Eastside Social Enterprise Blog

Friday, 13 February 2009

Voice: Mainstreaming Social Enterprise

I was up in Birmingham this week at the Social Enterprise Coalition’s Voice conference which is the main shindig for the social enterprise community. I am never sure how valuable these events really are but I think overall it was worth the 2 days out of the office and most businsess actually seemed to get done in the bar afterwards.

A key theme of the event was the relationship between business and social enterprise. Someone remarked that “this is the only issue that really matters for social enterprise right now.”

I kind of agree. I think this can be split down in to two broad areas of opportunity for the social enterprise community: one of a short-term/practical nature and the second that is long-term/aspirational.

First, the private sector can provide opportunities right now for social enterprises to scale-up (in both impact as well as financial clout) by creating business partnerships around service delivery and contracting out parts of their supply chain. Douglas Johnson-Poegnsen, a partner of ours at BT, is doing just this and we are expecting to hear announcements soon about BT joint venture with a social enterprise.

Second (and more aspirational) is the notion that the private sector might evolve to become social businesses themselves. Is this fanciful or might companies actually gain competitive advantage by having social as well as financial goals? This seems unlikely right now but there are fundamental shifts occurring in society that are changing the rules of business. We are choosing new ways to live, new ways to build our careers and changing the way we purchase our goods and services in light of social and environmental concerns. What will the winning businesses in 2020 look like? My guess is they will be different types of organisations than they are today.

We recently presented this view to Fernando Rojas, the CEO of Havas, the 6th largest advertising company globally and one that advises many large companies. To my surprise he agreed with this prognosis.

How business navigates this evolution over the next decade is of course incredibly tricky to predict. Some businesses will concentrate on short-term pragmatism in the light of the economic situation and will not be in a position to take a leadership role. It has been a disappointment not to see Havas’ rhetoric matched with action – or at least not yet. However, the current situation will also give opportunities to more visionary businesses and individual champions within firms to take a march on their rivals and to begin developing their brands into the ones that future consumers will demand. After all, in market economies there is only one group more powerful than investors – and that’s the customer!


Friday, 30 January 2009

Great social enterprises: Zaytoun

I was at a social enterprise event recently run by Cityzone, a fantastic network for entrepreneurs. Twelve social entrepreneurs presented their businesses and Jonathan Jenkins of UnLtd and John Bird (always good value) gave talks.

My favourite social enterprise of the evening was Zaytoun, a fair trade company producing and importing olive oil from Palestine.

Do you know that the oldest olive groves in the world are in Palestine and were exported to Greece, Spain, Italy in Roman times?

I also learnt from Atif Choudhury - the activist/director of Zaytoun - something about the challenges of distributing olive oil out of a war-torn area and the need in this case for both Palestinians and Israelis to support in this process. I was reminded of the power of social enterprise and so even today Zaytoun - an embryonic business – is making a real difference by giving villagers an opportunity to earn a living and a reason to avoid the need for more extreme resistance.

What a great example of addressing a social need through the market.

But what struck me most was that Zaytoun is promoted as a great product not as a ‘pity purchase’. The olive oil is a premium product and costs more than alternative brands in supermarkets. Atif is proud of this and promotes Zaytoun for the quality of its taste.

Spot on!

I have ordered a box (looking forward to that). I think Atif’s approach is exactly the right one and you can see this attention to quality in the website too - it looks classy and is good to read.

Social enterprises thrive when they deliver a high quality and relevant service/product for customers. When I go to say Bikeworks, I expect a reliable bike. I want a stimulating read when I pick up a magazine from a Big Issue Vendor and I want a high quality Pentium 4 PC from Computer Aid.

It's a useful reminder for us all as social entrepreneurs that the sure way to create conditions for long-term business success and therefore social impact is to strive continually to deliver quality to our customers. This is what business is about after all.

Pick up some Zaytoun at: searchadv.aspx?SearchTerm=zaytoun

Monday, 19 January 2009

Can Boards be Enterprising?

In a recent post, I mentioned that one of the reasons that mergers do not happen more frequently in the third sector is that Boards are averse to taking risks.


There are of course many wonderfully effective Boards and management teams around. But in our experience this is because of the presence of a very accomplished CEO (who does most of the decision making), the Chair or individual Trustees who are really hands-on. In a sense success happens despite the structure rather than because of it.


A sweeping statement maybe. But in our work we do see it again and again that Boards are very risk averse and it is often to the detriment of the long term stability of an organisation. This obsession with risk is particularly stifling for social enterprises whose existence is after all predicated on market opportunism and a certain amount of risk taking.


So what’s the problem? Well, first Trustee Boards tend to meet once every two to three months. In a marketplace where organisations need to be agile and responsive, this can really slow up decision-making and hinder the endeavours of the senior management.


Compare for a moment how governance works in the private sector. Board Directors are voted by shareholders and have a duty to maximise financial profits. In contrast, the Boards of a charity or third sector organisation do not have an explicitly stated role to maximise the social impact of that organisation, only to avoid insolvency. Their role is written in terms of protecting the downside, ensuring reasonable use of assets and funds and avoiding activities which put the organisation’s assets at risk. My point is that they should be explicitly encouraged to seek ways to find strategic opportunities to maximise the upside (ie the social impact).


I guess it shouldn’t be a surprise that Boards are not as effective in the role of strategic decision making. There are many reasons not to do something. And it’s often easier to say “let’s not do that”, than it is to get the consensus needed to commit to a plan for investment. This is especially so if Board members only have limited information.


But in spite of the governance structures, there is so much value that Boards can make by seeking opportunities and growth as well as protecting for risks. In fact, often the risk of inaction is much greater than pursuing a well-informed growth opportunity.


This is very much the case with the thorny subject of mergers, as discussed in my previous blog. Whether you are a Board member, or a charity supporter concerned about your cause’s options in the current economic conditions, it might well be a greater gamble to stay independent than to seek integration with a like-minded peer and organisation.


Please comment on this blog - your views are welcomed as are any suggestions for blog topics going forward.

Monday, 12 January 2009

Mergers and social enterprise

Richard Litchfield, Eastside's Managing Director, shares his thoughts on the third sector's need for mergers and social enterprise:

I like Craig Dearden-Phillips’s comments in the Third Sector that 2009 could be the year of the merger. His point is essentially, if we’re facing vaporisation, then “lets get together”.

Mergers have been talked about for a long time in social enterprise and more widely the third sector. There is a clear logic for them – they reduce duplication of services, increase the capacity of frontline agencies, and enable cost savings as organisations pool resources.

Occasionally we do see a merger – though they seem to be few and far between.

Compare this to the private sector where mergers are a key part of a CEO’s job description; there mergers are common place, whilst most of the third sector has grown organically. As a result senior charity and social enterprise managers and executives do not have direct experience of undertaking joint ventures or mergers.

So what’s preventing more mergers happening in the third sector?

Well. Merging two organisations is just a difficult thing to make happen. My thesis is that there are three things in particular that block more mergers: the egos of senior executives (which Craig also points out), the nature of charitable Boards who are risk adverse (and perceive mergers as risky) and the lack of experience among executives as mentioned above.

Yet times are changing. Hard economic reality means that organisations will be forced to pool resources with neighbours. Recession will galvanise management teams to make hard decisions and the risks of inaction will be greater than the risk of doing something opportunistic.

Through the recession, many more senior execs will gain experience of mergers. They will be forced to. In fact, ‘merger’ is probably not the right word here. We are much more likely to see distressed takeovers than mergers. This is where a larger organisation steps in to takeover the assets of a failing organisation to ensure a continuation of that service.

But there is a bright note here. The third sector should become more streamlined and efficient by pooling resources and merging. More experience, more case studies and more success stories of how to do it (and of course how not to do it) will emerge. This will create a positive cycle so that when the good times come – as they will do – then executive teams will be much more able to use merging as a strategic tool for scaling up and growth.

More reading we found on mergers

news/FinanceBulletin/869248/rise-merger/

society/2008/sep/10/voluntarysector.publicmanager

news/Article/867613/manchester-charities-merge/

news/Article/871080/housing-charity-absorbed-larger-organisation/


Case Study from Eastside’s experience of Mergers:

social_enterprise_services/case_studies.asp#social_enterprise_Strategic_review


Tuesday, 18 November 2008

Government announces funding for Spark until 2011

The pioneering Spark Competition – designed and managed by Eastside – is to again open for bids from applicant enterprises as Department for Communities and Local Government, BT and PricewaterhouseCoopers announce funding of £3.4m in total until 2011.

Housing Minister, Iain Wright, commented: “Social enterprises … are already giving people who have spent time on the streets another chance in the workplace, which is why we are continuing to support social enterprise and invest... in a second round of the Spark programme."

In 2008, Spark enabled 15 social enterprises to grow and provide long-term training and employment opportunities for homeless people.

Building on the success of its first year, Spark will make a call out to participants in December and invite applicants to submit business cases for either new or established social enterprises that are fighting homelessness.

If you are interested in making an application, check out the Spark website – www.sparkchallenge.org. Bids will open on December 10th.

Spark does offer money but it also provides business support and partnering opportunities to help social enterprises scale up. In fact, many of our first set of Spark winners commented that it was the additional support that added most value.

One example of this support in year one were the fifteen partnerships that were set up between winning organizations and our corporate partners. These proved an invaluable experience to both sides: people from very different walks of life bringing their skills to the table in the pursuit of creating social change.

We will be doing a similar thing in the new programme for 2009. We will not just be challenging the social entrepreneurs to submit great business proposals. Teams of employees from corporate partners will also be challenged to apply their skills and their firm’s resources to support the growth of Spark’s winning social enterprises. Corporate teams will be challenged to see how much value they can bring to the sector over the course of 2009!

Buoyed by this and our perception that companies are increasingly looking to move beyond social responsibility initiatives and invest in more meaningful ways, we will continue to knock on the doors of big business to advocate their support for social enterprise. Not because this is a good thing to do; but because it’s good business for them to do.


Links to


Thursday, 16 October 2008

Celebrating talent in the third sector

Eastside is holding an event at the Adam Street Club on November 4th to launch our new Foundation.

The Foundation is dedicated to nurturing talent for the social economy. Over the last two years, we have run a successful internship scheme and worked with some 30+ MBA students and young professionals.

This has proved of genuine value to all concerned - to the charities and social enterprises who have benefited from the work of these young professionals, to the individuals as a stepping stone in their careers and to Eastside. We are planning to roll out a fuller series of activities branded under the Eastside Foundation.

We all excited by this. So do come and join us if you can.

The party is scheduled with a serious bit to begin with (discussion on creating sustainable opportunities for young professionals) and then a less serious bit (drinks).

For more info please contact our intern manager, Tim at: [email protected].

How will the banking fall-out affect the third sector?

I guess you may have heard some news recently about financial markets collapsing, governments bailing-out banks and mind-boggling amounts of $$ being wiped off stock markets.

But what I really care about is what does this mean for the third sector and for charities, social enterprises and our clients?

I read a recent article by Rod Schwartz in the Guardian on this subject and some interesting ideas on the potential impact of the current 'meltdown' for the third sector (or more specifically what Rod calls 'social business and investment market').

It was refreshing to hear an optimistic vision standing out among the gloom. One of the key ideas being that the current economic crisis might just herald in an evolution – or rather a revolution – to a more social-minded economy with a new rapprochement between public, private and civil society.

In our own work we have also noticed a number of indicators that support this idea and a convergence happening in some parts of the public, private and civil society around a social enterprise model (more on this due course).

But this is all rather hard to conceive right now. What I want to address here is what is actually happening on the ground to the charities and social businesses. And what is happening to the people who are in need of the services of the charities and social businesses?

Well, first lets be clear here that we're all part of a guessing game to some extent which is going to play out over the coming weeks and months.

On a general level, we will see an increase in the need for the services provided by third sector organisations as unemployment, homelessness and other social problems consistent with a worsening economy take hold. At the same time the economic sustainability of these same organisations will tend to weaken.

On funding, I see a more favourable situation for social enterprises than faced by conventional small businesses. Financing will not be easy but established social enterprises will still have access to specialist social funds (who are sitting on capital). New philanthropic/social investment will be harder to come by.

Organisational resources will inevitably become more stretched as demand for services increases. Careful management, some cost cutting in non core areas and a renewed focus on financial viability will be important. In these conditions, we may find organisations seeking to consolidate and merge (a positive thing) and we may see a greater focus on enterprise/innovation as means of achieving sustainability.

For Eastside right now, I hope that our work becomes more essential - and we're able to help organisations navigate the rocky road ahead.

Do let us know your comments and how the current economic situation is affecting you or your organisation.