Social Business: an Oxymoron?

“Doing well by doing good” is a much-touted but often elusive strategic goal for a number of social businesses. The wave of scandals plaguing the microfinance industry and the spectacular failure of the SKS Microfinance IPO last year did nothing to alleviate the perception that the triple bottom line simply does not exist. But, as Proctor & Gamble discovered with their Pur brand, often a philanthropic model for a subset of products and markets translates into great business overall. Moreover, a single large corporation can often trigger change on a scale unprecedented in the decentralized world of international aid.

Recently, several press releases have highlighted P & G’s 1.4 million dollar effort to provide more than 140 million litres of clean drinking water to drought victims in East Africa using its Pur technology. Pur is a water filtration technology that purifies water at the point of use either through a physical installed system or by stirring it into the water in powder form.

P & G is a market leader in its ability to build powerful consumer brands, and boasts over $80 billion in sales. However, during the pilot launch of the product, a lack of consumer awareness about the value and potential of the product (it was shown to significantly reduce the incidence of diarrheal fatalities in test markets) rendered sales dismal, and led the company to consider cancelling the product entirely (PDF).

P & G returned to the drawing board, and adopted a non-profit model involving donations and cost-recovery pricing to aid organizations. Although this meant that the firm did not make a profit on that particular product line, the initiative generated a significant amount of consumer and investor goodwill, which in turn drove up sales on other product lines.

This is not to say, however, that socially oriented business must remain relegated to a small arm of a larger for-profit company. Even within the PUR distribution model, P & G is exploring commercial (for profit) models in Guatemala, the Philippines, Morocco, and Pakistan. Therefore, even if a non-profit model is the only feasible solution in some developing markets, other apparently similar markets may have characteristics that make a commercial model feasible. Companies can do well by doing good; it just requires a different level of understanding of consumer needs and a concurrent push to close the education gap.

CK Prahlad captured this idea brilliantly in his seminal The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. He highlights several cases in which multinational corporations adapted commercial for-profit models successfully for their “base of the pyramid” customers – simply by understanding and engaging their customers’ needs. His book is part of a broader body of literature that highlights that business solutions that deliver both profit and social gains are certainly viable – they just require a little creative thinking.