CROWDSOURCING & CUSTOMER SERVICE – STRATEGIC ANALYSIS

While the growths of the Web, social media and online communities have dramatically changed how companies and customers connect the 4 fundamental drivers of business have not. Companies still need to:

a)    Build

b)    Market

c)    Sell

d)    Support their products & services

New technologies have helped to simplify processes and reduce the cost of those four drivers. To succeed in today’s competitive market corporations must now meet five new business imperatives:

a)    Do more with less

b)    Increase profits while dropping cost

c)    Implement systems for better ROI, and strategically…

d)    Inform, engage, enlist & reward your customers, making them active copartners in your business

e)    Become a “Social Business”

The conventional definition of “ROI” as “Return on Investment” is still valid, but the spread of social media and the adoption of new Social CRM tools, ROI should be considered as: “Return on Interaction”.

Analyzing this situation drive us to the following conclusion: by listening, observing, asking, involving, and interacting with customers (partners, and employees too), a truly social business could build better products and services, that are increasingly designed, sold, and even supported by customers.

Every day, more and more customers go to internal or external forums and online communities in search of answers from people like them.  Unfortunately, on virtually all of today’s online communities, the process of resolving problems and issues is poorly handled, if not entirely unmanaged.

In order to face this new challenge, companies need to integrate platforms able to listen, involve and interact with their clients in real time. The best way to reach this target at a minimum cost is to crowd source their own customers. If your company is not already crowdsourcing its customer service and support, it’s time to consider doing so. Why? Smart businesses are looking more and more for ways to help their clients.

 I.  What is Crowdsourcing?

Crowdsourcing is using the “crowd” of users as the “source” to help other users. It allows the number of customer issues to be handled to grow without needs to incur in relevant additional labor costs. By letting users participate in the customer service and support process, it puts them center stage, engages them with the company, and increases loyalty.

Today, customer loyalty is considered as a key element for the success of a company. It determines whether or not it is a prosperous organization and the growth of the loyalty customer base is becoming a more and more relevant KPI.

Why a client is loyal? The most important element for him to be faithful to a brand is the quality of the product or service provided to him and how the enterprise provides it.

II.        Main Challenges:

The biggest challenges companies are facing in customer service today are:

a)    The growing operating cost of customer service

b)    Providing quick answers to questions from many communication channels if not your customer will start to abandon you

c)    Monitoring social media where you customers speak about you

d)    Operating and extending the number of communication methods that your customer wants to use

e)    Distribution of product/service knowledge internally and externally

f)     Growing your customer loyalty base

 

III.        The Solution:

Developing a business solution that helps the company to improve the customer service and tackle the challenges of today is the only way and should be sustained by the following three pillars:

a)    Create an expert community to provide peer to peer support customer (crowd-sourcing) deflecting requests from internal customer service

b)    Settle forums you can control for discussions on your products and services

c)    Improve and reuse the knowledge gained from requests/answers to make them easy and accessible with the help of a semantic natural language search engine

IV.        Basic Rules:

• This platform has to allow the company to listen, monitor and engage with its customers on social communication channels from one single interface.
• Customers have to be able to choose to communicate from a portal or through a social channel and the answers have to be provided in the customer preferred channel.

V.        Secrets for Success:

The company needs to setup and align its peer-to-peer support with the already existing operation model to use or customize the flow that fits the preferred customer experience.

The community has to be animated and/or integrated to other communities. In order to boost peer-to-peer support, a reward engine has to be built in to motivate the experts

VI.        Key Benefits:

a)    Cost reduction of operation (Normally between -30 & -40%)

b)    Increased customer satisfaction and customer loyalty

c)    Improved knowledge distribution

d)    Higher customer retention

e)    Brand protection

f)     Being seen as an innovative company

VII.            Examples:

The following summary table shows examples of Key benefits of online service and support communities:

VIII.            Conclusion:

Crowdsourcing can reduce drastically the burden on the staff, save money, and engage customers.

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PDF AVAILABLE @  http://www.scribd.com/doc/132461479/CROWDSOURCING-CUSTOMER-SERVICE-STRATEGIC-ANALYSIS

Content and analysis of this post is drawn principally from an article which originally appeared on March 12, 2013 on the CrowdEngineering website titled “Crowdsourcing Customer Service: Top Biz Imperative” at http://www.crowdengineering.com/news/industry-news/crowdsourcing-customer-service-meets-top-biz-imperatives/ and also incorporates content and graphics from CrowdEngineering’s presentation at Crowdopolis 2013.

This content is posted here with the approval and consent of CrowdEngineering, Inc.

Top 10 Digital Trends for 2013

The web has been in a state of flux since its inception, and this year is no different. Here’s what trends are expected to take off in 2013.

1. Personalized Products for each Customer

Organizations will move towards involving the customer when creating their products as opposed to a “one size fits all” mentality. The key action to take here is to evolve from the now ‘traditional’ social media marketing activities of buying display ads and pushing products, to buying social listening research, with the goal of product development personalized for the ‘individual’ consumer.

2. Demographics is out, now it’s about Behavior

In 2013, it’s no longer about targeting an audience that you THINK has an interest in your product based on age, income, gender, education, historical data, etc… It’s about targeting the audience you KNOW has an interest in your product by focusing on a more niche area of interest such as fan groups, societies, cults, that already engage in your product/service.

3. Quality over Quantity.

Having large amounts of data is invaluable to a company, but in the process of having all this data, it creates a lot of pains in discovering insights and actionable items. Brands need to move away from tracking overall sales each month; instead they need to look at ‘live’ sales. Track them by time, SKU, location, retailer, attribute, etc… This ground up approach will give the real insights from a small to large scale.

4. Fall of the PC looks to Responsive Design

The purchase of desktop computers are on the decline, so what are consumers buying? Mobile devices, i.e. smart phones and tablets. A website built in responsive design basically figures out the resolution of the device it is being viewed on, and the images and fluidgrids will size correctly to fit the screen. This allows the website, no matter on what device, to have the optimal viewing experience – easy reading and navigation with a minimum of resizing, panning and scrolling. The benefit – one website build, one seamless experience with thousands of screens.

5. Perceptive Media

Media, audio or video that adapts itself based on the information it has gathered on an individual user. Artificial Intelligence is the brain work behind this. The purpose is to provide media that target on a user-by-user basis. Imagine watching tennis on television with someone that doesn’t know the rules, perceptive media could show one user the detailed rules of tennis while showing the other user the current rankings of players and behind the scene footage. Creating democracy within the room by comparing the overall tastes of the group and reach the most compatible compromise.

6. Revolution of the 2nd Screen

•  80% of smartphone and tablet users use their devices while watching TV.
• 25% of U.S. smartphone and tablet users use their devices while watching TV multiple times per day.
• 51% of those who post on social media while watching

As consumers are engaging in one type of media, they are simultaneously engage in another. Imagine a consumer watching a television drama series, and at the same time shopping on the eBay app for the clothes that the main character is wearing. This revolution extends to mobile devices from the big screen, TV, and organizations are working to build on the relationship between screens.

7. Cloud Computing at the Forefront

Cloud computing is the storage of data online allowing access across multiple platforms simultaneously through consumer-based services such as email, social media, online file storage and corporate communication tools. A simple idea with a powerful effect, involving the fast growing mobile device Mobile cloud is a new way to create workflows. This will change the way we think about storage on our devices and instead think about storage in the cloud. Devices will then come with less storage, but be better equipped to access data.

8. Digital Convergence – Pulling it all Together

Forget about remembering where you left off in Season 2 Episode 3, 25 minutes and 32 seconds of The Walking Dead, think more about registering for an account via online cloud services and it’ll remember where you last left off and continue when you log back on via any compatible device. To give you even more, these services can make recommendations based on the content you have previously viewed. Nowadays, it’s not about finding the video, it’s about how fast your internet connection is so you can stream the video without lagging. Apps like HBOGo, UVideos, and HuLuPlus not only stream content to the consumer, they can measure the consumption, know the device used, connection speed, viewing history and purchase history; with this data they are able to personalize the ads, content and product recommendations a consumer sees.

9. All things Internet

It’s inevitable, and has been coming for a while – everyone will be able to connect to the internet via more and more devices – the refrigerator, the television, the car, etc… Everything will be automated. Companies like Ford have already begun opening up their APIs to developers to create new applications to use via computer systems in the vehicles. Computer chips installed in traffic lights connecting to GPS systems will provide the shortest travel distance with live data. One day we’ll live in a world where the toast is hot and ready on a plate the moment we step into our kitchen. It’s not really any stretch of the imagination, if you think about it.

10. Location, Location …..

2012 started this up, and now in 2013 with more and more mobile devices being produced (e.g. Sony recently released a competitor to the iPhone 5 and Samsung Galaxy 4 – the Xperia Z), in conjunction with privacy being loosened by tech giants such as Facebook, Google, Instagram, etc, this means that locations of users by default will be tracked, provided users don’t disable the functionality. But at the same time, growing social relationships are encouraging friends to share their location for rewards, namely applications such as Foursquare, and also social recognition of having visited various locations via networks such as Facebook Places.

3 STEPS TO AN EFFECTIVE SOCIAL MEDIA STRATEGY

 

Step 1: Assessment:

Start with a single question: “Why social media?” The answer will dictate everything you do in this first phase. Assessment is to evaluate where you are, where you want to go and what the wins will be along the way.

a.    Put Your Audience First

First things first: You need to clarify your audience’s needs, wants and challenges not to mention where they’re spending time online. Use tools like Survey Monkey or Google Docs to quickly and inexpensively survey your customers.

Each time I want to learn more about my audience’s behaviors, I create a quick survey and post it on my social networks to go straight to the source.

The five major benefits of knowing your audience are considerable:

1. Laser focus: You can create content that resonates instantly.
2. Break barriers: Confront pain points head-on to build trust.
3. Language: Increase engagement by being a person your audience relates to.
4. Empathy: The more you listen, the better you can respond to specific needs.
5. Positioning: You can become the go-to source in your niche.

b.    Define a Guiding Theme Strategy

Since you’ve identified your audience, the next step is to ask yourself what you want them to do.

What’s your theme? It’s usually one of three things:

• Awareness
• Sales
• Loyalty

Loyalty and awareness can both lead to sales, of course but stick to just one overarching goal for your strategy. Consistency and simplicity are key here.

Now it’s time to get really specific. This might be the hardest piece in the assessment process, and yet it’s critical to your success. Ask yourself, what does my business actually do? What do my fans say when they’re happy? What is at the core?

Talk it out with your team. Together you can hone in on your “One Thing” the heart and soul of your brand. Your “One Thing” will affect every content and posting decision you make.

As an example, if Disney = magic and Apple = innovation, what do you equal?

Your “One Thing” is the voice of your strategy across every network.

c.    Identify Metrics and Monitoring

How will you measure your strategy’s success? Depending on your theme, the metrics may change.

For example:

• If your theme is awareness, you’ll want to measure growth, engagement, brand awareness, sharability, likes and subscribes.
• If it’s sales, look at click rates, social e-commerce sales and conversion rates.
• For loyalty, look at engagement, sentiment and influence (Klout and Edge Rank Checker are good sentiment-measuring tools).

It’s useful to monitor some overall trends too, like mentions of key people at your company, your company name, brand names, product services, competitors and industry keywords.

And if you’re new to data measurement, take baby steps. Start with a simple free tool like Google Alerts.

d.    Put It All in Writing

Don’t wait for an emergency to nail down your communication policies. For example, what happens when there are negative comments? How should the company’s social sites be used? Are there guidelines for what fans and followers can post to a company Facebook page?

Drill down on the answers in a written editorial guide tailored to your business, team and goals. A good guide will address:

• Who is your team? Who is responsible for what?
• What’s the point? Identify why you’re using social media, and what you want to track.
• Where? Identify the networks you want to focus on.
• When? Be as specific as possible; e.g., blog at 8 am, post it to Facebook at 10 am.
• How—identify team tools and platforms. Including examples is great, especially when it comes to formatting of content. Your guide should enable anyone new on the team to know what’s going on.

Step 2: Implementation:

Next up: execution. The implementation phase is all about zeroing in on the details and day-to-day tasks you and your team are now responsible for.

a.    Create a Content Calendar

Now that you have an editorial guide, it’s time to translate policy into concrete actions preferably on an editorial calendar. The more information and detail you include, the better you can measure effectiveness. Consider:

• What is the theme or essence of your content?
• Who will create it?
• When and where will it be shared?
• How often will you create content versus share third-party content?
• How will you deliver content—as eBooks? Blogs? Video? All of the above?

b.    Have a Step-by-Step Plan for Promotion and Growth.

There are literally hundreds of ways to get your team promoting and sharing on the key social media sites you plan to use. Here are a few to get you started:

• Integrate social media on your website with plugins and icons.
• Run contests and promotions or offer rewards.
• Drive traffic by offering webinars, training programs, interviewing experts and create blog.
• Promote your networks consistently.
• Add networks to letterhead, email signatures and business cards.

c.    Identify Core Sales Campaigns

Visible social media icons and social plugins are some of the easiest ways to drive traffic to your social media networks.

Yes, social media is about relationships first. But the fact is, once you’ve built solid, genuine relationships online, you’re going to want to use your influence to grow your business. That doesn’t mean shoving it down fans’ throats or putting sales above the relationship. It simply means that you can and should promote what you offer to the people who believe in your mission.

Establish an action plan for the core campaigns you’ll use to collect and nurture leads, like:

• Outline promotional policy what is acceptable, and what is not allowed?
• Identify and implement opt-in opportunities like a custom welcome tab on your Facebook page.
• Determine where to direct leads for example, will you create an ecommerce platform on Facebook with a custom tab, or sell only on your site?

 

Step 3: Monitor, Measure and Get Momentum

After about two months of running your brand-new social media strategy, it’s time to hunker down with your team, evaluate your progress and fine-tune the details.

a.    Schedule an Evaluation Session
Don’t put off analyzing your results. Schedule your first evaluation meeting when you start phase one. I recommend scheduling a meeting about two or three months out from your start date. That’s just enough time to start seeing results and identifying weak spots.

Make sure you or your team members bring numbers and data to the table and are prepared to discuss them. Metrics, no matter how simplistic, will help you figure out what’s working and what’s not. Include time for brainstorming new ideas, too.

b.    Take Advantage of the Momentum

If you’re seeing traction with your strategy at this first evaluation milestone, consider mixing it up and adding some more advanced strategies into your plan. You have momentum building run with it!

Here are ideas for some “next steps” to take:

• Facebook ads are a good, inexpensive way to grow your fan base, increase engagement and collect leads. Try mixing up different ad types and destinations.
• Run a multi-level contest integrating multiple channels (like Facebook, Twitter and YouTube). Use a promotion, event or reward that will resonate with your audience. Word-of-mouth is a powerful way to leverage momentum.
• Live Q&As on Facebook, Twitter or Google+ hangouts.

Ultimately, everyone’s social media strategy will look different—and will get very different results. To be effective, know your business and the metrics that matter to you. A consultancy might need just 100 high-quality fans, whereas a company that sells a product might need several thousand to see financial results.

Does your business have a social media strategy in place?

What tips do you have for someone putting a strategy together for the first time?

 

PDF DOCUMENT AVAILABLE @ http://www.scribd.com/doc/130421364/3-STEPS-TO-AN-EFFECTIVE-SOCIAL-MEDIA-STRATEGY

 _______________________________

Contact :  herve@delhumeau.com

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Language and Globalization

“Globalization” is a social process “characterized by the existence of global economic, political, cultural, linguistic and environmental interconnections and flows that make the many of the currently existing borders and boundaries irrelevant”. Steger’s book Globalization: A Very Short Introduction (publ. date: 2003) Oxford University Press. Globalization is not as recent a phenomenon as economists have generally led us to believe, although it has undoubtedly operated in faster and more complex ways since the late 1980s

Globalization is readily increasing in today’s world. This increase in globalization has many effects on language, both positive and negative. These effects on language in turn affect the culture of the language in many ways.

However, with globalization allowing languages and their cultures to spread and dominate on a global scale, it also leads to the extinction of other languages and cultures.

Language contributes to the formation of culture, such as through vocabulary, greetings or humor. Language is in a sense the substance of culture. Languages serve as important symbols of group belonging, enabling different groups of people to know what ethnic groups they belong to, and what common heritages they share. Without a language, people would lose their cultural identity.

Languages are the essential medium in which the ability to communicate across culture develops. Knowledge of one or several languages enables us to perceive new horizons, to think globally, and to increase our understanding of ourselves and of our neighbors. Languages are, then, the very lifeline of globalization: without language, there would be no globalization; and vice versa, without globalization, there would be no world languages.

“Cross-cultural contact, therefore, is often viewed as a potential source of unmanageable, or at least undesirable, culture change and of language shift, given that power differentials are to be expected between ethnic groups in interaction” (Fishman, 1989).

Today there are about 6,500 different natural languages. Eleven of them account for the speech of more than half the world’s population. Those eleven are Mandarin Chinese, Spanish, Hindi, French, Bengali, Portuguese, Russian, German, Japanese, Arabic, and English. According to Garrick Bailey and James People in their book Humanity: An Introduction to Cultural Anthropology, estimates for extinct languages range from 4,000 to 9,000 since the 15th century. Other estimates for the future predict that only 10 percent of the present languages will continue into the 22nd century.

The global language system is very much interconnected, linked by multilingual persons who hold the various linguistic groups together. The hierarchical pattern of these connections closely corresponds to other dimensions of the world system, such as the global economy and the worldwide constellation of states.

English is distinguished from the other languages by having very significant numbers of non-native speakers, I think it’s going to be the one most affected by globalization.

At the opposite end of the scale there are languages teetering on the brink of extinction. More than half the world’s languages have fewer than 5,000 speakers, and there are many hundreds that have as few as a dozen. Languages are disappearing all the time — it’s estimated that a language becomes extinct roughly every two weeks.

We can say that almost everywhere language is used as an identity to be part of the “world system” now, and the thing about any system that integrates people is that it benefits its architects. Imported cultures are going to push out indigenous ones.

It’s clear that globalization is making English especially important not just in universities, but in areas such as computing, diplomacy, medicine, shipping, and entertainment. No language is currently being learned by more people — there may soon be 2 billion actively doing so — and the desire to learn it reflects a desire to be plugged into a kind of “world brain.”

To many people, then, the spread of English seems a positive thing, symbolizing employment, education, modernity, and technology. But to plenty of others it seems ominous. They hold it responsible for grinding down or homogenizing their identities and interests. It tends to equalize values and desires, without doing the same for opportunities.

So far, so unsurprising, you might say; but globalization may well have a kind of revenge effect. There’s a distinct chance, I think, that it will actually undermine the position of the very native speaker who, by virtue of having a mastery of this obviously valuable language, thinks he or she is in a strong position.

Why? Because one of the intriguing consequences of globalization is that English’s center of gravity is moving. Its future is going to be defined not in America or Britain, but by the new economies of places like Bangalore, Chongqing or Bratislava.

“The great difficulty is thus considering the unity of the many and the multiplicity of the unity. Those who see the diversity of cultures tend to overlook the unity of mankind; those who see the unity of mankind tend to dismiss the diversity of cultures”. Edgar Morin, L’identité humaine.

This endangerment of languages can have a drastic effect on the cultures that loses there identity. Effects on language loss on cultures might include: dismay at the realization that the native language is lost; anti-social behavior as minority will desperately try to preserve their language; loss of self-esteem. Therefore, it is important for cultures to preserve their language. Despite the increase in globalization, this is possible in many ways, such as language classes, promoting the native language in homes, schools, art, promoting though a strong national identity.

The most problematic issue is how to make these two seemingly contradictory facts compatible: continuity of the linguistic diversity created by humanity through its Diaspora all over the world, and the need for intercommunication between these groups of linguistically-diverse individuals in the new – ‘glocal’ – era of positive re-unification of the species

Actions and representations and discourses on language diversity (cultural identity), integration and intercommunication are therefore primordial, promoting the search for new principles and ways of looking at situations of language contact.

Capra therefore suggests dealing with the columns of the table below complementarily, in order to rectify, particularly in Western culture, the predominance of assertive thought and values at the expense of integrative ones:

Thinking Values
Self-assertive – Integrative Self-assertive – Integrative
Rational – Intuitive Expansion – Conservation
Analysis – Synthesis Competition – Cooperation
Reductionist – Holistic Quantity – Quality
Linear – Nonlinear Domination- Partnership

This change in paradigm does seem urgent because it is clearly coherent with the main problems of modern societies. Now that we are getting to know ourselves better genetically too and that we are sure that human are a unique species and that the genome of other species is not so different, perhaps we can enter another planetary era with more solidarity between the diverse cultural groups and the other species with which we share the biosphere. Biologically and linguistically, as Edward O. Wilson says, “soon we must look deep within ourselves and decide what we wish to become” !!!

If we have a deep look inside us we will come to the conclusion that Art can be the bridge that can make compatible Language and Globalization.

Herve Delhumeau

SOCIAL BUSINESS ……. SOCIAL EDGE ?

SOCIAL BUSINESS …… SOCIAL EDGE ?

Herve Delhumeau

 

 

 

There is a growing interest in a new kind of business that is now being referred as “Social Business”.

 

The key difference between a social business and a traditional business is that a social business explicitly sets expectations with investors that it will simultaneously pursue two objectives — specific positive social impacts and financial returns. Generally, social businesses “warn” investors that the financial returns may be negatively impacted by the social objectives and therefore they seek investors who understand and support these dual objectives when they make their investment. By definition a business must be ultimately self-sustaining … that is, generate a profit/surplus which can allow the organization to continue without indefinite infusions of investor capital.

 

So far so good. Then the definitions of social businesses by different people start to diverge.

 

Non-Profits and Earned Income. Few people consider non-profit organizations which have income generating activities to qualify them as social businesses, but most agree that while these may be good activities they are not in themselves social businesses because they continue to rely on donor income to be sustained. I think it is increasingly important for the viability of most non-profits to have a diversity of income sources which include earned income.

 

Self-Sustaining Non-Profits. There are a number of institutions which have explicit missions to “do well” and receive sufficient resources/income to be self-sustaining. These include private foundations and, more recently, operating businesses organized in a trust-type format. An example of the latter are a number of successful microfinance banks which generate profits, often are subject to tax, but are run by trustees (as there are no shareholders) who by law cannot have a personal benefit from the organization. Generally, the foundations and endowments are not considered social businesses even though some of them do have some operational components. For true operating businesses run inside non-share capital structures, these are increasingly viewed as social businesses even though they may face future limitations due to their inability to accept investor equity capital.

 

Corporate Philanthropy. Many companies have initiatives to “do good.” Some organizations commit a specific % of corporate profits to these initiatives. Examples of companies which have institutionalized this are Ben & Jerry’s, Google (1% of equity, 1% profits) and RealNetworks (5% of profits). These come under what’s known in the business world as the “corporate social responsibility” category. Generally, these initiatives are separate and unrelated to the company’s business. There is much debate about whether these are essentially public relations efforts vs. serious attempts to make a meaningful/optimized social impact. Most people agree that simply having some “do good” social programs do not make the business a social business.

 

Yunus Definition of Social Business. In Muhammad Yunus’ latest book, he argues for a much narrower view of a social business. He proposes that only two types of businesses are true social businesses: (i) businesses owned primarily/exclusively by the poor; and (ii) businesses where investors are limited to only receive back their invested capital and no more. He says that type (i) provide social impact through the returns they provide to the poor through shareholding and don’t necessarily need to have a social mission (although having one would make them an even better social business.) For type (ii), he argues that if the investors have any potential for return above their investment that this will always trump any social objectives.

 

“Hybrid” Social Business. Then there’s a form of social business which has clear objectives for both social impact and financial return. One of the most prominent examples is the many “for-profit” microfinance businesses sprouting up around the globe. These businesses explicitly operate as businesses (with investor capital) and focus on providing valuable products and services to the poor (if not the poorest) citizens/communities. Some argue that these are simply “regular” businesses which happen to focus on a certain market segment … the poor. In some cases, businesses which focus on the poor/vulnerable are exploitive … e.g. moneylenders and their re-branded breathern, pay day loan providers. While there definitely are exploitive business models, there are a growing number of examples of businesses which genuinely seek a material positive social impact. There are a growing number of social investors who are seeking out quality social businesses of this nature … a good example is Good Capital.

 

[There are some businesses which have a more indirect impact on a population … example is mobile telcom operators which appear to increase GDP in emerging markets as subscriber penetration increases … Merrill Lynch report 0.59% increase in GDP for every 10% increase in mobile penetration … but generally these are not seen as social businesses.]

 

Why I Like the “Hybrid” Social Business Model

 

While I have a lot of respect for one of my current day heroes, Muhammad Yunus, I disagree with his narrow view of a social business because I think it is too limiting on the potential for social impact through the social business construct. Here are a few of my thoughts:

 

Investor expectations do matter. If you select investors who are incompatible with your objectives (e.g. they don’t value your social impacts), you’re going to have a challenge keeping focused on your social objectives. But, this is true for any business … you need to find the right investors and set expectations very clearly.

 

Investors take a portfolio approach. Almost all investors seek to have some diversity in their investment portfolio in order to mitigate risk. If I want to be a social business investor, I’m going to want to invest in multiple social businesses realizing that returns/results will vary. So, if I invest in 10 social businesses and 5 fail (no return, not unusual), 3 have modest returns and 2 have strong returns, I have less risk. I also potentially receive my capital back plus a return (both financial and social = Hybrid) This means that the successful social businesses are overcompensating me in return (financial and social) and the unsuccessful social businesses are undercompensating me. If I agreed to only received my invested capital back with no financial upside, then I would be losing 50% of my invested capital in this scenario and this should be structured a charitable donation.

 

Social entrepreneurs may serially fail. As noted above, it is not uncommon for 50% of businesses (any type of business) to fail.

Accessing investment capital. While there is a considerable amount of money in foundations, donor advised funds and other like pools, these funds represent a very small amount of the overall investment capital pool. Most people need/expect to earn a financial return if they are going to commit monies from [their much larger] investment capital “pocket” (vs. their much smaller philanthropic pocket.) So, if you want to attract this capital, you need to offer a financial return even if it is potentially somewhat lowered due to the additional social impact return objective