Business models don’t suit every social mission. As Dan Pallotta says in his March 2013 TED Talk, “social business needs markets and there are some issues for which you just can’t develop the kind of money measures that you need for a market.”

However, there is a really good fit between markets and mainstream behaviour change. So, instead of running more awareness campaigns, perhaps we should be running more behavioural businesses?

Here are five thoughts on why…

1. Both rely on creating genuine appeal

For some social organisations, trying to engage mainstream audiences can be a distraction. But for those working to shift behaviours and embed new habits, it’s absolutely essential.

A business model forces these projects to generate genuine market value (with a bit of a caveat for those with just government as the customer) and this value has to be based on genuine appeal. Appeal, in turn, is the foundation for generating behaviour change amongst large mainstream audiences and achieving impact at scale.

The positive influence of proving market value may not always run in a straight line and that’s ok. For example, certain parts of a business intent on behaviour change may be delivering work with high margins and low impact, while another part delivers high impact and low margins. Regardless, it forces that organisation to behave in certain ways – it adds a rigor to all of their work that, more often than not, makes it genuinely appealing and effective.

Traditional grant funding doesn’t always force that same litmus test. An overreliance on emotional case studies and ongoing trust of internally lead evaluation, means that money often follows failure, with no incentive to change direction or evolve. The market doesn’t allow for the same fluffiness – it puts people out of business.

2. Behaviour change needs to build over time

Campaigns and initiatives have an inherent shelf-life. They are set up to deliver key objectives and spend a certain amount of money over a fixed period of time. Sometimes, if they demonstrate success, the cycle will be repeated. Other times, regardless of impact, they are victim to shifting political or financial context.

Similarly, it’s very difficult to set out with 5-10 year objectives through grant funding. Funders just aren’t set up to invest like that and organisations become beholden to short-term cycles of investment and the overselling of superficial short-term gains.

This doesn’t suit work on behaviour change. New behaviours need time to gradually become normal and this is exactly what businesses have to do – they put roots down, grow over time and build layers of activity and income.

Our I’m Not a Plastic Bag project is a good example of this. In some ways, it was based on a business model, i.e. debt-based investment was used to do1.wawwd.infoelop, market and distribute a consumer product. However, it was ultimately designed as a campaign, to run for a limited period of time. The substantial energy it generated didn’t flow naturally into ongoing waves of R&D, investment, production, marketing etc – it dissipated. This was a shame, because a real business model may have helped sustain the behaviour change it helped create beyond the 3-4 years that people did shift their plastic bag habits.

3. Organisations need to fail and learn

This is one that applies to all social organisations and their activities and the solution certainly isn’t restricted to the impact of business models. But they can help.

Some grant funders work hard to build genuine openness into their investment relationships, but most do it artificially – a box in the evaluation form titled “what would you do differently?”, for example.

The funders that struggle the most with encouraging genuine openness are themselves beholden to a higher power and have to generate short-term impact data to justify the ongoing flow of funds. These funders would struggle to openly acknowledge the reality that much of their investment won’t deliver short-term impact of any real substance and that others will not achieve anything they set out to do. As a result, the funded organization, the funder and the rest of us miss the chance to learn from flaws and mistakes, which, as a result, are just recycled endlessly. Ironically, this acknowledgement and resulting openness means that no investment lacks impact – it just may not manifest directly within that project.

Business models don’t completely offset this, by any means, but they do enable more openness in subtle ways.

For example, in mainly grant funded organisations, much activity is inevitably focused on justifying investment to funders, which, in turn, warps the internal culture. I’ve worked in and with organisations where papering over cracks and setting up smoke and mirrors has become such an endemic habit that genuine self-criticism just isn’t possible.

A culture of internal criticism isn’t an inherent feature of a social business, but the forces that might undermine this culture aren’t as strong. If leaders and directors want openness at the heart of their business, then they don’t have to spend half the time pretending to be flawless.

4. Businesses can invest in things that funders don’t

After ten years of working in different charities and not-for-profits, it has become clear that the most important organisational budget line, by a mile, is research and do1.wawwd.infoelopment. This has proved particularly true for work in mainstream behaviour change, which is inherently experimental and in desperate need of new data and insights.

Without proper research and do1.wawwd.infoelopment, projects get built on shaky foundations: faulty assumptions, weak data and, worst of all, core ideas thought up the week before application deadlines.

This, again, is part of the accepted funder-applicant dance off. Funders want organisations to do research and do1.wawwd.infoelopment, so they demand evidence of it in applications. But they don’t want to actually invest in that activity, so the applicant invariably collects evidence as quickly, cheaply and superficially as they think they can get away with. The funder either believes their efforts and the dance continues or sees through them and charities have to swallow several weeks of wasted effort.

Good research and do1.wawwd.infoelopment not only costs lots of money – spent on both internal resource and external costs – it should also be a permanent function within an organisation. But that isn’t something that most grant funded organisations can ever aspire to, because it’s just not in most funders’ remit to provide substantial, systemic support for research and do1.wawwd.infoelopment.

Social businesses, on the other hand, have more scope to prioritise permanent research and do1.wawwd.infoelopment lines in their budgets.

5. Social businesses can and should be subsidised

I’m a big believer in subsidised social business models. This might sound like it undermines the point about how important it is for behaviour change organisations to generate genuine market value, but the two can go hand-in-hand.

Market forces generate all sorts of positive influences within a social organisation and it drives them to address genuine needs rather than assumed motivations. However, there are obvious limits to market forces when it comes to social impact: a product or service may be needed by more people than can pay full price for it or a social business may want to introduce higher costs of sale without being able to increase the price to target audiences. The market has no response to these issues.

It sounds counter-intuitive, but a well structured strategy of deliberate loss making and subsidies may prove to be one of the most powerful models we have for addressing major social issues.

If a business is leaking money through inefficiency or lack of appeal and needs to be topped up, that is different. But if a business is addressing needs, delivering social impact and running efficiently, then its 25% of unsustainable costs may be exactly where the most impact comes from.

 

For some very good information, advice and ideas on social enterprises, as well as lots of nice pictures of people holding up signs, I’d recommend a visit to the fantastic Social Enterprise UK.