SMITH BUSINESS Magazine
Volume 11 No. 1 SPRING 2010

Leadership for a Better World

Smith’s new Center for Social Value Creation explores the ways profit and social impact align.

Selling beer is not normally the way to solve a severe public health problem in a developing nation. But that is just what happened in Kenya.

Diageo, the largest alcoholic beverage company in the world, bought an east African brewing company. When it was exploring marketing options for its beer, Diageo discovered that illegal home-brewed beer had the largest market share in Kenya, because of the high tax on beer imposed by the Kenyan government. But home brew was often made with locally available water. Beer made from contaminated water caused blindness, and as a result blindness had become a widespread public health problem. Diageo negotiated with the Kenyan government for lower taxes on beer, which would allow Diageo to sell their beer at a competitive price—a win for the company. But safe affordable beer bottled under quality standards also reduced the incidence of blindness in Kenya—a win for the country and for many of its citizens.

This was just one of the stories heard at “Leadership for a Better World,” the inaugural conference of the Smith School’s Center for Social Value Creation, on September 25,2009, co-sponsored by the Smith School’s Center for International Business Education and Research (CIBER). Almost 300 attendees from the public, private and nonprofit sectors packed the auditorium at the Ronald Reagan Building and International Trade Center, also home to the Smith School’s Washington, D.C., campus. The forum was the official launch event of the Smith School’s Center for Social Value Creation, which was created to support Dean G. “Anand” Anandalingam’s vision and address a growing demand from students, corporate constituents, and alumni to make social and environmental impact a Smith School priority. The center will help inspire and equip students to tackle some of society’s most critical environmental and humanitarian needs through engaging curriculum, real-world field experience, cutting-edge research, and targeted career planning.

Three Rules for Social Innovators

1. Have a business model that works, says Rachelle Sampson. It’s not enough to want to make the world a better place. Your business has to be financially viable too.

2. Eat like a fly and poop like an elephant, says Oliver Schlake. Find ways to have the biggest possible impact using the least amount of resources.

3. Trust is a must, says Ritu Agarwal. Your customers must have a reason to trust your integrity, so make sure your corporate behavior is above reproach.

Rosabeth Moss Kanter, Ernest L. Arbuckle Professor, Harvard Business School, author, and one of the morning’s feature speakers, shared the Diageo story to illustrate the unexpected ways in which profitability and social good align. Supercorp, Kanter’s new book, examines the business practices of “vanguard” companies—highly profitable and successful organizations that put social value at the heart of the enterprise. These “supercorps” outperformed their peers even during the financial crisis, Kanter found.

Kanter emphasized the connection between a company’s purpose and values and its ability to inspire enthusiasm among its employees and trust among its customers. IBM garnered its supercorp status when it adopted as one of its core values “innovation that matters for our company and for the world.”

Honest Tea didn’t make Kanter’s supercorp list. But Seth Goldman, its CEO and co-founder, also spoke of the way profitability and social good align in his organization in another morning session. Goldman related some of the challenges his company faced in their pursuit of sustainability. Recently Honest Tea redesigned its bottles to use 22% less plastic—a win for the company, because of the lower cost of materials and the lower cost to transport the bottles, and also a win for the environment.

But the lighter plastic bottle had a problem—it buckled under the weight of the beverage inside. In order to be structurally sound, the bottle had to be redesigned with a large divot in the bottom. To some of Goldman’s customers, the divot made it look as though they were getting less tea for their money. Honest Tea is still working on helping consumers understand the reason for the new bottle design, said Goldman.

All the morning’s speakers reinforced the major principles of the Center for Social Value Creation: that businesses can experience economic prosperity while driving transformative social change. “The pace of social innovation is so fast right now, we couldn’t possibly keep up with it from a traditional research model. The center is a critical link for the Smith School. It provides a bridge between theory and what is really happening in the business world,” says Melissa Carrier, executive director of the center. “We give students opportunities to explore these issues as they’re evolving.”

More highlights from the forum, including video and photos »»

In a panel discussion moderated by Alan Webber, founder of Fast Company magazine, Smith School professors Rachelle Sampson, assistant professor of logistics, business and public policy; Oliver Schlake, Tyser Teaching Fellow of management and organization; and Ritu Agarwal, Robert H. Smith Dean's Chair of Information Systems; doled out some practical advice for aspiring social innovators in a lively question-and-answer session. Much of their conversation focused on changing corporate culture.

Social innovators must use the power of market-based incentives, says Sampson, and corporations must be persuaded—or strong-armed—into putting their focus on long-term rather than short-term goals. An emphasis on managing the “end-of-life” of products to ensure that they can be successfully recycled would change the way products are designed, for example. And the metrics firms choose to measure success and failure shape their strategic decisions, so changing those metrics is key to helping firms resist destructive competitive pressure and make socially responsible long-term choices.

Agarwal said that trust and transparency must become cultural norms within a company. When a company’s ethics are called into question, trust is broken between the company and its stakeholders, and even a company’s best efforts toward sustainability and social responsibility will be treated with cynicism.

Oliver Schlake, a serial entrepreneur who teaches entrepreneurship courses at Smith, urged aspiring social innovators to create a corporate culture where risk is rewarded, even when it doesn’t succeed.

“It’s not difficult to innovate once. The real trick is to innovate twice or three times, as part of your business’s ordinary culture,” said Schlake. One of his former companies gave an annual prize to recognize the most important failure of the year—one that taught the organization something valuable and important it would not have otherwise learned.

“You can’t solve new problems with old categories,” said Webber, quoting from his new book “Rules of Thumb.” “Nonprofit, government and business are no longer a useful way of divvying up the world, because our problems no longer fit neatly into those categories.” He urged participants to consider problems across many contexts and to seek solutions both inside and outside traditional business disciplines.

The Smith School’s Center for Social Value Creation provides a host of opportunities for students to innovate at the intersection of public policy, non-governmental organizations and the commercial sector. But a number of its events and initiatives are also open to Smith alumni.

Please join the center on March 25 for its 2nd Annual Social Enterprise Symposium, featuring workshops around social entrepreneurship, environmental sustainability and international development. The center has also partnered with the U.S. Agency for International Development (USAID) to sponsor a national business innovation challenge. Teams from around the world will devise innovative and effective ways for a multinational corporation to participate in the economic development of a given region through a public-private partnerships. Finals will be held in Washington, D.C., on March 26. Both events are free of charge.

“Alumni have already done so much to support student opportunities. They’ve opened up their networks, invited students to events, introduced them to employers,” says Carrier. “We’d like to build strong relationships between alumni and the center.” Alumni can also:

  • Host student Career Treks
  • Sponsor a social venture consulting project
  • Participate in executive education, starting fall 2010
  • Help open networks and create partnerships
  • Provide much-needed funding for center projects

To learn more contact Melissa Carrier.

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