After four and a half months of sweat and toil we are pleased to announce our idea:

We are developing a web service that harnesses the collective intelligence of The Economist Group’s community, enabling them to contribute their skills and knowledge to international and local development organisations. These business minds will help find solutions to the world’s most important development problems.

It will be a global platform that helps to offset the brain drain, by making expertise flow back into the developing world. We’ve codenamed the service “Lughenjo”, an Tuvetan word meaning gift.

So how does it work?

In a nutshell, non-governmental organisations (NGOs), charities and other organisations - as well as entrepreneurs active in developing countries - will be able to post tasks on Lughenjo asking for help in solving problems. Qualified individuals can then provide such help by donating their knowledge and skills. By connecting these two groups Lughenjo will create a marketplace for good and a new channel for skills and knowledge transfer.

So what difference can it make? We can’t help but think that if we allow The Economist Group’s community to give their time and expertise online - quickly and easily - then something great will happen. Initially we’ll start small. Lughenjo users will be able to answer questions that are posed by accredited international development organisations. Think Yahoo! Answers for good.

The key will be what happens later, when tasks become more complex. Imagine a CEO examining a business plan for a developing world social enterprise. Or when one of the 450 000 finance and accounting professionals of CFO and Economist.com can look over the books of an NGO in Nairobi. The possibilities are endless. What’s more, by allowing skilled, smart, professionals to help development organisations, they will help solve development problems with market-based solutions.

But what’s the business model? Lughenjo will be a social business enterprise. A business that does good, and returns a profit. To do this we’ll do what media companies do best and put ads in front of eyeballs.

Time for questions

There are many questions, which we have thought long and hard over. Does the world need another volunteer-matching site? Will time-poor professionals donate their time? Do NGOs and other organisations actually need such a site? Can you make money on the back of charity?

In the next few weeks we’ll be dealing with these issues on our blog (starting with the question of making money from philanthopy, below) and at the same time putting together a great pitch for the Group’s management team.

So there it is. We’d love to get your feedback on the idea - feel free to post a comment.

And if you work at an NGO or are a social entrepreneur who would use Lughenjo for getting help, then please e-mail us on:

When you receive a generous gift, you don’t usually turn around and sell it.

So why, then, would we want to make money from a website on which people are supposed to donate their time to solve development problems? Such an approach, one might argue, is bound to fail because volunteers would feel taken advantage of. This “smacks of cynical exploitation and a values clash”, was an initial reaction of one of my Economist colleagues.

You can be sure that we have had more than one heated debate about this question. Initially, we wanted Lughenjo to be not-for-profit, with revenues to finance the programme coming from The Economist Group as well as long-term sponsors and grants.

Yet this would have been an all too easy way out, not very innovative – and would likely have led us into a dead end. A business model mainly based on the financial support of others has serious drawbacks that would limit Lughenjo’s growth and sustainability. For starters, sponsors and grant givers may jump ship if their priorities and thinking change. At The Economist Group, for instance, many think that shareholder money should not be spent on charitable causes: if shareholders want to do good, they can do it themselves.

What is more, not-for-profits often don’t raise enough funds, and thus cannot fully achieve their mission. Witness the several interesting online volunteering sites such as OnlineVolunteering, run by the UN, and Nabuur, a Dutch site. Although they have pioneered international online volunteering, both have problems getting real traction.

Most importantly, by making its brand and readers available to the site, The Economist Group will be taking a considerable risk, which should be compensated. This will give the Group a strong interest in making Lughenjo a success – which, in turn, will help achieve the site’s mission.

We are not the only ones who have begun to rethink the divide between profit and social goal. There is a growing “social enterprise” movement. One of its leaders is Muhammad Yunus, who – along with the Grameen Bank he founded – won last year’s Nobel Peace Prize for their efforts to create economic and social benefit from below, notably by pioneering microcredits. He is now promoting another idea that he calls “social business enterprise”. This is an enterprise that has an overarching social goal, but is run like a business – which can include making a profit.

“Once a social entrepreneur operates at 100% or beyond the cost recovery point he has entered the business world with limitless possibilities”, Yunus writes in an article on Grameen Bank’s website. “This is a moment worth celebrating. He has over-come the gravitational force of financial dependence and now is ready for space flight! This is the critical moment of significant institutional transformation. He has moved from the world of philanthropy to the world of business.”

Grameen Bank itself is the best example so far. Although it lends small sums of money mostly to poor women, it is a for-profit company. In 2006, in made a profit of $20m (which was transferred to a local not-for-profit created to cope with disaster situations – to exempt Grameen Bank from paying corporate income tax). Recently, Yunus launched another social enterprise – a yogurt factory. Built by the French food company Danone, it produces fortified yogurt at an affordable price. Profits will be reinvested, with Danone getting back its initial cost of capital. If the setup is a success, the new company intends to build dozens of such factories.

On the other side of the political spectrum, Eric Posner, a law professor at the University of Chicago Law School and son of the prominent federal appellate judge Richard Posner, has recently co-published a paper making the case for “for-profit charities”. If there currently are hardly any, he argues, it’s because tax benefits are linked to not-for-profits.

The internet has already given birth to a number of pro bono/for-profit hybrids, notably open-source software communities, such as the one that gave birth to Linux, the computer operating system. It is developed by volunteers across the world, but it is accepted that for-profit companies make money off it by selling services and other add-on products as long as they also contribute to the community and “don’t do evil”, to quote Google’s corporate mantra. (By the way: , the online giant’s philanthropic arm, is a “for-profit charity” because this gives it more flexibility.)

In digital philanthropy (meaning websites that allow people to make donations, be they money or time), too, one can also find a few hybrids. GlobalGiving, for instance, a sort of eBay for international philanthropy, that matches donors to projects in developing countries, cooperates with a for-profit partner, which also pays the CEO’s salary. JustGiving, a UK-based private company that enables charities to raise money online, take a slice of the tax refund. And if discussions on SocialEdge, a website for social entrepreneurs, is any guide, there is much interest among charities and NGOs in going “hybrid”.

It is easy to dismiss these efforts as vain attempts to mix oil with water. And admittedly, with Lughenjo, we’re pushing the idea further, by not reinvesting the profit. But we strongly believe that all these examples are just the beginning of a larger trend that will spawn many hybrid organisations that will both do good AND make money. Just as the internet has enabled new business models in the for-profit space, it can do so for charitable organisations. And we hope that Lughenjo will become one of the foremost examples.

I’m sure you’re all thinking ‘Hey Project Red Stripe, why the silence?’. To tell you the truth we wrestled a bit (not literally) before we stopped writing our blog. At the time we certainly believed that - as Ludwig said in his blog post -‘going public now would almost certainly kill our idea’. Going under the radar has allowed us to investigate a sector which is totally out of the Economist Group’s remit. We thought our business model was so different we’d instantly receive thunderbolts from on high.

Why? Because we wanted to start a not-for-profit. Then, imagine if our pitch hadn’t worked and we had to kill the site. It would have been embarassing for The Economist, we thought. This is slightly a case of bigcompany-itis - not wanting to try something new because we might look stupid. Going silent gave us time to work on the idea, making it rock solid before presenting it. We needed this time to concoct a business case for having a not-for-profit because The Economist Group - and The Economist itself - is sceptical of corporate social responsibility, reasoning, not unfairly, that shareholders can decide themselves how to spend their own money charitably.

Working under cover has given us advantages. It has meant we could engage potential stakeholders and partners without having to manage a community. It has meant we could change our direction a lot, without having to explain our about turns. We have been free to switch from a not-for-profit model to being a social enterprise, without worrying about loss of face.

Conversely, it would have been interesting to have tried to do this in the open. Instead of having to research our ideas from scratch, we could have asked for pointers from our community. Instead of having to find key partners, they could have been suggested to us. As opposed to having to torturously work out whether you can make money from doing good, we would have heard from a social entrepreneur.

Once we decided that our business could do good, without being a not-for-profit, then the only reason we would keep quiet was if someone pinched our idea. That’s a risk we are willing to take because our key asset in this is something that is unique to The Economist Group and that is our community and our content.

All I will say about the idea is that I am very, very, very excited about it indeed.