PRACTICE. open: the small business network from american express

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1 IN A march 2002 number 1 SERIES ABOUT INTEGRATING BUSINESS AND COMMUNITY DEVELOPMENT PRACTICE CORPORATE CITIZENSHIP is fast becoming an essential business competency. Many companies are coming to find that developing the economic assets and social and human capital of lowincome communities pays dividends to the bottom line. In the short and long term, this kind of strategy develops untapped markets, new labor pools, effective suppliers, and new operating sites. Leading businesses find that integrating business and community development creates new pathways to achieve long-term sustainable success a win-win proposition for the business and the community. In this series we profile examples of this integrated approach across a range of industry sectors. open: the small business network from american express COMMUNITY BUSINESS PROGRAM We cannot be vibrant and growing in the long term if we are not relevant to the fastest growing segments of our community. We want to make sure that we will be continuously reinventing ourselves through relevancy to key communities We saw an opportunity to target a growing population, help them through the cradling process, and build a new customer base out of the graduates of the program. DONNA VIEIRA, [ Vice President, Business Finance, OPEN: The Small Business Network ]. In tackling the challenge of generating long-term sustainable growth, American Express Small Business Services saw the opportunity and necessity of making a broad-based, long-term commitment to community economic development. Their approach shows how a company can apply its competencies and resources to benefit its own business, while at the same time assisting low- to moderateincome individuals in developing their capacity to generate assets, a win-win proposition. In April 2001, American Express Small Business Services (now, OPEN: The Small Business Network from American Express) launched the Community Business program, a new source of funding for individuals with little or no access to credit and other resources needed to start and grow their small companies. In doing so, OPEN: The Small Business Network aims to become the largest private source of funds to a fast-growing sector of the nation s small business community-microenterprise. THE CENTER FOR CORPORATE CITIZENSHIP at boston college 1

2 Microenterprises are small businesses that employ fewer than five employees and have capital needs of less than $35,000 a year. Through the Community Business Program, American Express targets established small business owners interested in helping the microenterprise community grow. By signing up for a Community Business Card, American Express contributes one percent of the cardholder s spending at no cost to the cardholder to select development organizations that provide loans and assistance to microentrepreneurs. The Community Business Program is a partnership between American Express and three microenterprise development organizations that serve communities throughout the United States: ACCION, which provides small loans and training to low-income, self-employed, primarily Latino entrepreneurs, including corner grocers, seamstresses, and childcare providers. ASSOCIATION FOR ENTERPRISE OPPORTUNITY, a trade organization of local microdevelopment organizations, including those serving primarily African American, Native American, and disabled microentrepreneurs. COUNT-ME-IN FOR WOMEN S ECONOMIC INDEPENDENCE, a national on-line microlender providing business loans, training, and mentoring to women starting their own businesses. THE IDEA FOR THE COMMUNITY BUSINESS PROGRAM Small business is a critical component of the nation s economy, representing 99% of all U.S. business, creating three of every four new jobs, and generating 55% of all innovation. In her role as Director of New Product Development for American Express Small Business Services, Donna Vieira was tasked with exploring, evaluating, and developing new product ideas that would advance the division s newly defined mission to advance the growth and success of small businesses in America. Convening a group from across the organization, the mission focused their brainstorming, spurring ideas for new products and services that would both serve the small business community and bring value to shareholders. While grounded in your company s mission, be creative in building on your organization s proven competencies. Building on American Express long history of successfully launching reward programs that feed money or gifts back to the customer, they generated an idea that built on their unique strengths as an organization a rewards-based credit card that contributes to the small business community of microenterprises. Its concept was to have established small business owners support new ones through their use of the special credit card. 2 THE CENTER FOR CORPORATE CITIZENSHIP at boston college

3 Researching the idea, the team members unearthed growth predictions for small business that cemented their thinking. They found that women and minority-owned U.S. businesses are the fastest growing segments of the small business community. Between 1987 and 1997, the number of minority-owned businesses grew by 168%, with revenues growing by more than 362%. By 1997, there were 3.25 million minority-owned businesses in the U.S., generating $495 billion in revenue and employing close to 4 million workers. The nation s 9.1 million women-owned businesses employ 27.5 million people and generate $3.6 trillion. However, women and minorities are also segments that are more challenged in terms of access to capital through traditional means, sometimes seeking resources through microenterprise development organizations. Previously neglected and underserved populations often hold hidden opportunities for developing future market growth. Ask yourself: How can success of our mission be enhanced by the opportunities that exist in low-income communities? How can the pursuit of our mission help support low-income communities? Microenterprise development has received increasing attention throughout the world. A large segment of microenterprise is comprised of ethnic and racial minorities, women, and other groups that have struggled to launch commercial ventures. This is especially troubling, as analysts note the importance of private enterprise to the sustained community and economic development of neighborhoods and regions. It is especially important for minorities and women who, when successful, tend to provide good jobs for their communities. Microenterprise development has emerged as a promising strategy to promote economic development through the engine of small business creation. Microenterprise development strategies typically focus on providing investment capital through relatively modest low-interest loans or (less frequently) equity investment. While the total value of the investment appears small, it makes the difference for a small business entrepreneur without the personal means to build his or her own business. American Express saw a natural opportunity to leverage its mission to support its long-term growth goals, its relationships with current clients, and to support community development. MAKING THE CASE While Vieira and her team had the support of senior management, they faced challenges in selling the idea internally, as would be the case with any new product. As Vieira notes, given the size of American Express, There are a lot of other brilliant ideas around, and everybody is lining up for funding. Vieira THE CENTER FOR CORPORATE CITIZENSHIP at boston college 3

4 These projects require scrupulous due diligence. Make a solid business case. and her team developed a business plan that defined the product, its characteristics, target market, and value to the corporation, in this case in terms of both shareholder value and the more intangible goodwill factor. We just overdid it on due diligence, she said, anticipating every question, every challenge, and backing up everything with solid data. It was our job to unite the needs of the business with the needs of the community in the eyes of those we sought for approval. Moreover, Vieira reports, People should not underestimate believing in the project. One of the constant pieces of feedback we got is that it was hard to say no to this team because we so strongly believed in what we were doing. All innovations must overcome obstacles to take hold. The business case is not enough. It must be part of a well-crafted internal marketing and communications campaign that uses a variety of tactics appropriate to your organization s culture. Their biggest challenge was education. Not many people know about microenterprise, said Vieira, plus it s a complicated product because the reward does not go back to the cardholder. Some people questioned the feasibility of marketing such a complex idea to customers. We had to figure out how to tell what felt to us like the greatest story never told. We had to be very clear on who our target market was, and who it wasn t. Our audience is successful small business owners, not the recipients of the funds, and our focus groups told us that they feel an enormous connection to others within their community. A product like ours could really tap into this fertile market. FINDING AND WORKING WITH PARTNERS The idea for the Community Business Card came from a keen understanding of what American Express does best and its savvy about key areas for market growth. The program s successful development and rollout, however, rested on an acknowledgement of the company s need to understand how the field of microenterprise works. Think of community partners as you would other business partners. Utilize and rely on them for their expertise and core competencies and not just for their ability to receive grants and deliver services. 4 THE CENTER FOR CORPORATE CITIZENSHIP at boston college

5 American Express selected three established and respected partners in the microenterprise field, all with nationwide reach. These nonprofits brought invaluable insights about the microenterprise field in the U.S. Moreover, American Express had a prior relationship with Count-Me-In as a founding donor and advisor, so they began with at least some familiarity. This was truly a partnership, says Vieira. We didn t come into this saying, we re American Express, so we know what to do. We respected their expertise, and they respected ours. That feeling permeated the entire process. The partners got involved early in the process and helped Vieira and her team think through important issues. For example, the Association for Enterprise Opportunity (AEO) helped them learn the reality of how stable microenterprise lenders allocate funds. Successful partnerships rely on not just the right mix of experience, expertise, and skill among partners, but upon a sense of mutual respect. According to Bill Edwards, executive director of AEO, A well-managed program really has three discrete uses of funds. One is, of course, capital to loan out. The second is training and technical assistance to help entrepreneurs develop viable business plans. The third is some level of administration and overhead. We proposed setting the fund use criteria at a ratio of 60:30:10. American Express agreed. American Express had identified ACCION and Count-Me-In as programs that serve Hispanic and women microentrepreneurs, and contacted AEO initially for leads on organizations serving primarily African Americans. Jointly formulate the most effective way of operating with your partners, focusing on effectiveness vs. control. AEO offered to use its organizational expertise to take charge of the search to find these organizations. It sent out questionnaires that described the parameters of the program and queried organizations on their history, processes, structure, stability and successes. It received close to 500 responses, and, using the established criteria, whittled down to a list of 20 potential recipients, out of which American Express chose eight. These included organizations serving not only the African American community, but also Native American and disabled microentrepreneurs. In addition, AEO also proposed that it act as coordinator and liaison for American Express with the smaller beneficiary organizations. This would ensure an efficient giving process, close supervision, and effective relationship management. THE CENTER FOR CORPORATE CITIZENSHIP at boston college 5

6 The nonprofits stayed connected with American Express via weekly Partner Calls. The ongoing dynamic was highly interactive and respectful. What worked well for us was to not be shy about expressing our ideas about project design, says Bill Edwards of AEO. American Express made the final decisions, but we gave them the benefit of more than 30 years experience working with microenterprise organizations at the local and national level. ISSUES ENCOUNTERED ALONG THE WAY Donna Vieira had jumped in late to American Express new product development cycle, so the project started off with approval but without the necessary resources and funding. Donna had to pull these together on her own, and quickly. In addition, she was assigned a very small team all the budget would allow following an enormous product launch that had run their resources dry. As a result, while it was clear Vieira and her team were committed to Community Business, the program was developed on a limited budget, which considerably affected its marketing efforts. To reach the small business community directly, American Express followed a viral marketing strategy designed to create a grassroots buzz about the program and propagate positive word of mouth among target customers. This strategy relied on relationships with Community Business Marketing Partners, including groups like the National Dental Association, the Business Women s Network, and the Latin Business Association, whose members, small business owners themselves, would likely feel affinity with the individuals receiving loans from the partner microenterprise development organization. This, however, became a tremendous coordination challenge for Donna and her team. ACCION was concerned about the limited marketing budget behind the program, but also realized it needed to accept the internal business environment that Donna faced and hope for the best. Of course, says Christi Beebe of ACCION, we would have preferred to have a paid advertising campaign alongside the viral, grassroots marketing being proposed by American Express. But we also recognized that we might not get everything that we wanted for promotion of the project at the outset, and we hoped for a future payoff. We knew the idea behind Community Business was a good one, but the budgetary restrictions from American Express limited the ability of ACCION to really promote the program, Beebe adds. For instance, when we requested several thousand card application flyers for our affiliated U.S. programs to distribute at local community centers, we were told that we would first be allowed only a 6 THE CENTER FOR CORPORATE CITIZENSHIP at boston college

7 few hundred, and that those flyers would be tracked to determine how many successful leads they generated. It seemed like there was a squeeze on even the resources we needed to help promote the campaign in a grassroots way. Looking back nine months post-launch, Teresa Legree, Manager, Business Development, who currently manages the program, shares that while trying a grassroots marketing partners approach was a great idea, American Express has come to recognize that the program warrants national attention. Legree acknowledges, Not enough people know about Community Business We need to be broad in our thinking. While marketing partners may have affinity, there are more people out there who want to help. In 2002, OPEN: The Small Business Network from American Express, will expand Community Business marketing to include more traditional marketing approaches by including national coverage, media, and direct mail. PLANS FOR THE FUTURE The company s new branding identity and value proposition as OPEN: The Small Business Network being open to innovation and to support the community of small business owners on terms amenable to the everyday reality they confront provide a fitting context for how the company thinks about Community Business. The company is committed to Community Business for the long haul. If we can help one person, we re successful, says Legree, although the company s new commitment of marketing resources to the program affirms its aim to fulfill the more ambitious goal of being the nation s largest non-governmental funder of microenterprise development organizations. The company has received an overwhelmingly positive response to the introduction of Community Business. Legree reports receiving numerous invitations to speak at conferences, requests for interviews, and queries from organizations interested in marketing the card. She is optimistic about the program s prospects and its capacity to help OPEN: The Small Business Network from American Express develop a local presence in communities. Community Business brings us into the grassroots community in a new way, suggests Legree, a way that facilitates growth for both under-resourced members of the small business community and for American Express. OPEN: THE SMALL NETWORK FROM AMERICAN EXPRESS (formerly American Express Small Business Services) is a unit of American Express Travel Related Services Company, Inc., solely dedicated to serving companies with fewer than 100 employees. OPEN: The Small Business Network from American Express provides a broad range of financial services to more than 2.5 million small businesses in the U.S. THE CENTER FOR CORPORATE CITIZENSHIP at boston college 7

8 The IN PRACTICE series is supported by the Ford Foundation s Corporate Involvement Initiative. The series captures the process by which companies work to increase the economic assets and social and human capital of low-income communities and individuals. The Center focuses on companies that aim to accomplish this through regular business operations and investment of core business resources. By sharing both successes and challenges, these profiles offer practical insights that our members can use to influence their own efforts. These are stories of partnership, integration and communication. THE CENTER FOR CORPORATE CITIZENSHIP at Boston College provides leadership in establishing corporate citizenship as a business essential, so that all companies act as economic and social assets to the communities they impact. The Center for Corporate Citizenship at Boston College Wallace E. Carroll School of Management 55 Lee Road Chestnut Hill, MA Tel Fax: ccc@bc.edu Director: Bradley K. Googins, Ph.D The Center for Corporate Citizenship at Boston College. All rights reserved. Reproduction prohibited. Quotation permitted with credit. THE CENTER FOR CORPORATE CITIZENSHIP at boston college 8