The Mission-Profit Continuum: A Lesson from Executive Shadowing

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Apr 252011
 

by Stephen Huie

This past Friday, I visited Community Wealth Ventures and Share Our Strength as part of the Smith Net Impact Club’s Executive Shadowing Program.  Other students visited Noblis, a non-profit scientific and engineering research center.

I learned a lot, especially about the role of mission in circumscribing the limits of earned income social ventures.

Community Wealth Ventures

Community Wealth Ventures is  a for-profit firm that  provides management and strategy consulting for non-profits.  CWV was created as a social enterprise by Share Our Strength to assist other non-profits in developing earned income ventures.  Examples include homeless shelters providing gardening services, Goodwill creating a janitorial service firm, and environmental groups creating wood certification and verification.  These social ventures must deal with the competition and managerial challenges of running a business.

Amy Celep, CWV’s President and CEO, explained that when advising clients on the type and structure of earned income ventures, the organizations must understand where on they want to be on the “mission-profit continuum.”  Just like for-profits, non-profits also have core competiencies – those unimitatable capabilities and resources that can be leveraged across various areas.

The decision to start a venture that is not related to the mission of the originating non-profit may often preclude the new firm from taking advantage of the inherent knowledge, organization, networks, and skills of the originating non-profit.  On the other hand, the profit margins for ventures more closely related to the firm’s mission are sometimes below the cost of capital.  According to Celep, empirical evidence suggests that social ventures that stray too far from their progenitor’s mission are more likely to fail, often because of internal misunderstandings and disconnects about the management and nature of both organizations.

In recent years, CWV has focused on general managerial and strategic consulting and executive coaching for nonprofits and for foundation grantees.  Although incubation funding (e.g. below market rate loans, foundation program related investment) for social ventures does exist, there has been a dearth of demand from non-profits wanting to expand into earned income ventures.  Celep described CWV’s shift as moving from focusing on social enterprise as the means to focusing on sustainable organizations as the goal.

Share Our Strength is a non-profit foundation that uses culinary events, social media, and cause marketing to end childhood hunger.  Share Our Strength magnifies fundraising by connecting critical industry players with each other through charitable events and joint marketing.  The organization collects this funding and then grants it out to the direct service providers.

Tamra McCraw, Director of Business Development, called this trading of ”creative leveraging rights” that allow companies to gain access to resources that enhance their core mission.  For example, A Tasteful Pursuit, hosted by Share Our Strength, unites top celebrity chefs for dinner fundraisers and builds matching dollar for dollar sponsorship relationships with food manufacturers who want access to the chefs.

What was most impressive is that Share Our Strength drives hard bargains and is not afraid to step away from a partnership that does not fit the core mission of ending childhood hunger.  In other words, you can’t just buy the Share Our Strength brand name or its relationships; it refuses to be just an advertising channel for food companies.

Stephen Huie is an MBA candidate at the University of Maryland Robert H. Smith School of Business

EPA Sustainability Expo: Good Things Afoot

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Apr 162011
 

Yesterday I had the wonderful honor of joining a select group of ambassadors and corporate executives to get a sneak preview of the EPA’s National Sustainability Design Expo and P3 Competition. The event is designed as an annual event for (directly from the brochure) “teams of graduate and undergraduate students to design solutions for environmental and sustainability challenges worldwide. P3 stands for People, Prosperity, and the Planet, fyi. 55 of the best and brightest teams of students are all there showcasing their work to create a greener future. Continue reading »

Using Consumer Insights to Thin America and Fatten the Bottom Line: Is Paying Too Much Attention to the Customer Limiting Innovation in Health and Wellness?

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Apr 052011
 

by Stephen Huie, MBA ‘12

Apr. 3, 2011

Just because the growth rate of American obesity has slowed down to reach 34% of the adult population from 30% ten years ago, there isn’t any reason to begin letting loose again.  Obesity may be plateauing for adults, but the number of obese children tripled to 17% over the same time period (CDC – 2010).

Food producers have been watching these “mega” trends in obesity and their counterpoint, health and wellness, for many years now.  Food companies recognize that their customers’ bodies are changing and that buyers are responding by modifying what they choose to buy and eat.

But, how do you design and market healthier food products to a mass audience, especially when you’ve been producing products high in sugars, sodium, and fats for so long?

I just heard three industry veterans share how they do just that at the 2011 U. Maryland Social Enterprise Symposium.  Sitting on the panel were:

  • Dale Clemiss, VP Beverages, Campbell Soup Company
  • Lupe Sierra, Senior Manager of Consumer Insights for Global Health and Wellness, Kraft Foods; and
  • Heather Stouffer, Founder/CEO, Mom Made Foods

Framing Food and Understanding the Consumer

All of the panelists described their company’s product choices in reference to how consumers perceive their lifestyles and their food.

Heather Stouffer, who founded Mom Made Foods to create convenient frozen organic meals for kids, shared the challenges of designing macaroni and cheese that did not use artificial food coloring.  Given that many parents grew up on yellow and orange mac and cheese, Stouffer knew that she had to make her version match what shoppers were expecting.

Stouffer designed a butternut squash and sweet potato puree mixture to recreate the bright orange that kids love and caretakers recognize.  She said it was a difficult process to adjust the viscosity of the mixture using vegetables, but that the mac and cheese came out as a perfect representation of what her firm was trying to achieve.

More than anything, Stouffer, emphasized the child’s perception, noting that “kids like cool colors.”

For Lupe Sierra of Kraft Foods, nothing is more important than understanding exactly what eaters and shoppers want.  Sierra described how average values have shifted to wanting a better sense of “balance” and eschewing excess.  These are the core principles that ultimately drive the lifestyles and purchasing decisions that promote health and wellness.

Kraft has responded by redesigning over 5,000 of its products.  Kraft has begun to increase the amount of whole grain in their Nabisco crackers and plans to double it by 2013.  Their Oscar Meyer Lunchables now include carrots and apple slices.  They’ve even added Vitamin C to Trident Gum.

Taste: The Real Bottom Line

Yet for all the creative ways to produce a healthier snack, Sierra insists that food sales are ultimately driven by one thing: taste.  You can’t sell something unless it tastes good.

This has been especially challenging for established companies such as Kraft and Campbell, both of which have been reducing the sodium and saturated fat levels of many of their products.  For example, Dale Clemiss of Campbell Soup shared that the vegetable drink V8 was originally introduced as a way for people to get a daily intake of vegetables.  In the past few years, Campbell has reduced their sodium content, but has had to make up the taste by redesigning the ingredients.

So if it’s not tasty, it won’t sell – and what good is a healthy product that sits on the shelf?

However, what is tasty is also rather relative.  In the same way that parents today grew up on yellow and orange mac and cheese, North Americans have grown up mostly on high sugar and high fat diets.  Our reference point – the anchor of experience by which we pass judgment – is already skewed toward the sweet and savory.  As Michael Pollan points out in The Omnivore’s Dilemma, if someone who had been living off of whole grains and fruit all their life had suddenly walked into a supermarket and ate processed food, most of it would seem disgustingly sweet!

So if taste drives consumer demand, and businesses continue to adjust their offerings based upon consumer demand, then will anything really ever change?  Will large and established food producers be stuck in a market position that isn’t clear enough to be labeled a “healthy product” rather than just a “healthier product” (just look at Kraft’s “Wheat Thins: Hint of Salt”)?   Have we already opened the Pandora’s Box of the super sweet and salty, making it hard to adjust downwards?

Profit from Disruptive Innovation in Food and Beverages

While food companies continue to struggle with balancing their sales with product R&D, they would do well to remember the role of disruptive innovations.  Writing in 1995, Joseph Bower and Clayton Christensen mapped out the trajectories of technological change.  They defined disruptive innovations as advancements that provide a different set of attributes than currently appreciated by the market.  At first, disruptive innovations undersell because few people find them desirable.

Yet, these poorly selling products evolve at such a fast rate that the new product can eventually invade established markets.  Bower and Christensen’s key insight is that the product doesn’t have to completely dominate the competition on all characteristics in order to dethrone the incumbent – the new product only has to get far enough to meet the market demand for existing attributes.  By that point, incumbents are often too late to make up the difference.

The corollary – and more relevant conclusion vis-à-vis this topic on food and health – is that the incumbents who miss disruptive innovations are often paying too much attention to what their customers want.  Perhaps many food companies are following the trends but missing the larger opportunities.

This doesn’t have to be the case.  Within the food and beverage industry, Honest Tea, which recently closed its sale to Coca Cola, has been extremely successful.

Seth Goldman, Founder of Honest Tea, was the keynote speaker at the Symposium and discussed how the idea of an organic cold tea developed to fill in a market gap between flavorless water and uber-sweetened soft drinks.  As it gained momentum, Honest Tea expanded its product line to multiple flavors and began distributing through channels outside of the local community niches in which it began.  Although their branding and promotions were undoubtedly effective in capturing the right set of buyers, they created an entirely new market for an underdeveloped product category.  They started below demand, but moved to meet the market demand.

We see a similar story in the recent Fast Company article profiling baby carrot creator Bolthouse Farms and its CEO Jeff Dunn, a former Coca Cola executive.

There’s much large companies and startups can do to improve the North American diet by designing to balance taste with health.  However, the real money will be made through internal entrepreneurship, spinning off new ventures to allow them adequate independence from the parent, taking risks, and breaking the parochial limits we have created around flavor and taste.

Stephen Huie is a First Year MBA at the Robert H. Smith School of Business at the University of Maryland.  You can also read about his experience on his Smith Blog.

What Makes A (Social) Entrepreneur?

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Apr 052011
 

by Mike Levitsky, University of Maryland Smith School of Business Undergraduate (2012)

Simply seeing the panel of “Social Entrepreneurs: Stories from the Field” at the UMDs Social Enterprise Symposium has shown me that these type of people come in all shapes and forms. A diverse panel allowed for different perspectives and experiences, each with unique contributions to what social entrepreneurship really means in our society. But, whether fighting against genocide in Africa, making green living the norm, helping women find financial help when no one else would, or bringing a new technology to become the standard in healthcare, these entrepreneurs have presented several traits and tidbits they feel are necessary for “entrepreneurial” success:

  • Audacity is great. Don’t be afraid to go big early.
  • Always go where you will have the most impact
  • Passion makes up where skills lack
  • A great TEAM is essential to success
  • Be idealistic!
  • “I got a great idea….now tell me what’s wrong with it”
  • You don’t need anyone’s permission to do what you want to do
  • Failing is good
  • Entrepreneurship should be learned late in life! only after technical skills are learned should entrepreneurship be studied, so that these skills can be applied in new ways.

So…

It seems this “social entrepreneur” needs to be risky, goal oriented, passionate, idealistic, and rebellious. They need to have the ability to surround themselves with a good team of critics that won’t hold back, and to be able to accept failure time and time again.

Maybe it’s just me, but I feel like I’ve heard this before….in any business class that has tried to define entrepreneurship.  So what is it that makes these people SOCIAL entrepreneurs?

Nothing, except changing times and trends.

The social conscious-ness of society of changing. We have more than we’ve ever had before. Resources, responsibilities, relationships. For one reason or another, we care more about how our actions impact the earth, others, and ourselves. The trend is impossible to ignore. More companies are claiming to be “socially responsible” through CSR programs to try to strap you to their bandwagon. We can even try to connect this trend to the growing needs of Gen Y’s in the corporate workplace. Simply put, times are changing.

Our generation can make a difference (realism has been replaced by idealism.) In a society experiencing innovation at rates never seen before, with technology making tasks and actions more efficient, while resources become more readily available, the new class of entrepreneurs has shifted its focus towards widespread impact. This, combined with the increased interconnectedness of people around the world due to the growing popularity of social media has allowed for MOST entrepreneurial ventures to be “social.”

No longer is the goal to create some new invention or gadget for its use or functionality. The new goal is to create something that will change markets, change the availability of resources, change how people live.

So join me in making the world a greener place. Save some paper, and lets simply call it “entrepreneurship,” whether it’s social…or it’s social.

Taking the Entrepreneurial Plunge: Stories from the Social Venture Field

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Apr 042011
 

by Sara Herald

One of the sessions at the Social Enterprise Symposium held at the University of Maryland last Thursday featured tales and advice from four social entrepreneurs: Janessa Goldbeck from STANDnow, Steve Ma from Live Green Inc., Josh Nesbit from Medic Mobile, and Robyn Nietert from the Women’s Microfinance Initiative.  What do these individuals working on the front lines to solve a variety of social problems have to say about the future of social entrepreneurship? That the world needs fewer generalists and more specialists who can tackle specific ills.  What does that mean for the group of eager college and graduate students in attendance? Pick an area of interest to study and then focus on how the skills learned can address social problems.

That theme echoed throughout the Net Impact National Conference back in October, and it was really interesting to hear it repeated by people who have started successful businesses, both non- and for-profit.  Echoing Green fellow Nesbit was pre-med at Stanford and became fascinated with mobile health and its implications in rural Africa while studying in Malawi.  What kind of people is he looking to hire for Medic Mobile? Those with technical skills in software development and healthcare.  It’s important to be passionate about the organization’s mission and a proven commitment to rural healthcare, but bottom line is that passion alone isn’t going to get you a job.

Nietert emphasized the need for more “boots on the ground.” The Women’s Microfinance Initiative makes loans as small as $50 to women in Uganda.  While the organization counts on several experienced women in leadership posts, it also makes extensive use of willing interns in both its Bethesda, MD office and in the field in Uganda.  But the skills that have proved most valuable to the viability of the organization are technology and microfinance related.  Web development and media work have been crucial stepping stones, as has knowledge of how the microfinance field has evolved since the starting days of the Grameen Bank in Bangladesh.

So if someone has a specific idea and wants to start a business, what must they know? All four entrepreneurs had a positive impression of the funding environment right now, even though traditional venture capitalists are often uninterested in social returns.  Angel investors are key to the success of social ventures, and then there are several organizations that are specifically geared towards funding social enterprises.  Echoing Green is one, as is Kapor Capital, Good Capital, and Underdog Ventures.  Those who find that non-profit status makes the most sense for them should look at government appropriations and foundations focused on the same social problem as them.  Just as important as financial funding is building a good team.  Goldbeck noted that “audacity is great, and a bold goal is necessary to separate your organization from the fray, but you won’t go anywhere without a talented team.”  It’s easy to get lost in a push to get the organization off the ground, but an organization is ultimately not sustainable in the traditional sense until the founders become part of a successful group that can operate even when they’re not present.

Sara Herald is a second-year MBA student at the University of Maryland’s Smith School of Business.  She is the Vice President of Social Impact for the student government association and serves on the board of the Net Impact chapter.  Sara graduated magna cum laude from Georgetown University with a B.A. in Spanish and English.

Planning For Passion

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Apr 042011
 

By Zachary Olson

Everyone’s been lured into those seminars that are supposed to teach you THE SECRET to something, like finding happiness and blah blah blah, but then you end up just wanting to leave as soon as possible because they’re telling you things that seem like just common sense. But then sometimes, if you’re lucky, the speaker asks you to actually do one of their exercises, and your ego completely deflates as you realize you’re not actually doing these simple things.  I had one of those moments in Dr. Mrim Boutla’s session about choosing a socially conscious career at the 2011 Social Enterprise Symposium. This is basically how the session started:

“Align your career with your passions!” Really? I should choose a job that I like doing? What a mind-blowing concept. 47 minutes left until I can leave and get some free food.

“Write down your top 6 passions.” I like my job, thanks. …If I were to do it, though (which I’m not), I guess I’d list things like web design and development and something to do with economic development or education and something about being outside and travel… None of which I get from my new internship (queue animation of ego shriveling up into a prune).

Now that I had official confirmation that I’m stupid and my life sucks, I figured I might as well listen to what Dr. Boutla had to say and actually do the exercise. Essentially, after you think of your six passions, write down how you’ve incorporated them into your life in the past, present, and ways that you could use each of them in your life more in the future. Here’s mine:

  1. Web Design / Development
    1. Worked as a web developer for a couple of organizations
    2. Not much… Some programming at my new internship.
    3. Work as a web developer after graduation? Volunteer services?
  2. Economic Development and Education
    1. Not too much, some assorted volunteer projects
    2. Volunteering at Grameen Foundation
    3. Same as Web development – potentially work for an organization / business doing something in this area or continue to volunteer
  3. Being Outside – Hiking, walking around the city, etc.
    1. Used to work in  nicer area of DC, walked part of the way to work
    2. Not much, don’t have time to talk to work and work is in a boring part of town.
    3. While this seems silly, maybe work in an area I like? Or at least try to make more time for walks, camping trips, etc.
  4. Architecture
    1. Not much, basically just making houses with The Sims
    2. Even less, my friend lost my copy of The Sims L
    3. Buy a new copy of The Sims? Or make some time / money to travel a little and see interesting architecture
  5. Working with people – tutoring, collaborating on projects
    1. Group projects for school, etc
    2. Same, groups projects in every class this semester
    3. Find a career that allows me to work with teams, rather than alone in a cube
  6. Organizing, planning
    1. Planning class schedules, planning out project work schedules, class work, etc.
    2. Same
    3. Similar to #5, work on multiple projects, take change of managing schedules

Ok, I realize the last one sounds a little crazy, but I do get some freakish pleasure from looking at my beautifully planned out schedule and to-do list, and I was sort of running out of ideas; it turns out I’m actually a really boring person with not many interests.

Anyway, the point of all this is that, even though working with your passions seems like an incredibly simple concept, if you actually sit down and work through this, I guarantee you’ll find that there are something that you’re not getting enough of.

If you want to find out more about Dr. Boutla and her career counseling program, the More than Money League, go to http://www.events.icohere.com/MTML/

What are your passions? How have you managed to incorporate them into your life?

Calling All Female Would-Be Entrepreneurs!

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Apr 042011
 

By Sara Herald, MBA Class of 2011

Although rates of entrepreneurship among women in the United States have been growing steadily, 60% of new businesses are still founded by men[i].  However, if Natalia Oberti Noguera, Julie Lenzer Kirk, and Amy Millman have their way, that percentage will decrease significantly in the coming years.  These three women, all entrepreneurs themselves, have made careers of helping other women start and grow businesses.

Oberti Noguera founded the Pipeline Fund, “a social venture fund that invests in women-led for-profit social ventures and trains women to become angel investors.”  She wants all aspiring female entrepreneurs to know that “it’s okay to fail, because each failure is just a step closer to success” and is passionate about gender equality in the business world.  Lenzer Kirk is a founder and CEO of Path Forward Center for Innovation & Entrepreneurship, an organization that works to create “businesses that grow beyond the founder to create jobs, increase opportunities, improve communities, and change the world.”  Lenzer Kirk started her own technology company in 1995 and after running the business for 10 years decided that her true interests lay in helping other women start businesses.  Amy Millman, a former lobbyist, is now the president of Springboard Enterprises, a company that “educates, sources, coaches, showcases and supports high growth [women-led] companies seeking equity capital for expansion”.  Having co-founded the organization in 2000, Millman has helped female entrepreneurs raise over $5 billion to fund future growth.

Here at the Smith school, these three women were speaking to an audience of undergraduates, graduate students and members of the local community at the Social Enterprise Symposium on a panel titled The X Factor: Women in Business.  While they are quite accomplished and know a lot about the details of starting and growing a business, they unfortunately refrained from sharing specific lessons learned and took on the role of cheerleaders.  Rather than focusing on particular skills that women can leverage in the business world or talking about how women should navigate a male-dominated venture capital environment, the panelists resorted to hackneyed phrases like the “importance of the female perspective” in business and how women should just “follow their passions” to start their own companies.  Furthermore, while the audience was predominantly female, there were a few men present, and the panelists regrettably attempted to use them as representatives of the male sex as a whole and put them on the spot to answer for their gender.

One of the Smith school’s tenets is entrepreneurship, and the admissions office puts considerable effort into recruiting qualified female students as both undergraduates and MBAs, but panels like this one do not really spark the creation of women-led businesses by the students present.  Encouragement and success stories give hope, but if women are to succeed in a cut-throat start up environment and credibly compete with their male peers, they need to find out which skills to cultivate and what resources to seek out.


[i] http://www.drjeffcornwall.com/2011/02/how-female-entrepreneurs-defin.html

Sara Herald is a second-year MBA student at the University of Maryland’s Smith School of Business.  She is the Vice President of Social Impact for the student government association and serves on the board of the Net Impact chapter.  Sara graduated magna cum laude from Georgetown University with a B.A. in Spanish and English.