have the social outcome as their primary goal. In our endless debate about what social entrepreneurship means, this would refer to those on the spectrum who are more in it for promoting themselves (and the money of their investors) than the well-being of their constituents and beneficiaries.
Seen this way, would it be too radical to posit that collaboration, or openness to collaboration, is central to anyone who wants to find the best (i.e., lowest cost and most effective) method to serve their mission? Many social problems by definition are too big and each company too small nowadays to make a real difference by itself. Do we honestly have time for people who are more concerned about the credit and looking better than others?
But here I want to also entertain the objections to collaboration. Seen from the traditional view of business, the lifeblood of a company is of course revenue and any activity that threatens to reduce revenue could be seen as not in the best interest of the owners/investors. Thus, collaboration, if it results in other companies taking advantage of my connections, leads or distribution channels, may also result in them placing ultimately more sales than me among the same pool of end customers. This hurts my business in the end. The worst outcome of this would be that I go out of business where others succeed at my expense.
Back to the example of the solar social entrepreneur in this article: is this also an example of such a risk? The author mentioned that he offered a solution that would benefit all competitors, including the firm under consideration, by reducing costs and therefore increasing profits for each company. There was no mention of sharing distribution partners or exchanging contacts or IP. Based on this evidence, it seems ludicrous to me why that entrepreneur would object to the suggestion on grounds of just not wanting to benefit the others.
A fundamental question that each business entrepreneur asks is: “How can I remain in business as long as possible and make as much profit as possible?” A social entrepreneur, however, should rather ask: “How long SHOULD I remain in business?” The answer: as long as the social mission is not achieved, as long as there is demand for my services, as long as the social problem or injustice exists. Or perhaps: as long as there are insufficient alternative providers of my social services. But what should my reaction be when I see the villagers I used to work with now hold the lamps of a competitor? Anger? Envy? Disappointment?
How about: feeling glad? Because that’s what the mission of my organization was about in the first place. In the case of the solar business, bringing people light through affordable, healthier (or less pernicious) technology. If that is exactly what competitors can provide, why be mad at them for succeeding? Is there no room for generosity of spirit in the world of social enterprises?
In the end, perhaps what am I suggesting is that a genuine social entrepreneur should be willing to do whatever it takes to reach his social mission in the most effective and efficient way. If it means to collaborate with “competitors” then that should be unquestionably part of the solution. Should it imply that I may be driven out of business if someone outsells or outperforms me in the market? Arguably, yes. The key is to make sure to have the right investors on board (impact investors anyone?) who care about the mission more than the money, and are happy taking it back from the closing business to be redeployed elsewhere.
Let me finish this post with the following questions, which some of you may call heretical or plain out silly: Why can’t we leave the term “competitors” in the world of traditional for-profit business and instead call the same people “comrades in arms” or “peers” in the world of social businesses? Why can’t we leave behind the need to beat others when the goal is to help people who frankly don’t care about such struggles? Does anyone have strong arguments against collaboration? If so, I would love to hear about them!