Do we have to choose between impact and profits?

Much of the challenging dynamics faced by social enterprises center around the question of how profitability and impact relate.

DDD San Francisco hosted a series of Critical Friends meetings last week. The goal of these meetings was to solicit feedback (and general wisdom) on our ideas of how DDD can scale its business and impact in the coming years. Much of these discussions–and much of the challenging dynamics faced by social enterprises in general–centered around the question of how profitability and impact relate.

In one of his inaugural blog posts, Paul Polak recently wrote:

I have long felt that there is massive confusion about the how the social mission and the bottom line profitability of a social enterprise relate to each other.
To me it’s very simple.
Any self respecting social enterprise should build the social mission into the vision and mission of the enterprise, and then forget about it- the rest of the time should be spent on making a profit.

This obviously resonates with me: the reason DDD uses a social enterprise approach that employs people to do revenue-generating work rather than, say, handing out food, is that we think sustainability is crucial. We’re changing systems and markets–not to mention our staff’s lifelong earning trajectories–rather than just changing the dinner on one night’s table.

But the interaction between impact and profitability is still not “very simple” to me: at DDD, many of the decisions in front of us involve a tradeoff. In part, this relationship is complicated because we are a social enterprise that employs poor people, not one that markets to them. If we employ people with less access to education, less exposure to English and business, lower analytical abilities, we could make an even bigger difference in individual lives, but we would not be able to do as advanced, high-paying work. Similarly, if we work in countries with more developed markets, we could generate more revenue through local work and save on training costs, but we wouldn’t be operating in the place that most needed the human resources we develop. It’s a tricky balance, and one that we’re continuously refining.

In this spirit, something that Jacqueline Novogratz said in her recent Dowser interview, about why she doesn’t like the phrase ‘doing well by doing good’, had me nodding my head:

It implies that there are easy solutions. That the perfect way to change the world and end poverty is if we all can make a lot of money doing it… you may make a lot of money and serve the poor in usurious ways that keep them poor forever, like many of the mafia services do, but if you want to provide systems that are fair and affordable, and that they can trust into the long term, building them takes a long time. Over time as you really hit scale,  you will make money, but we’ve been in some of our deals for six or seven years and we feel we’re just starting.

At DDD, we’ve been making money and an impact for nine years–and while we’re making more money and having a deeper impact than we were when we started, it’s still not easy. In a way, though, part of the goal of our work is to make it easy for others to do well by doing good, to make impact creation more accessible. By offering clients a digitization solution that makes business sense–by being competitive in price and quality–and also creates a social impact, we hope to be that “easy solution”…even if it means a lot of sweat and tough calls along the way.