Consider these relatively recent developments:
- Tanzania has tripled the number of life-changing treatments the country provides to obstetric fistula sufferers via the mobile phone platform of a single company: Vodafone.
- The Save the Children charity has a seat on the R&D board of global healthcare company GlaxoSmithKline.
- A consortium of nonprofit organizations in Australia has acquired a large for-profit and turned it into a social enterprise.
- One of the world’s largest restaurant chains, a mining company, and a soft drinks manufacturer have joined forces to tackle malaria.
- The Global Fund has taken donations of more than $50 million from one global extractive industry giant and invested more than twice that sum in another.
These are just some examples of what I call cross-sector convergence, a situation in which the barriers between the traditional sectors (business, government, and NGOs) are not just blurring but getting redefined. There are various reasons for this, but the upshot is that there is increasing willingness to address complex problems both pragmatically and innovatively. Combine this with the consensus that businesses need to better define their social purpose to attract the best talent, and the stage is set for the fourth sector.
I define the fourth sector as that which aims to deliver specific social outcomes that are measurable, scalable, and (importantly) profitable. It is likely that hybrid business models and novel funding mechanisms such as development impact bonds could be the vehicles that the fourth sector uses to operate in the future. But, as its goals are so much more broadly defined than any of the other sectors, the fourth sector requires a particular type of person: one who is comfortable moving between the skillsets, language, and inherent trade-offs of the for-profit and the not-for-profit sectors.
Behind each of the cases I listed above stands a personal story. The challenges that leaders of these efforts face can help us better understand the skills needs of this emergent sector. These leaders have two things in common: 1) Their ambitions go beyond the search for profit, and 2) they can be hard-nosed about achieving their aims and in seeking out sometimes surprising partners. In the battle to train more Kenyan community health workers, who would have thought of a mobile technology platform as a natural ally to an NGO ? Someone with a fourth-sector mindset.
So it makes sense that young leaders are taking this concept seriously when planning their careers. Just look at the latest “UN Global Compact-Accenture CEO Study on Sustainability”—84 percent of CEOs said that business should lead efforts to define and deliver sustainable development goals, and 78 percent of CEOs said that partnerships across the sectors would be the way to deliver this in the next five years.
I wasn’t surprised therefore to read that a much greater number of MBA students, for example, are choosing to take internship placements with NGOs.
What are the kinds of challenges the fourth sector might throw at leaders? Well, consider a scenario. Which of these options is a better investment decision?
- An opportunity that grows revenues by $1 million
- An opportunity that cuts costs by $1 million
- An opportunity that boosts profit by $1 million
You don’t need an MBA to say that all three options are effectively the same (assuming of course that costs remained fixed as revenues grow and vice versa). In this scenario, shareholders or investors would be agnostic.
But what about adding the fourth-sector option? How about an opportunity that delivers only half the bottom line impact but results in a 2 percent reduction in employee attrition; uplifts employee engagement by 11 percent; gets 1,285 extra hits on the LinkedIn recruitment page; increases volumes of sales of a strategic product line by 37 percent in emerging markets; improves customer satisfaction scores by 80 basis points and helps tackle a social problem like access to medicines?
This sort of scenario makes the business decision harder, as it assumes new desiderata. Short-term profit is no longer the only yardstick. Let’s be clear, feeding the next billion, educating the 57 million kids currently without schooling, and providing financial services to the unbanked and uninsured may be a huge untapped market opportunity, but they’re unlikely to deliver returns in the next quarter. We need to reframe the problem and rethink the business case.
Exactly these types of long-term decisions are facing the next generation of business leaders, and I’m pleased to see that the concept of Sustainable Development Goals is working its way into discussions around the replacements for the Millennium Development Goals. Savvy business schools will have to start working this thinking into their curricula if they are to equip a new generation of business professionals with the skills and purpose they need to succeed in the fourth sector.
I’ll end with an example that illustrates the kind of fourth sector thinking I have been talking about here. Myriam Sidibe has a doctorate in public health and a father who is head of UNAIDS. Her expertise lies in how hand-washing with soap can prevent diseases like pneumonia, diarrhea, and cholera. By 2020, her team of dedicated professionals wants to reach 1 billion people and save thousands of lives. The organization she works for? Unilever.