People. Product. Profit

I recently had the opportunity to travel to the Catalyst Kitchens Conference in Seattle and the Social Enterprise World Forum in Hong Kong. Catalyst Kitchens focuses on food-based social enterprises in the US and Canada, while the Social Enterprise World Forum is a gathering of social enterprises from around the world, including everything from technology to hospitality. My experience at both conferences touched on the three Ps of social entrepreneurship: people, product and profit.

Every social entrepreneur I met was focused on people first, a critical priority that embodies why the social enterprise sector was created in the first place. All too often, the people of our communities are neglected. As social entrepreneurs, it is our responsibility to put them first. When I think back to our focus in the development of Bloom Bakery, our top reason for creating a social enterprise was our mission to create jobs for our graduates. Our people always come first.

In Seattle, I had the opportunity to meet a life skills instructor from FareStart, an organization that also assists members of its community with barriers to employment. At one point, the instructor took a $1 bill, crumpled it, stepped on it and threw it on the floor. She then picked up the bill and started to smooth it out and said, “What is the bill worth now?” The group responded, “One dollar.” She went on to say that our participants or the people whom we serve have experienced hardship, but that does not make them worth any less. They might always have a few wrinkles left over from their past, but it is our job to give them a second chance and to help smooth out those wrinkles. In my mind, this demonstration perfectly summed up the work we do at Bloom.

Our employees or clients are on the cusp of major and often difficult life changes, from looking for housing and making amends with their families to trying to earn a livable wage. As social entrepreneurs, we work to solve some of our communities’ most prevalent issues, and it’s nice to see this work pay off.

The same instructor who did the $1 bill demonstration also shared the story of her heroin addiction. She was incredibly young at the time – only in her twenties – and fighting for her life on the streets. It wasn’t until she was arrested and referred by her parole officer that she got connected with FareStart, the non-profit social enterprise where she now works. FareStart helped her to turn her life around and become a shining success story.

We want to create more success stories like hers, but in order to provide this support, the product must be just right. I am a huge believer in “market-driven” social enterprises – if no one is willing to buy your product, it doesn’t matter how great it is. So many social entrepreneurs only invest on the mission side, but the reality is that you must invest on the product side in order to adequately support the mission.

At Bloom Bakery, we asked ourselves, “What does Downtown Cleveland need? And what does Downtown Cleveland want?” The answer was a bakery – but more importantly, an authentic artisan bakery with unparalleled quality. We took this feedback and set out to create the best bakery in Cleveland by using training and recipes from a world-renowned baker, only sourcing top-of-the-line ingredients and creating an atmosphere that draws people in.

All of the successful social enterprises I encountered during my trip had a world-class product or service that was market-driven. One social entrepreneur stood out in particular – Eriko Yamaguchi, who started a company called Motherhouse. Back in 2004, Eriko visited Bangladesh, the poorest country in Asia. She wanted to find a way to get the people of Bangladesh working in an environment that is family-oriented and pays fair wages. That’s how Motherhouse came to be – a fashion line that focuses on the product first, developing unique handbags, scarfs and jewelry inspired by nature. Eriko sought feedback from her customers and developed a brand that has been a huge success around the world, generating nearly $20 million in revenue. Most importantly, she’s been able to employ hundreds of locals in Bangladesh, providing them with an opportunity to earn a living that they otherwise wouldn’t have had.

As entrepreneurs, we create products to produce profits to serve the people or mission. For me, profits are by and large the most crucial element of a social enterprise. Social enterprise was created to utilize the business sector as a force to create social change. The non-profit/philanthropic sector has far fewer resources than the for-profit sector – so social enterprise works to use the resources available in the for-profit sector to combat social ills without drawing down on non-profit resources. In order for this to be effective, the social enterprise must be profitable.

At the two conferences I attended, this is the area where opinions diverged. About 50% of social enterprises rely on some sort of philanthropic or government subsidy to support their businesses in addition to any profits they may make. Don’t get me wrong – this model is still making significant impact in our communities – but is it sustainable?

As a social entrepreneur with experience working in the private sector, I believe that social enterprises should be free-standing, sustainable and profitable ventures. To accomplish this, people and product have to be put first. During my trip, I met the co-founder of Mozilla, a social enterprise that owns the Firefox web browser. Mozilla set out as a non-profit to compete with some of the largest technology/software companies in the world, including Microsoft and Google, with a mission of creating an open-sourced platform that promotes privacy and security on the Internet. Today, despite its non-profit status, Mozilla is producing hundreds of millions of dollars in revenue each year from ad sales.

As the saying goes, “non-profit doesn’t mean no-profit,” and Mozilla proves that is true. Non-profits and/or social enterprises are meant to be profitable; the differentiating factor is how those profits are put to use. 

Social enterprises all over the world are gaining market share while creating a social economy centered on doing good while making money. After spending over two weeks with like-minded social entrepreneurs, I would challenge our community to think about how we can continue to support doing good through enterprise. Instead of offering donations to social enterprises, think about how you can help incorporate products produced by social enterprises into the supply chain. This offers a much more sustainable solution for our businesses. If more of us “Buy Social,” we can help end the cycle of poverty for those who benefit from the services of social enterprise. 

- Logan Fahey