In preparation for my March 2013 board meeting I was asked to evaluate and construct key performance indicators (KPI’s) for our Marketing function and the related investment we are making in social business. The ensuing conversation that occurred between me and the WTIA Marketing Director was analogous to two people who don’t speak each other’s language trying to give detailed directions on how to program a VCR.

It became clear to me after the first 30 minutes that this was not going to be straight forward. Social business in many ways is more of a concept than an actual specific set of activities or strategies. As such, I felt it only prudent to do some more research and actually look up definitions of social business. Thanks to various sources (and of course Wikipedia!!) this is what I uncovered:

• Social business (as a term) was first defined by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his books – “Creating a world without poverty” , “Social Business and the future of capitalism” and “Building Social Business”
• The objective of social business is to expand the company’s reach, improve the product or service, and to subsidize the social mission.
• Yunus postulates a new world of business in which profit-maximizing enterprises and social-benefit-maximizing enterprises coexist.

So… as I was getting prepared to learn about how Linkedin, Facebook, and Twitter impact ROI, I instead was hit with a bunch of esoteric theory around how social causes and maximizing shareholder wealth can actually complement each other.

At first, this completely threw me off but, as I started to think about it more, Yunus’ definition really resonated with me and actually reinforced why I was having such a difficult time evaluating social business. Consider the following illustration:

This is a traditional view that links social business activities with company performance. In this example, all of the social business activities are trending in a positive fashion yet the financial and operating performance of the company has regressed. The next logical step for most organizations (marketing functions) is to do a deep dive as to what activities had the most correlation with outcomes and why the positive activity trends didn’t translate financially.

What is missed in this traditional analysis, according to Yunis, is the alignment and relationship between financial and social outcomes. This analysis contains no evaluation of desired social outcomes and, therefore, implies that an increase in social engagement is an effective proxy for a desired social outcome, which it is not.

Consider this: I can offer a free car promotion for the first 20,000 people who sign up for a WTIA Twitter account. That might be a very effective strategy to increase my Twitter subscriber base, however, most folks who would sign up would be doing it because of the car, not because of their support and deep belief in the underlying mission of the WTIA.

In taking Yunus’ theory and applying to the above analysis, a “new model” for evaluating social business may look something like this:

This more comprehensive analysis attempts to measure the “social-mission driven” outcomes that occurred over the period. The “social KPI’s” in my example tell a much different story, indicating that there were macro-economic factors related to an unfavorable political environment that impacted company specific (WTIA’s) performance. The WTIA’s mission of helping technology companies prosper is directly impacted by good or bad changes in the Washington State political landscape.

The inclusion of social outputs in this analysis also helps to explain the disconnect between the positive activity trends and negative financial results. It is very conceivable that professionals would increase their social engagement in matters that impact the tech industry and political landscape without directly having the time, bandwidth or financial resources to financially invest in the WTIA.

Conclusion:

The good news? This is an illustrative example and does not imply that the political landscape got worse for technology companies during the FY 13 Washington State legislative session. Also, the WTIA is doing well and thanks for your continued support!

With that disclosure now out of the way, Yunus hit on something that is hugely profound and I absolutely drank the Kool-Aide: We are in a new era where profit-maximizing and social-benefit-maximizing enterprises not only will complement each other but, in my view, will create a competitive advantage for companies that can align these two objectives.

Executives will have to be more thoughtful when constructing and evaluating the company’s social objectives and desired impact in the community. For those of you with marketing and analysis roles, I suggest that you schedule some extra time as the meeting will likely run long!