In past postings I have touched upon two of the big ideas that came from the Social Entrepreneurship Summit that have community building as their common denominator. Next we will examine a fundamental fact of social business: sustainability is dependent upon having a clear business design that facilitates profit.

This should not be taboo but it is sometimes loaded with connotations of greed and excess for those choosing to see social businesses as a retreat from the extremes of capitalism. I would argue that this paradigm is not only unproductive, but will occasionally lead to a cycle of dependence on other entities for investment and funding, but more often initiate a spiral toward extinction.

One of the major lessons that I learned from studying the late management guru Peter Drucker was that in order for a corporation to honour its commitments toward citizenship and philanthropy, it must first focus on creating lasting value and profitability beyond its own cost of capital. Without these two vital factors the business cannot sustainably contribute to the community.

Social businesses with a double bottom line can learn from this lesson. Managerial attention spans are finite and, by focusing solely on the social dimension, social entrepreneurs risk their own marginalization. By leveraging the technical and specific knowledge in their community, they must design business offerings that create lasting value for both their customers, and their subsequent beneficiaries. This value must translate into profits and consequent retained earnings that can be reinvested into scaling the business.

David Smith

David is Project Leader at the Martin Prosperity Institute and a practicing management consultant. He is a recent MBA grad from the Rotman School of Management and is passionate about developing the thinking and leadership potential of others. See more…