When you start a new business, you rarely do it with a sole purpose of making money. Many business founders are driven by the mission to make the world a better place and believe that their solution contributes to a more sustainable and fair future. At ScaleUpNation, we are committed to helping young innovative companies to scale both their profit and their social impact. In our research, we have analyzed business practices of hundreds of impact scale-ups. We have identified a small group of companies that aim not only at making a positive impact with their offer but at changing an entire industry. We call them trailblazers.
No need to choose between impact and profit
Whereas impact entrepreneurs strongly believe that social impact and the financial sustainability of their company should go hand in hand, the majority of the academic literature and the experts we interviewed show a deeply rooted belief that it is impossible, that any company should choose to focus either on economic or societal goals. This belief is summarized in the slogan “Impact first” that keeps popping up when we talk to NGOs, financial and academic experts.
We have studied business practices of hundreds of impact scale-ups in different industries, and see that it is not only possible, but even beneficial to generate both societal impact and profit. Our research shows that young innovative ventures that combine both goals have a 50% higher chance of scaling than purely commercial companies. We define a business model where social or environmental impact and financial goals are intertwined as a lockstep business model.
Trailblazers don’t just make a positive impact with their offer, they change the entire industry.
A lockstep business model means that a company has created an offer that generates both economic and social value. For instance, by selling solar panels or building new houses from recycled materials, a company creates a positive environmental impact and generates revenue. The companies that have a lockstep model can grow their impact by expanding their market share and/or by increasing the positive impact of their product. In this case by making solar panels more efficient and affordable, or by working towards 100% circular and zero-emission buildings.
Trailblazers score 1.93 times higher on Google Trends than other impact scale-ups.
Even with a successful lockstep model, many impact scale-ups realize that their impact is not enough to create wide and lasting change in their industry. They become trailblazers: impact scale-ups that aim at changing practices in their own industry. These companies use trailblazing strategies to scale their impact beyond their own market share.
How can you achieve a sustainable change? You need to make your solution attractive not only to innovative consumers, but also to the early majority. Trailblazers are doing that by raising public awareness about a social issue they are addressing. But, most importantly, your business practices should be widely adopted within your industry. Trailblazers help to make it happen by sharing their knowledge and working together with their partners to change industry standards and policy regulations.
Storytelling for impact
Trailblazers are successful communicators. They have a compelling story to tell about the problem they aim to tackle and the solution they propose. They use any opportunity to attract public attention and to raise awareness about an issue. Be it media campaigns, public speaking, organising events that trigger wide attention to the issue, educating their customers via blogs, workshops or training programs. For example, Dopper aims to empower people to choose reusable over single-use water bottles and to drink water from the tap to stop plastic pollution of the ocean. The company has initiated the movement (“Join the wave”) aimed to encourage consumers to stop using disposable bottles. They actively participate in events and deliver public speeches to tell their story and to raise consumer awareness of plastic pollution of the ocean.
Trailblazers share their technological knowledge and intellectual property with their industry partners via commercial licensing, open source, training and consulting other companies in their industry. For instance, Toast Ale is a brewing company that is brewing ale from bread waste. Their mission is to lead a brewing movement to eliminate bread waste and make the food system more sustainable. Toast Ale’s recipe is shared so it can be locally replicated by other entrepreneurs. The trailblazing strategy they use includes open source technology and popularization of sustainable beer production within the industry.
To orchestrate ecosystem changes, trailblazers build alliances with multiple stakeholders. They develop new industry standards, create cooperatives for fair pricing. Trailblazers also collaborate with academia and NGOs on further advancing sustainable technologies and sharing them within their industry. For example, Polymateria creates cost-effective packaging solutions to the global problem of plastic pollution. They have developed high profile partnerships in order to build a global “Recycle by date” campaign to encourage practical actions to stop plastic pollution. They are working together with the packaging industry, recyclers and NGOs to drive towards 100% of packaging being recyclable and biodegradable.
Influencing favourable conditions
Making a new practice widely adopted in the industry often requires changes in public policy. Trailblazers influence favourable conditions by advocating for policy changes. These include regulation, certification, taxes, subsidies for socially beneficial practices, fines to restrict socially harmful practices or pricing externalities (such as CO2 credits). For instance, New Motion produces charging solutions for electric vehicles. Already in the start-up stage, the company spent significant resources on external communication with policy makers. It also invested in advocacy for sustainable transportation, supporting a public policy to subsidize electric vehicles. This created a win-win solution for car manufacturers, consumers, and all the producers of electric charging stations.
What does it take to change an industry?
Our research shows that trailblazing strategies can be developed in response to external barriers that scale-ups face trying to scale their impact. Customers are often not convinced that a sustainable alternative is better than traditional products. It can be more expensive or may require additional training to use. Sometimes, scale-ups face barriers within their business ecosystem: insufficient governmental support, outdated industry standards, difficulties with certification or integration of their solution with existing industry practices. Breaking these barriers requires additional effort and resources on trailblazing activity on top of the already heavy demand to build your business. Trailblazers don’t want to wait until public opinion, business ecosystem and political agendas are ready for their solution. They are working to make them ready. And for that, they do deserve our utmost appreciation and support.
Our findings indicate that trailblazers influence a much bigger audience than other impact scale-ups. Their Google trend scores are almost twice as high as those of their lock-step oriented counterparts. High media visibility and solid reputation help them to carry out their trailblazing activities. You can spot successful trailblazers by the results of these activities: increased public awareness, followership and industry recognition.
What are the costs of trailblazing activities? How to choose the most effective trailblazing strategy? How to make sure that it does not hamper your lockstep business model and helps in scaling your impact? To answer these questions, we are organizing a Reflexive Dialogue session with impact scale-ups CEOs about trailblazing best practices. The main topic is their goals and ambitions in changing their industry. We’ll be discussing the amount of time and resources they allocate to trailblazing on top of growing their business, their role models in trailblazing and the most effective trailblazing strategies.
We need your help. Whom should we involve in our research? Who are the real trailblazers (scale-ups with impact beyond their size) in your industry? We would love to hear your thoughts and suggestions. Let us know via email@example.com.
How we did our research
For this project we have interviewed close to 40 experts and scale-up CEOs. We built a database of more than 500 young socially oriented companies (driven by one of the UN SDGs). We narrowed it down to scale-ups: those between 3-10 years old, with 10-100 employees, and yearly growth rate of more than 10%. From this group we selected 30 pairs of companies that propose similar solutions, like biodegradable packaging, sustainable food production or green energy. However, they either focus their efforts on their own lockstep or also enact trailblazing strategies to scale their impact. And we compared their strategies, their growth rate and their social media impact via Google Trends and LinkedIn followship.
This is the first publication about our ongoing research on scaling impact funded by Goldschmeding Foundation. Stay tuned for our upcoming publications that dive deeper into the success factors of scaling impact. Find more research articles here.
This publication is written by Anna Fenko, Liselore Havermans, Ji-ye Oh, Afroditi Terzi and Menno van Dijk.