Mariel Wilner

There’s more than one way to do some good

(written on May 5, 2011)

The distinction between for-profit entities and nonprofit organizations was often cut and dry: a for-profit existed primarily to make money while a nonprofit organization focused on helping the community or provided a service. Today, however, more and more for-profit and nonprofit businesses alike are focused on socially conscious missions and/or social responsibility either as the sole purpose or a byproduct of the organization’s day-to-day operations.

As the line between for-profit and nonprofit blurs, social entrepreneurs, business management, and nonprofit leaders are finding a variety of ways to build and tailor their business in order to contribute to social good. A recent piece by Inc. Magazine explored a variety of such models as the article built upon the (1) Traditional Nonprofit by discussing the (2) For-Profit with a Social Mission and the (3) Nonprofit with Earned Income.

A closer look at these three social good business models will reveal that there’s no longer one organizational structure nor model that signals that an organization is contributing to the greater social good:

(1) Traditional Nonprofit

These organizations, 501(c)(3)s, are fueled by tax-deductible donations – cash contributions from individuals, public grant funding, or money from foundations.  The model is ideal when the organization creates value for an individual who cannot pay or when the organization does not want to make the individual pay.

Example: Khan Academy

The Khan Academy is a nonprofit started by Salman Khan. The goal? Changing education for the better. By utilizing technology, Khan’s goal is to offer a free world-class education to anyone, anywhere. The site’s resources are available to all, free of charge, with lessons ranging from Simple Equations to Bay of Pigs Invasion and fromBasic Capital Structural Differences to Big Bang Introduction. (you can check out the full list of videos here: http://www.khanacademy.org/#browse).

Khan shared in a recent Bloomberg article that by giving away the educational videos rather than selling the curriculum to the public education system, he’s able to wield creative license in crafting the lessons. If, alternatively, his organization were constrained by profit motive, that would likely result in Khan spending much of his time tailoring the videos to satisfy curriculum requirements. Instead, as a nonprofit that is not looking to sell content, Khan is able to focus all of his attention on improving, and perfecting, the end-user experience in order to capture the attention and inspire many across the world.

While Khan originally funded the endeavor via his personal savings, the cash contributions have been rolling in: Two of the biggest backers of the Academy include the Bill & Melinda Gates Foundation ($1.5 million) and Google ($2 million). Bill Gates, a Khan Academy advocate, sees what Khan is doing as “the start of a revolution” and Google became a supporter after the Academy won a crowd-sourced contest called Project 10¹⁰⁰ in September 2010.

Khan’s Academy is an impressive organization that’s not turning a profit, but, as Khan, Gates, and others believe, is poised to change the world.

(2) For-Profit with a Social Mission

New waves of social entrepreneurs who seek to make a social impact are weaving their respective social mission into the very fabric of their for-profit business. It’s simple, really: continually turning a profit means being able to sustainably do good, year after year.

Example: TOMS

Blake Mycoskie, Chief Shoe Giver at TOMS, intentionally bucked the traditional “do good via a nonprofit” example and created a for-profit business with a “one for one” business model: with every pair you purchase, TOMS will give a pair of new shoes to a child in need. Simple. Thus, TOMS is a sustainable answer to the “children without shoes” problem: for every pair of shoes purchased, one of those children has a new pair of shoes to wear.

With the commitment to the “one-for-one” business model, TOMS has leveraged the purchasing power of the individual to benefit the greater good. This model transforms customers into benefactors, which allows TOMS to create a sustainable business and thus, ensure the ability to continue with their cause.

However, while traveling the world, Mycoskie realized that, more than just shoes, people essentially need help with two basic needs: education and being able to work. To these ends, being able to see has a similar affect as wearing shoes (in the developing world, kids that can’t see can’t learn and adults that can’t see can’t work).

Thus, this past Tuesday, Blake announced the “next chapter” for TOMS: it’s no longer a shoe company, but a One For One company. The first step beyond shoes is to address the aforementioned issue of sight via eyewear: buy a pair of TOMS glasses and you give the gift of sight – glasses, cataract surgery, or medical treatment – to one person.

So TOMS, a for-profit business, is working to address the greatest needs around the world. As stated in a Fast Company article this week, “that’s the key to the new “one-for-one company model: solving the great needs through Western consumption.”

(3) Nonprofit with Earned Income

These 501(c)(3) organizations focus on generating income in addition to the aforementioned tax-deductible donations. This differentiated approach towards fundraising frees the organization from total dependence on funders who may or may not back the organization from year to year.

One such way that organizations have been generating income is via product licensing. In doing this, the organization leverages cause marketing, the byproduct of cooperative efforts of a for-profit business and a nonprofit for their mutual benefit. Benefits for the for-profit include positive PR, increased goodwill, and additional opportunities for marketing. Benefits for the nonprofit include leveraging the financial resources of the for-profit, the ability to reach new supporters via for-profit’s customer base, and, our focus here, additional income.

Example: LIVESTRONG Sporting Park

Something innovative if happening in Kansas City: LIVESTRONG and Sporting Kansas City (a Major League Soccer franchise) teamed up to unveil – yesterday – the new soccer-specific stadium, LIVESTRONG Sporting Park. Sporting KC has bypassed the guaranteed revenue typically secured by offering up naming rights to a franchise’s stadium. Instead, LIVESTRONG has licensed their name to them in exchange for a promise of $7.5 million over 6 years via a percentage of ticket and concession sales. 

Doug Ulman, LIVESTRONG President and CEO, states that, “LIVESTRONG Sporting Park is more than just a stadium – it’s the first athletic venue in the world with a social change mission and offers an ideal avenue to champion the cancer cause.” Financially, this partnership means significant funding has been secured by LIVESTRONG over the next 6 years, even before individual contributions, grants, and public funding have been accounted for.

For LIVESTRONG, is an organization that is now bringing in over $50 million per year, the $7.5 million over 6 years for naming rights doesn’t exactly make their operating budget concerns go away. However, it’s an innovative approach to garnering additional income while easily exposing themselves to potential new supporters in the process.

Traditional nonprofits still have their place in the social good ecosystem, no question: As exhibited by Khan Academy, sometimes focusing on generating a profit gets in the way of the intended end goal. But as Mycoskie’s TOMS simplicity (one-for-one) and the Sporting Kansas City x LIVESTRONG partnership creativity shows us, for-profit businesses are getting in on the “do good” movement with innovativeness and, hopefully, really striking results.

Leadership, Social Entrepreneurship, and TOMS

I’m fascinated by the challenge of being a leader. The root of this fascination is my understanding that the job of a great leader is never done. You’ve had success? Awesome: your team is excited, people congratulate you, and then … they want to know what’s next. What will you, and thus your team, do to top your recent success? How will you master tomorrow?

Back when I was playing soccer competitively, the above mindset drove me. I was a goalkeeper; it’s become quite cliché that if you’re a goalkeeper on your team, you’re automatically a leader. But the challenge of being a goalkeeper is more than the leadership characteristics that you must embody. The challenge of being a goalkeeper has to do with what’s expected of you each day: If you make a brilliant save in the game, everyone on your team is psyched, and then … they want to know if you’ll make the next save. What will you do to top your preceding save? How will you keep the ball out of the net for the full 90 minutes?

Simply put, the expectation of a goalkeeper (namely, to perform at a high level, day in and day out) is not too different than the expectation of leaders in almost any other realm, business or otherwise. 

And so, I guess it’s no surprise that I look at great leaders with the utmost admiration and respect; I know firsthand how challenging – and rewarding – it is to be a leader and to have the weight of your team’s successes and failures squarely on your shoulders.

Thus, predictably, a recent New York Times article enthralled me: Distilling the Wisdom of C.E.O.’s.  The gist of the article (which I’d 100% recommend as a read to anyone) was that successful leaders embody 5 particular traits:  

-       passionate curiosity

-       battle-hardened confidence

-       team smarts

-       simple mindset

-       fearlessness.

Around the same time that I read this particular NYT article, I was looking closely at TOMS. While helping to coordinate Outreach efforts for Soccer Without Borders, I was talking with the director of digital marketing for a new company named Two Degrees Food (TDF). The business model of TDF is much like that of TOMS – one for one; thus, understanding TOMS helped me to understand TDF (here’s a shameless plug for TDF: you should totally check them out! http://twodegreesfood.com/).  

Consequently, with the “5 traits of successful leaders” and TOMS taking up significant mental real estate, it’s no surprise that I started to take a closer look at TOMS’ Chief Shoe Giver, Blake Mycoskie.

Minor disclaimer: I’m not a TOMS or a Blake Mycoskie fan(girl) … rather, given my close ties to Soccer Without Borders, it’s fitting that quality leadership in the emerging business sector of Social Entrepreneurship intrigues me; Blake, unquestionably, is leading the charge of a wildly successful company in said emerging sector.

There are many definitions out there for what makes a social entrepreneur, but perhaps he/she is best defined as someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to achieve social change (wikipedia). And as it turns out, the qualities that make a successful social entrepreneur are not too different than the qualities that make a successful business C.E.O.:

Passionate Curiosity: wondering why things work the way they do, whether they can be improved, and if they can, spotting and seizing the opportunity to do so.

When Blake traveled to Argentina in 2006, he shares that he saw kids without shoes, and it was the “first time in [his] life that [he] had this desire to do something besides just start another company … [he] watched as these kids who had cuts and infections and scabs were getting shoes that were not even new … and not really the right size, and [he] thought, there’s got to be a better way to solve this problem.”*

Well, there was. Namely, TOMS.

Battle-Hardened Confidence: the ability to overcome adversity due to a positive attitude mixed with a sense of purpose and determination.

Before he founded TOMS, Blake started 6 companies from the ground, up; if that’s not the makings for someone to be battle-hardened, I’m not sure what is. Where does the purpose and determination come into play? He shares that back in 2006, he was “instantly struck with the desire – the responsibility – to do more [for these kids].”

The intrinsic motivation that exists within individuals who start their own business plus the extrinsic motivation of helping others is a very, very powerful combination.

Team Smarts: knowing how to get the most out of a group by bringing them together around a common goal.

In his keynote address in Austin, TX at SXSW 2011, Blake shared that because he’s incorporated giving into his business, he’s been able to attract and retain the most amazing employees in the world. How? The culture that has been created at TOMS embodies new evidence as to what motivates us: in a 2009 TED Talk, Dan Pink explains that the best motivation comes from a “desire to do things because they matter, because we like it, because they’re interesting, and because they’re a part of something important.”

The employees that have helped TOMS to grow exponentially over the course of the past 4+ years are passionately motivated by their common goal, their common purpose to improve the lives of children around the world. That common purpose matters, is interesting, and clearly, is quite important.

Simple Mindset: laser-like focus on a core objective over and above anything else.

What is TOMS? A for-profit business with a “one for one” business model: with every pair you purchase, TOMS will give a pair of new shoes to a child in need. It’s as simple as that. Thus, TOMS is a sustainable answer to “children without shoes” problem: for every pair of TOMS purchased, one of those children has a new pair of shoes to wear.

So, with commitment to the “one for one” business model, TOMS has leveraged the purchasing power of the individual to benefit the greater good. This model transforms customers into benefactors, which allows TOMS to create a sustainable business and thus, ensure the ability to continue with their cause.

Fearlessness: people who have an appetite for change and can manage the heck out of it.

Blake and TOMS have proven that the “one for one” model can succeed in both selling shoes and giving shoes away to those in need: in 2006 they gave away 10,000 shoes … and in 2010 they surpassed 1 million! But rather than be satisfied by success, Blake is choosing for TOMS to take the next step: they’re changing the nature of their business.

As Blake has recently announced, “TOMS is no longer a shoe company. We’re the one for one company.” (check out the announcement for yourself: http://bit.ly/e9U6iT).

Wondering what the next chapter for TOMS is? I am, too. And while I’m extremely excited to see how TOMS plans to further their philanthropic mission, I’m equally excited to watch closely the leadership that makes it happen. 

*(you can listen to the rest of Blake’s talk at the Clinton Global Initiative here: http://bit.ly/eQLNQB)