Fairphone: disrupting the mobile phone market through values
The Guaridan, by Bas van Abel
Fairphone is a social enterprise based in Amsterdam with nine people on our small, startup team. By making a phone that puts social values first, we hope to spark a movement of people and organisations that together work toward an economy based on fairer principles. We are part of initiatives that account for the true value of the phone’s life, and produced in a way with minimal harm to people and the environment. In this way, Fairphone offers its buyers more than a smartphone. The phone is a beginning to change the way things are made and create systemic change in the industry.
When we began three years ago, Fairphone was established as a campaign, a non-profit organisation with a mission to raise awareness on the relationship between conflict minerals and their electronic goods. We always knew that to make interventions in the supply chain, we needed to understand what lies behind the production of a mobile phone. To understand these processes, we needed to actually produce a phone. This is how the social enterprise started.
While we were still in our phase of raising awareness, people (consumers, even phone operators) started asking us whether they could buy our phones. Although it wasn’t until the beginning of this year that Fairphone received funding, enabling us to be established as a social enterprise, we had already identified a consumer market.
For the year prior to our pre-order campaign, we opened up a subscribers’ list where people could register for a phone. By the time we started pre-orders in June, we had accumulated 16,000 signatures, which made us feel confident to launch. These people cannot be captured in marketing terms, but what they do share are certain values. Values that seem to have become more important as big brands (in the electronics) industry become more closed and improvements tended to be focused on technology, not ethics. These values are related to sharing, opening, positivity, creativity, access, values that contribute to creating a human feeling of ‘fair’. Fairphone has given them a means to an end.
So how we tapped in to the consumer market can be explained from several angles. The phone is one; our mission is another. When it comes to the product, you could say that the phone is distinctive in a market that currently differentiates mainly on design and technology. We feel that the overall reason, however, for our "success" is because we have tapped into a feeling (not a market) surrounding the production of goods in general that is demanding change – on all levels. We see that there is a change happening in the industry, from the consumer to the mineworker, for whom the current economy and business models aren’t working anymore. People are looking for disruptive models and in the end, that’s what Fairphone is: a movement for change. It’s a movement that people can participate in. Their actions, as consumers, amount to a political act, enabling them to voice their discontent and demand change. That is why our product has gained so much attention in a market that seems saturated with big players; the story is different.
In addition to this, Fairphone’s business case has recently become very successful in an area that is relatively young – the social enterprise. We call it a movement, but by offering customers more than a product, whether it’s social impact, or a guarantee of a "net positive effect" of the production of their goods, this idea is gaining momentum. The product is important but it is good to realise and remember that there is an additional responsibility that goes hand-in-hand with production.
As for Fairphone’s own funding as a social enterprise. We started up operations of our company, with seed capital we received from a known investor, with whom we had a longstanding relationship with at the Waag incubator (from which we spun off). We had been around for three years prior to this, receiving funding from non-profit foundations supporting our cause. But most importantly, our community of buyers has now financed our next step. This on the one hand has given us a major responsibility, not just toward production of the first phone, but beyond as they have invested in future steps and interventions. On the other, we feel that these buyers have endorsed our mission of creating a fairer economy, and that we can do this together, one step at a time.
Our strategy for current operations and production was to make this happen on our own, together with the people who buy the first batch of Fairphones. It’s amazing that this has happened. Once we have proven to be able to produce and market the phone we can be open to social impact investors. Since we won’t raise enough capital from this first round of phones to pre-finance a next batch, we’ll have to rely on impact investors to grow into new markets. From the first batch of the phones any profit we make will be invested in supply chain improvements. With the company up and running, though, we are sure that we will be able to attract social impact investors for the next batch. This will give us the leverage to keep our independence and grow in a natural way.
With this community momentum going forward (a growing Facebook community of over 22,000, and over 10,000 pre-orders in just over one month), we can continue our business philosophy of applying commercial strategies to maximize social impact. As we stay transparent in our operations and show our community the steps in making a phone, we feel that our movement has the potential to positively influence our economic system.