Social Enterprise: First Book

Social Entrepreneur(s): Kyle Zimmer

Founded: 1992 
Sector(s): Education, Youth  
Location(s): US and Canada 
Website: www.firstbook.org

The Innovation

Incentivize the private sector to serve low-income markets by eliminating their risk.

The Innovation Explained

Through intensive research, First Book founder Kyle Zimmer discovered inefficiencies in the publishing industry that helped explain why new books are too expensive for lower-income Americans. A retail book price includes not only royalties, printing, shipping costs and profit margin, but also the cost of all unsold books that retailers return to the publishers. As a result of this major industry risk, publishers are locked into a pricing strategy that almost exclusively targets the upper 10-15% of the market.

Therefore, First Book designed a win-win model that gets new books to disadvantaged children for an average of just US$ 2.50 per book (average US$ 8.00 retail) and provides publishers access to a new market (the lowest 30% of the socio-economic pyramid), while eliminating the industry’s risk. Its flagship innovation, First Book Marketplace, buys large quantities of books at discounted pricing from 90 US and Canadian publishing houses on a non-returnable basis; this removes the publishers’ risk. 

First Book then amassed a previously unserved consumer segment and offered a market expansion strategy to publishers, who had experienced years of flat sales results. To aggregate the consumers, First Book created a national network that now numbers over 50,000 classrooms and programmes, which collectively serve 3 million disadvantaged children. This network is growing at a rapid rate and should reach self-sustainability within three years. To date, First Book has distributed more than 100 million new books, totalling over US$ 750 million in retail value.

Why This Matters

Getting books and quality educational materials into low-income, resource-starved classrooms and programmes is critical. Studies confirm the link between access to books and educational performance, and demonstrate the correlation between children’s book ownership and their future income.

The fundamental innovation of the First Book model (eliminating/reducing industry risk for entering a low-income market) has almost limitless applications. “You can leverage market designs … for any product that is an essential good but suffers from a significant error in pricing, like clothing, food and medicine,” says Zimmer. As an example, the same principle of providing a guaranteed market is at the heart of ongoing efforts to develop vaccines for infectious diseases common in poor countries.

Practical Advice

Forget the myth that entrepreneurs are born, not taught. Explains Zimmer: “…it’s handy to have good business instincts, but nothing substitutes for doing your homework. I had to plough through hundreds of articles on the publishing industry and reams of data about who buys books. Logging the hours is the only way you come to know an industry inside and out.”

Identify how you can add value to your partners. “Social sector organizations sometime view corporate departments as sitting on unlimited resources,” says Zimmer. “[This is] not true. You need to understand everything about a company: who its customers are, who its competitors are and what you can offer it of value that also serves your mission. Understand the motivations of the person sitting across the table – then the conversation focuses on what you can build together, rather than what you can extract from them, and that’s enormously powerful.”

Ask for help. Zimmer adds: “When you’re a start-up you don’t necessarily have legal or accounting expertise, so you’re forced to wing it and sometimes you make bad decisions. Whenever I stumble onto a challenge … I make a list of the top 10 brilliant minds on that issue, [for example], on branding. I rehearse ahead of time … and I call them up and say, ‘I have a branding issue and I’m not sure how to think it through. What would you do?’ You will be surprised how often people will step up and help you out.”