[English] value creation with positive social outcomes

[stephen at melbpc.org.au]

When Tech Innovation Has a Social Mission

JOHN MARKOFF April 13, 2008  www.nytimes.com

STEVE WOZNIAK built the original Apple I to share with his friends at the 
Homebrew Computer Club, but it was his business partner Steve Jobs who had 
the insight that there might be a market for such a contraption. 

Indeed, for decades, Silicon Valley has been defined by the tension 
between the technologist’s urge to share information and the 
industrialist’s incentive to profit.

Now a new style of “hybrid” technology organization is emerging that is 
trying to define a path between the nonprofit world and traditional for-
profit ventures. 

They’re often referred to as “social enterprises” because they pursue 
social missions instead of profits. But unlike most nonprofit groups, 
these organizations generate a sustainable source of revenue and do not 
rely on philanthropy. 

Earnings are retained and reinvested rather than being distributed to 
shareholders.

The new companies, like thousands of Silicon Valley start-ups before them, 
typically begin as small groups of intensely motivated people dedicated to 
the goal of building a product or service. 

The best-known examples are efforts like the Mozilla Corporation, which 
maintains and develops the Firefox Web browser, and TechSoup, an 
organization that was started two decades ago to connect technology 
experts with nonprofit groups. It now distributes commercial software to 
nonprofit groups in 14 countries. (Mozilla’s mission is to preserve choice 
and innovation on the Internet, which it considers a social good.)

By most measures both companies, with hundreds of employees, qualify as 
vibrant businesses. Each has revenue in excess of $50 million annually. 

Moreover, there is also a range of smaller organizations, like the 
Internet Archive in San Francisco, with smaller but sustainable revenue 
streams. Significantly, an ecosystem is emerging that involves support 
groups like the Electronic Frontier Foundation, which provides legal 
services, and the Internet Systems Consortium, which plays the role of an 
independent Internet service provider for the community.

“There is a lot of discussion taking place right now about a whole new 
organization form around social enterprise,” said James Fruchterman, 
president of Benetech, a social enterprise incubator based in Palo 
Alto. “Many of these efforts can make money; they will just never make 
enough to provide venture capital rates of return.”

Brewster Kahle, who has founded a number of successful Internet companies, 
as well as the nonprofit Internet Archive, said: “If we do this right, I 
think there is momentum here. The next major operating systems company 
might be a nonprofit.”

The Internet Archive, which runs Web crawlers — programs that index 
information stored on the Internet — and offers the popular Wayback 
Machine, which allows surfers to find previous versions of Web sites, now 
has two self-sustaining projects. The first is digitizing books and the 
second is creating and maintaining Web repositories for national libraries.

Mr. Kahle says he is developing a set of principles that he hopes will 
help formalize his idea that there is a middle ground between the 
technologists and the capitalists. 

He ticks off operating guidelines like transparency, staying out of debt, 
giving away information and refusing to hoard. 

TechSoup stumbled upon its business eight years ago after it began sending 
a truck around San Francisco to pick up donated commercial software to 
distribute to nonprofit groups. 

Today, the organization distributes products from 32 commercial companies, 
including Cisco Systems, Microsoft and Symantec, to roughly 50,000 
organizations annually, for a small administrative fee.

“We were just trying to meet the needs of nonprofits,” said Rebecca 
Masisak, co-chief executive of TechSoup.

Nonprofits with revenue are not new or restricted to Silicon Valley, and 
there is a great deal of debate over whether they offer a sustainable 
approach. 

The new stream of technology-centric and successful nonprofits, however, 
appears to be driven in part by a set of microelectronics technology 
trends that have sent shock waves through many industries, from publishing 
to music and movies.

“Computer technology and the Internet are lowering the cost of doing 
business,” said John Lilly, the chief executive of Mozilla, the Web 
browser developer that is being subsidized by advertising revenue from the 
search engine business. 

That blends with the strong sense of social purpose held by a number of 
the best and brightest in Silicon Valley.

“We went through all these decades where we had nonprofits that thought 
business was evil and sustainability was irrelevant,” said Debra Dunn, an 
associate professor at the Hasso Plattner Institute of Design at Stanford 
who advises social entrepreneurs. “Now there has been an influx of 
business thought. People are saying, ‘I have enough money and I care.’”

STILL, most technology-oriented social entrepreneurs acknowledge that the 
hybrid model is by no means a one-size-fits-all approach, and there is 
significant debate about how far it can reach. Moreover, the approach 
hasn’t always worked.

For example, beginning in 2002, the Lotus Development founder Mitchell 
Kapor invested more than $5 million in the Open Source Applications 
Foundation, with the intent of finding a sustainable business. The group 
had a number of strategies for obtaining revenue from the distribution of 
free software, but it was unable to get far enough along to begin the 
experiment. The project never got to the point where the calendar program 
Chandler could be widely distributed, and Mr. Kapor has since scaled back 
the project.

The experience, however, has not dulled his optimism.

“You can use a lot of the methods of business, specifically 
entrepreneurial start-ups, in ways that are directed at having a positive 
social impact,” Mr. Kapor said. “Mozilla and the Archive are cases where 
we are harnessing powerful techniques of value creation that were 
originally forged in the Valley and putting them to use.” 
==


cheers people
Stephen Loosley
Victoria, Australia