Blended Value

Are you skeptical of social entrepreneurship? Do you think that social entrepreneurship is a story of wasted money and effort? Then here is the point you are missing: The key to success is to create blended value. In their book The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World John Elkington and Pamela Hartigan describe blended value as, “…what results when businesses—whether for-profit or nonprofit—create value in multiple dimensions—economic, social, and environmental.”

Capitalism is not a complete success. If you are in the American middle-class, then you may not fully appreciate the failings of capitalism to reach inner city neighborhoods only a few miles from your two-car garage. You may find it easy to blame single mothers and college dropouts for their own mistakes. You may point at un-ambitious, but able bodied, minorities who would rather collect welfare and charity than work. You can even throw your hands up and point to the failure of government bureaucracy to make any inroads to the situation. These may all be valid points to make, but unless you’ve walked a mile in their shoes, you would better serve your own interests by considering how we can help them.

As a member of the American middle class, it is impossible for us to fathom the impossible situation in Haiti, where no amount of ambition and hustle can help you overcome the odds. We cannot imagine places in Africa where oil drilling has caused devastating pollution, taking away the ability villages once had to sustain themselves through fishing and farming, poisoning them, and preventing them from sharing in the profits that the oil generates.

There are many areas of this planet where capitalism is not working, and there are many reasons. There are many potential consumers who are unable to participate, prevented from participating, or fear participating due to the scandalous history of capitalism. That does not mean it is a flawed system that needs to be replaced. Capitalism is the greatest economic system when it works, and it can be tweaked to work anywhere.

Social Entrepreneurs are tweaking capitalism to create a blended value that is self-sustaining. Charity is ultimately not sustainable because it depends on a constant stream of generous donations. In places where people cannot yet compete in a global economy, charity is simply a matter of throwing money down a hole if it is not used to create value. However, if the charitable donations are used to enable participation in the global economy, then we can call it an investment.

When a multinational firm arrives in a developing nation, the locals will automatically assume that their best days are numbered. They will assume that a lucky few locals will benefit from the arrival, while the vast majority will experience exploitation, pollution, and neglect. The reason for this is because in the 20th century, the primary aim of capitalism was to generate profits for the shareholders of the company. If you did not own a share of the company, then your opinion and your welfare was not important. Hence, many people experienced capitalism in the form of quasi-slavery and oppression.

Today, we are seeing trends towards Corporate Social Responsibility and Social Entrepreneurship, which aim to make capitalism more responsible. In this model of blended value, capitalism aims to generate value for the stakeholder which includes the shareholder, the employees, the supplies, the customers, and the local community. In return, each stakeholder protects their interest in the corporation in order to ensure they receive their share of the benefits provided.

By focusing on stakeholders rather than shareholders, Capitalism is transformed from a model of “dog-eat-dog” and “every man for himself” to a model of symbiotic relationships, a functioning village, and a system of sharing resources. Competition still exists, and bad businesses will still fail, but there will be a level playing field and better chance for everyone to do well.

Better still, the firms who provide a greater benefit to the community will likely receive lower taxes, less political obstacles, and a better perception in the market. Your efforts at social equality and creating blended value may become your most successful form of marketing.