Enhance ReadabilityFor the past two years, I have read applications for a fellowship program that offers seed capital and in-kind support to social changemakers with big ideas.
These changemakers are possessed of superhuman grit, passion, and shrewdness. They have assembled world-class talent around them. Their technology works. They understand the dynamics of the market in which they operate.
Most of all, they want to solve a deeply entrenched social problem.
And that is where, as far as I can tell, these applicants — and social changemakers writ large — often go astray. In their relentless pursuit of a solution to a problem society faces, social changemakers too often overlook the importance of providing a solution to a problem that paying customers face as well.
Social changemakers too often overlook the importance of providing a solution to a problem that paying customers actually face.
Lessons learned the hard way
In 2014, a graduate school classmate and I founded an organization named Solstice. The mission of Solstice is to bring solar power to American households who cannot install solar panels on their rooftops. To do so, Solstice leverages a new model for residential clean energy known as community solar power, which allows households to enroll in and enjoy financial savings from large-scale solar farms sited in their communities.
Early on, we knew enough to be certain that the lynchpin of any organization is providing a compelling solution to a glaring problem. And so, when we would pitch Solstice to stakeholders, we would talk about the problem as we conceived of it: that there are 90 million households in the United States locked out of the solar market and that, from a normative point of view, it was paramount that they, too, enjoy the benefits of clean energy.
For many months following, despite long days and late nights, we saw little customer traction. Simply put, households were not interested in buying what we were selling. I could not figure out why, so much so that I found myself succumbing to the temptation to lay blame for our mistakes at the feet of our customers. Don’t they know, I wondered, that we are offering them a solution to an important problem?
At long last, the most basic of truths finally dawned on us: what we were providing was a solution to a social problem, but not to a customer problem. These two problems were far from identical, and the yawning gap between the two had us convinced of the righteousness of our work even as customers were totally indifferent to it. Perversely, this certainty about the importance of our work made it harder to acknowledge the need to correct course, even in the face of overwhelming evidence that we should.
Identifying the obvious
I certainly look back in hindsight and ask how I could have failed to notice something so obvious for so long. It is possible that this dynamic was specific to our organization, but based on the applications I have reviewed and the conversations with changemakers I have had, I fear that it is not.
What we were providing was a solution to a social problem, but not to a customer problem.
With that in mind, allow me to put forward a modest proposal: a framework that can, I hope, help entrepreneurs with ambitious social goals avoid the trap that we fell into.
In academic and professional circles, a debate about the utility of bringing entrepreneurial approaches to bear on social problems is unfolding. One pole of this debate is comprised of skeptics: those who argue that entrepreneurs should and must privilege solving the problems of customers over the problems of society. This view does not discount the possibility that entrepreneurship can solve social problems, but suggests that this progress is incidental to the task — the serendipitous outcome of working to build a profitable business.
At the other extreme are evangelists who, it seems to me, presume that the mandate of mission-oriented organizations is to solve social problems. Speaking and thinking about solving the problems of users smacks of mission drift, of selling out, of sounding too much, well, like a business. (In the early days of Solstice, I would have put myself squarely in this camp).
To profit or not to profit?
I would suggest that there is a third way that can reconcile this squabble and, in so doing, move the conversation toward a more coherent approach to the role of entrepreneurship in solving social ills. This approach turns on two basic criteria:
(1) Organizational mission. Is the primary goal of the organization social in nature? That is, is it setting out, first and foremost, to solve a social problem?
(2) Alignment between social problem and customer problem. In the event the organization is setting out to solve a social problem, does it have the opportunity to also solve a problem that customers face?
The answers to these questions yield three possible paths for any organization:
(1) Non-mission-driven for-profit organization. In the event an organization is not primarily interested in solving a social problem, it should operate as a traditional for-profit business.
(2) Mission-driven non-profit organization. In the event that an organization is founded with social goals in mind but cannot easily solve for a problem customers face, it should organize as a non-profit organization. It should take this approach because, since it is not solving for a problem customers face, its users are unlikely to be willing to pay more for its services than it takes to acquire them. That is, the organization may be doing something socially useful, but it is unlikely to possess a viable revenue model.
Organizations can and should be founded with lofty social goals in mind.
(3) Mission-driven for-profit organization. In the event that an organization is founded with social goals in mind and has the opportunity to solve for a problem customers face in a manner consistent with these social goals, it should organize as a for-profit corporation. It should take this approach because, since it is solving for a problem customers face, its users may be willing to pay more for its services than it takes to acquire them. That is, the organization may be doing something socially useful and it may possess a viable revenue model. It should focus on solving the problems a customer faces since, in so doing, it can accomplish great social good.
*It’s possible that an organization is solving neither a problem customers face nor a problem societies face. In this case, the organization should not exist at all.
This framework may seem woefully simplistic. I would contend that it is powerful precisely because it is simple. It does away with the need for the tortured conversations entrepreneurs often hold, early in the life of their company, about legal structure — discussions that revolve around unanswerable questions related to commitment to the mission, equity and compensation, and governance. It focuses the entrepreneur’s mind on whether her organization is seeking to solve a social problem, a customer problem, or both. And it preserves the sensibility that organizations can and should be founded with lofty social goals in mind.
In sum, my hope is that this might provide entrepreneurs some clarity of thought that enables them to get out of their heads and start in on the task of saving the world.
