Disruptor and mind changer
From the category of things, I discussed too many times…
Tesla is one of the most discussed companies in the last decade. The maelstrom of the incumbent car manufacturers, Tesla caused a lot of headache since starting its first electric car the roadster in 2008. Ever since, the company is an example of disruption and innovation. Clearly, Tesla is a disruptor in its industry, but is it also a social business?
To answer that question let us have a look at what a social business actually is and which factors define it.
After speaking to Muhammad Yunus, the person that coined the concept of social business, in Bangladesh in 2017 defining social business is not as simple as doing something good. The idea is more holistic and takes into account a multitude of factors.
Social businesses follow a very specific purpose to solve a defined problem. Some founders even have grown up facing that problem every day. To tackle that problem a clear business strategy is designed that often emerges from incremental hands on dealing with the challenges.
An example of purpose is the Ecuadorian Chocolate social business Pacari (Article is coming soon). Not only in Ecuador but all over the world cocoa farmers suffer from insufficient payments because of low international cocoa prices. With a vision in mind, Pacari established its brand in Ecuador. The founders realised that value creation in the chocolate industry is undoubtedly connected to branding. Pacari established its brand to tackle the initial problem of insufficient payments to cocoa farmers in the first place. Through their value they created they are able to pay cocoa farmers significantly higher prices for their top quality cocoa. This is just one of many examples of what being a social business means. It doesn’t happen in a company charity event; it is the actual DNA of a business.
Having a purpose means also that the prime goal is increasing the impact. While hiring new people or extending the market scope is important, the goal should always be to extend the social impact. Sometimes that means to go against growth to ensure social impact.
One great example is Greenchar in Kenya. The social business creates an alternative to charcoal out of waste from sugarcane factories. The superior product is sold by Kenyan women in rural areas. They receive a small shop with an attached grill to get started. Nowadays, the idea impacts thousands of families in Kenya. In a strategic meeting in 2017, the social business had the opportunity to move towards more lucrative industrial partners were margins would have been significantly higher. After long discussions, the leadership team of Greenchar decided against that expansion. The team felt that the impact would slowly decrease and would drive Greenchar away from that vision to give humble families an alternative to life-threatening charcoal fumes in their houses.
To make a point, a social business is a business after all. It has to be managed rigorously to achieve the strived for social impact. However, the goals that a social business tries to achieve have an effect on how the company is run. A cut-throat investment bank mentality has nothing to do in a social business which empowers neglected people.
A great example to understand why culture is a key to a social business is the non-profit social business Helm in Egypt. The company supports disabled people through engagement, coaching and governmental consultancy to create an accessible and inclusive environment for everyone. Internally, Helm empowers people with disabilities in key positions in the company. I had the pleasure to speak with Ayman who is responsible for PR about the social media strategy. Helm is a great role model how social businesses create a culture that is empowering and a mirror of their business objectives.
So let us have a look at how Tesla fits into the picture of a social business. What aspects are in line with social businesses and what aspects drive away from the concept defined by Muhammad Yunus?
The company really is built on the idea of making mobility sustainable without blasting billion tons of carbon dioxide into the atmosphere. The purpose really is visible also by speaking to employees that carry the vision to transform how we see travelling and commuting. Elon Musk obviously envisions much more than just electric cars if we take a look outside of Tesla at SpaceX and especially at the Hyperloop project that also involved engineers from Tesla.
If we take a look at Tesla’s global impact, it is phenomenal. Whether you argue the trend of electric vehicles was already developing or Tesla actually created real demand for their products, an impact is clearly visible to everyone. Governments around the world discuss new mobility concepts not only in the smog of Chinese urban areas but also Saudi Arabia, Chile or India. Undeniable climate changes create urgency but also companies such as Tesla showcase that radical transformations are economically feasible.
Capital market side
Yes, social businesses need a commercial drive to be successful; however, the chase for profits is not the core of a social business. Does that mean that every company that is in the stock market is not a social business? Yes, because the requested focus on margin and revenue growth leads to a decreasing focus on social impact.
Moreover, recent incidents of alleged harassment and discrimination show that the company does not fully embrace cultural values that are crucial for social businesses. Even more so, Tesla’s cut-throat performance reviews of their workforce give us an idea of its dark side.
Summary and outlook
Since its creation in 2003, Tesla shows great ambition in reshaping our attitude towards travel and the importance of sustainable transportation. However, looking deeper into the company especially at how it treats its employees, it becomes clear that the company is far away from being a social business. The listing on the NASDAQ pressures Tesla to prioritize pushing revenue over other goals. Hence, a listing on a stock exchange is a no-go for any social business. Nevertheless, there must be a way out for social businesses to attract additional financing.
In the next articles we’ll have a look into funding opportunities for social businesses and how technology impacts social entrepreneurs. Please leave a comment. What do you think about Tesla?
September 2018, North Carolina, USA