For Profit vs. Non-profit: Innovating the Business Perspective

While reading this week’s articles, and reflecting upon our recent discussions in class, it struck me how caught up a lot of our focus has been in the dichotomy between “for-profit” and “non-profit”. In reading about the misconceptions about how profit can affect the poor—how a for-profit company can often be chastised for trying to run a sustainable business providing quality goods and services to the poor—we see that social ventures struggle with the notion that you can either do good, or you can make money.  Society tells us we can’t do both.

For a class based upon social innovation, it’s ironic that we’re allowing our perspective to be boxed in by traditional market views and concepts.  We keep struggling to determine if for-profit or non-profit is a better business model for social ventures, when we could just as easily be innovating the business model schema itself.

And that’s exactly what I think both our class, and society in general, needs: an innovation in business model. We need to create a new designation for businesses—not for-profit, but for-impact. We need to carve out a new space in the business world for ventures that strive to do well by doing good. We need to create new metrics and a new dialogue to evaluate how much impact a social venture has, not by how much profit they make or how little money they spend on salaries, but by how many lives and communities are changed.

Think about it: we can develop a system for calculating an ROI based on social impact. Instead of looking at purely profit dollars, we can look at how widespread the organization is, how deeply rooted its impact is, how many years it can sustain itself operating at its current capacity. Making profit by doing good won’t be looked at as greedy capitalism, it will be looked at as effective impact-ism.

I realize that some of these metrics are very abstract and hard to truly capture in number form. And that numbers won’t always tell the whole story. But just as we have experts trained in reading financial statements and evaluating the viability of a for-profit corporation, we can train experts to be adept at reading impact statements. We can teach students how to evaluate the numbers in the context of the venture, and determine if the venture is succeeding or not. It won’t be perfect, but it will help to alleviate a lot of the stress caused by the for-profit/non-profit chasm forced upon businesses currently. 

While I’m sure there are organizations that follow a similar model, I think this concept needs to be embraced and promoted by the business community and at B-school. Major corporations should develop for-impact offshoots, business schools should develop specializations in for-impact studies, investment groups should start using for-impact ROI to highlight investments that are both sustainable and effective. Who knows, maybe one day we can even get an official designation in the tax code to encourage for-impact organizations.

Is this feasible? Can we innovate the business model schema itself, to encourage a new wave of social entrepreneurs? You tell me. But I certainly think it’s worthy of a valiant effort, and at the very least could spread awareness about the limitations of our current perspectives on for-profit and non-profit organizations.