Built to scale? Growing pains hit Cambodia's businesses for good

by Matt Blomberg | @BlombergMD | Thomson Reuters Foundation

Thursday, 14 November 2019 00:00 GMT

Businesses with a social purpose across Southeast Asia struggle to juggle more money and staff with their ideals of improving the lives of vulnerable communities

By Matt Blomberg

KAMPONG CHAM, Cambodia, Nov 14 (Thomson Reuters Foundation) - A snippet of Leakena's life is written on a pair of jeans.

It marked the high point in a tale of redemption: from being exploited and ostracised to working a steady job making $250 jeans for a boutique manufacturer in rural Cambodia, with enough spare time and money to raise two children.

And then the Duchess of Sussex, Meghan Markle, stepped off a plane in Australia last year wearing a pair of "slave-free" Outland Denim jeans, into which was sewn the story of a faraway seamstress like Leakena, adding a new twist.

"People like us are often given little value," Leakena told the Thomson Reuters Foundation during a visit to the factory.

"But now we make outfits that are suitable for queens."

With the 'Markle Sparkle', the little-known business - which employs survivors of human trafficking and other vulnerable women to make ethically sourced, environmentally friendly jeans - exploded.

The style the duchess wore sold out in 24 hours. Sales spiked sixfold in a month. A second plant was opened in the capital, Phnom Penh, and staff doubled, to about 100.

However, the spotlight also created a dilemma for the young social enterprise - or business using profits for good - in how to scale up while staying true to its original mission of nurturing people who had been exploited.

The perils of growth are familiar to a rising number of businesses with a social purpose across Southeast Asia as they struggle to juggle more money and staff with their ideals of improving the lives of vulnerable communities.

The sudden growth ruptured Outland Denim's company culture - which revolved around people, not profits - said James Bartle, who started the Australian firm in 2011.

"Our culture suffered in the scaling process," said the former steel fabricator. "We had to come back in and really reset why we exist and what we are here to do."

One of the primary hurdles start-ups encounter, premature scaling up can create a domino effect that shifts focus away from the mission, according to researchers.

"There comes a point where management needs to switch from running the business to understanding how the business is run," said Neal Harrison, associate director at the Miller Centre for Social Entrepreneurship in California.

With that in mind, Bartle weeded out a "few bad eggs" and reworked his team.

The focus went back on staff, who are schooled in English, financial literacy and maternal health at the breezy, laid-back countryside factory - a far cry from the industrial zone production lines that drive Cambodia's economy.

"One of the big things we learned - we can scale very quickly but we need to scale the management support with it to maintain the integrity of what we do," he said.

For Leakena, growing the brand means more jobs for women like her. But that can only come with a focus on staff welfare and personal touches - such as the seamstress-to-consumer messages printed inside jeans pockets.

"It's our way of connecting with the people who wear our jeans," she said. "Famous or not, they can share our story and let the world know we exist."

SELF-ESTEEEM

While personal stories helped propel sales for Outland, at Kate Korpi - an academy and salon in Phnom Penh that trains and employs trafficking survivors and vulnerable young people - the past is left at the front door.

"When they walk in here, they are stylists - and that's it," said U.S. founder Matthew Fairfax.

"I don't even want to know their backstory," he said, focusing instead on becoming Phnom Penh's premier salon.

Trainees attend class at the Kate Korpi Salon academy in Phnom Penh in September. Luka van Opstal/Handout via Thomson Reuters Foundation

Since launching in 2014, Kate Korpi has grown steadily. But it only takes in four new students each year despite having a backlog of applicants.

When a potential funder took interest in the academy and suggested more trainees be pushed through faster, Fairfax knocked them back.

"You can't rush self-esteem ... You don't just take somebody who's been traumatised and in six months say, 'Okay, you are ready to reintegrate'," he said.

Fairfax is looking to replicate the model with more trafficking survivors his hometown, Seattle.

But replication, if not properly considered, can be another top hazard for social enterprises. Many take a "cookie cutter" approach, failing to consider all the elements of working in a different market, said Harrison, the mentor and researcher.

"People get distracted and run off into lots of different directions, choosing too many markets, or the wrong one," he said. "Very few companies do scale successfully. Most of them fall prey to these ... kinds of problems."

OPPORTUNITY

For Phare Ponleu Selpak - or "brightness of the arts" - which started as an arts school for vulnerable children in 1994, scaling was an organic stage of evolution when it began producing skilled graduates.

With about 60 alumni performing, Phare, the Cambodian Circus is one of the biggest tourist draws in the northwestern resort town of Siem Reap, the gateway to the Angkor temples.

Artists from Phare, the Cambodian Circus perform in a show titled Eclipse, in Siem Reap, Cambodia, in this undated photo. Peter Phoeng/Handout via Thomson Reuters Foundation

From an outdoor stage and a few dozen plastic chairs, the circus is now seen by thousands each month and has performed in South Korea, Australia, the United States and France, with one graduate touring the world with Cirque du Soleil.

"We haven't got to the threshold where we don't have any more jobs to create," said marketing director Craig Dodge.

But they aren't far off.

The school, which is partly funded by the circus, now has more than 1,200 students, meaning it will soon be churning out more artists than the circus can employ.

"Scaling ... is something we struggle with," said Dodge. "It is a challenge to find jobs for these graduating artists."

To account for that, Phare last year opened a graphic design and animation studio and a has a theatre-and-dinner project in the pipeline for Phnom Penh.

"The younger generation, they see what their brothers and sisters are doing and that they can make a good living," he said.

"Now it is seen as a career opportunity ... so we have to find ways to incorporate that into what we are doing."

(Reporting by Matt Blomberg @BlombergMD; Editing by Katy Migiro. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's and LGBT+ rights, human trafficking, property rights, and climate change. Visit http://news.trust.org)