Social vs Financial: Which Is the Real Value of a Business?

You need to spend money to make money. A classic line you’ll have heard before no doubt. But there’s much truth behind it; according to Rafael Lourenco, EVP at ClearSale, the real value of a business lies beyond the importance of finances.

The fraud prevention business grows more valuable by the day. The steady stream of consumer data breaches and the exploitation of stolen data by organized criminals is part of why the global market value of the AI-supported data security industry will hit $17 to $18 billion by 2023. There’s a lot to be said for building a business that creates rising value for investors and shareholders—and that growth brings the opportunity to build other types of value as well.

At our company, we have a lot of internal discussions about building what Harvard Business School professor Rosabeth Moss Kanter calls “social or institutional logic,” by which businesses see themselves as important contributors to the broader society in which they operate. In her research on the world’s most admired companies, Kanter has found that “great companies work to make money, of course, but in their choices of how to do so, they think about building enduring institutions. They invest in the future while being aware of the need to build people and society.”

The rising importance of social logic in business

It would be easy in our rapidly growing industry to focus solely on building market value, finding a buyer, and moving on to a new startup project. However, because we aspire to be a great company, we strive to use the social logic demonstrated by enterprises that align long-term goals for improving people’s lives with their business goals. This logic expresses itself in various ways. Kanter’s examples include IBM’s support for remote work that helps keep talented women, international talent, and trailing spouses in the workforce; Procter & Gamble’s on-the-ground support for communities cleaning up after major floods; and PepsiCo’s grants to give more people worldwide access to safe drinking water.

With projects that reach beyond the basic financial scope of business, Kanter writes that companies can spark innovation and retain talent. “Articulating a purpose broader than making money can guide strategies and actions, open new sources for innovation, and help people express corporate and personal values in their everyday work.”

It’s not only multinational companies who are focused on building social value. Social logic is also starting to govern decision-making by major investors. Perhaps the highest profile recent example is BlackRock founder and CEO Laurence Fink. Fink oversees the largest investment firm in the world, with more than $6 trillion invested. In January, he sent a letter to the heads of the world’s biggest public companies letting them know that in order to thrive they “must not only deliver financial performance, but also show how [they make] a positive contribution to society.” Businesses which don’t, the letter said, will lose BlackRock’s support.

How can startups embrace social logic?

What does social logic look like for a startup, especially one in the dynamic fraud-prevention space where taking one’s eye off the ball can mean missing major changes in the game? For us, it means aligning our product development goals with the goal of making life better for those who come into contact with our products and people. In particular, we focus on three areas: positive long-term effects for our clients, better experiences for consumers, and identification and development of talented employees.

Other companies build social value in their own ways. Kanter mentioned Corning Inc., which has been active in the small community of Corning, New York, since the 1860s. Today, Corning is a multinational, multibillion dollar enterprise, and the company’s foundation supports educational, cultural, and human-service programs in communities where Corning operates. Some of the foundation’s educational grants have helped schools in several states to add science labs and equipment, improve their computer labs, and deliver industrial technology training to community college students who want to learn skilled trades like welding and machining. The result of this social value-building is more opportunity for students to learn, build rewarding careers, and create stronger communities.

As we expand internationally, we look to build lasting long-term value in every market where we operate, for our clients who want to succeed in business, for consumers who want simple and safe transactions, and for our talented people who want to have a positive impact on the world. We believe that this social logic will help us deliver better protection, better user experiences, and more meaningful work for our teams. And as more investment firms adopt social logic as a selection criterion, we believe a focus on long-term social value has the power to build financial value, too.