First Book founder Kyle Zimmer talks about the hybrid model that’s key to the nonprofit’s success.
In the early 1990s, Kyle Zimmer was a practicing attorney who spent her free time volunteering at a soup kitchen in Washington, D.C. Working with struggling families made her realize that many children do not have access to new, high-quality books, which are the building blocks of education. She did her research, came up with a plan and launched First Book, a social enterprise that has distributed millions of books and other items to children in need.
But it’s not run like most nonprofits. First Book charges a small shipping fee per book that covers the operating cost of its book bank and it adopted atypical publishing terms so it could buy books at a discount.
Zimmer spoke to Katherine Klein, a management professor and vice dean of the Wharton Social Impact Initiative, about the hybrid business model First Book has adopted that was key to its success.
An edited version of the conversation appears below.
Katherine Klein: I think of First Book as one of the most impressive nonprofit social enterprises I know. You’ve been at it for a long time and are passionate about continuous improvement. How do you describe First Book?
Kyle Zimmer: We are a nonprofit social enterprise. At the highest level, we’re dedicated to equal education. We focus on fixing the lack of physical resources in any space serving children in need, ages zero to 18. We provide books, computers, winter coats when they’re needed — anything that is a barrier between kids and an equal shot.
Klein: Books were the initial starting point. Is that the major focus of your work? What’s the balance when you talk about these other resources?
Zimmer: Books are always the heart of First Book. In fact, we were delighted last year to hit 160 million books distributed over the lifetime of the organization. Last year, we did about 18 million or 19 million books through our system in a single year, and it’s growing 20% a year.
Klein: Who are these books going to?
Zimmer: They go into the hands of anyone serving children in need. It can be the most informal teen drop-in center. It can be a Head Start program. It can be a WIC clinic, a church basement, a barber shop where they’re doing outreach to get neighborhood kids reading, a Title I or Title I-eligible classroom. It’s a gigantic range.
“I was raised by people who believed deeply that education was the road to equality.”
Klein: The name First Book suggests this may be the first book in a kid’s life or in the home. Why First Book?
Zimmer: I fell in love with a poem by Rita Dove that’s called “The First Book.” That’s where the name came from. It has to do with being the first book that really grabs you and turns you into a reader.
Klein: You founded First Book 25 years ago after making the jump from a career as an attorney. What I’ve seen in my role in the social-impact world is that plenty of people have a larger sense of purpose, but they don’t take the plunge. How and why were you able to take the plunge?
Zimmer: I think that I took the plunge for two reasons. One, I was raised to focus on education. I was raised by people who believed deeply that education was the road to equality. To this day, I believe that it really is the next wave of the civil rights movement. That has always been at the core of who I am. When I started, I actually was practicing law. I went in the evenings to a soup kitchen. I just hung out with kids from the neighborhood. It was in the late 1980s, early 1990s. It was a tough period for Washington, D.C., a period of the height of the crack epidemic and very violent. These kids were doing everything right, coming in from a tough neighborhood, looking for adult intervention. I realized that even though I wasn’t a teacher, those hours could be a lot more productive if I just had books and could pull a kid onto my lap and start reading.
The lack of books in that setting set me on a trail of exploration. I started looking at schools in the neighborhood, what resources they had available, reading studies about it. One thing led to another. Like probably every social entrepreneur in the world, I have that split where my head is fundamentally private sector and my heart is social sector. I began to put together a business plan to understand the intricacies of the publishing industry and to start imagining how you develop an actual business plan that would fix the chasm.
Klein: I love how you put this, with the heart in the social sector and the head in the private sector. Another way people talk about organizations like yours is as hybrid organizations. They can be for profit; they can be nonprofit. But there’s a strong social mission and a revenue-generating model as well. How does that work in your case?
Zimmer: At this moment, we have two big jet engines. One is called the First Book National Book Bank. Fundamentally, it’s focused on books, but there are other products as well. It accepts large-scale contributions from really almost every major publisher in the United States and Canada. We take that inventory in, and we make it available through an online system to our expansive network of classrooms and programs who have signed up with us and are eligible to receive resources.
Klein: That is essentially a donor model, where companies are donating books and you’re distributing them.
Zimmer: Right. While that sounds more traditional in its design, the books remain free. But the people who receive them pay a shipping and handling fee. On average, it’s about 55 cents, 60 cents per book. What that fee allows us to do is not only pay shipping and the hard out-of-pocket cost, but it allows us also to pay 100% of the costs related to running the National Book Bank. It’s completely revenue-neutral for the organization. That places 14 million books a year, something like that. It’s a powerful engine.
The second engine is called the First Book Marketplace. About 10 or 11 years ago, we realized that although we loved the Book Bank — it’s wildly efficient and places enormous quantities of books and resources out there — what it doesn’t do is fix the problem for publishing. Publishing is a consignment industry. What that means is that they know that when they hit the print button every year on whatever titles they select, 25% to 30% of that inventory is coming back to them. That means that they elevate the price at retail to reflect that. So, we have a market now where a premium picture book for kids in the U.S. runs just a hair over $18.
“Like probably every social entrepreneur in the world, I have that split where my head is fundamentally private sector and my heart is social sector.”
You have an entire publishing industry that really has a market restricted to about the top 5% of the U.S. socioeconomic ladder. That’s not good for the industry. No one wants to have that kind of constriction. We went to them and said, we are going to crack open the bottom of the market for you. We will aggregate the market. We will take care of talking to them so there will be no advertising costs. And we will buy, for the first time ever, on a non-returnable basis, which took the consignment risk off the table.
We now offer about 6,500 titles. The average price of a picture book through us is $2.85, and it includes shipping. Sometimes they are hardback, and the cost is a little higher on those. We change format sometimes to keep the costs so it’s accessible. But it also works for the publishers. It’s a brand new market, and they’re still making money on those sales.
Klein: How are the recipients paying, whether it’s a community center or school system or the local barber shop?
Zimmer: It depends on the program. Sometimes, it’s Title I funds, which are governmental funds. A lot of times, what we know is about 90% of teachers in the United States take money out of their own pocket to pay for resources in their classroom. If you’re a teacher at a Title I school, the needs are so high that First Book believes that none of those people should be, first of all, paying for it themselves, but secondly, paying $18 per book.
Whether they’re out of their own pocket, whether they’re school funds — sometimes it’s local foundations or affluent folks who come to the table and recognize the need — it’s a huge range. All we care about is making sure that every dollar that comes in pushes the maximum number of resources out the door.
Klein: With your model, it sounds like you’re not experiencing a tension between the revenue-generating aspects of the model and the social impact. The more books that are getting donated, the more books that you’re selling, the more books you’re contracting, the greater your impact. That’s not always the case. Do you have advice for others who are looking for a successful hybrid model where you get that win-win?
Zimmer: I do think that we’re particularly fortunate to have our model directly on point with our mission. If I were advising somebody to design one, what I would suggest is a couple of things. One, I’m a big believer in writing a business plan. It may sound old fashioned, it may sound boring. But what you need to do is sit in front of your computer and make sure that you can clearly articulate exactly what you intend to do and exactly what the risks are. And you need to do it fearlessly. Ask yourself every tough question.
Young people who are trying to start social enterprises need to step out and ask for help. I talk to a lot of classes and a lot of young people. They have MBAs from great programs like Wharton. They’re still worried that they don’t know enough. They don’t know enough about logistics or whatever the topic is. I think that the best minds recognize that team leadership is the way to go, and that you’re never going to know enough. Even if you do when you start it, within six months you’ll be facing challenges that you really couldn’t even foresee. So, you need to routinely get yourself in the mode of reaching out, asking for help. Ask people you know will give you great advice, but who will also ask you the tough questions so that you don’t run the risk of falling so in love with your design that you lose track of your business model.
“About 90% of teachers in the United States take money out of their own pocket to pay for resources in their classroom.”
I think there are lots of wonderful models where they don’t have the alignment. I do think the centerpiece of that is refined thinking, forcing business practices, forcing yourself to answer the tough questions.
Klein: Many organizational leaders will struggle from their positions as CEO and founder to get real information. How do you get that bottom-up information?
Zimmer: I think we have really worked hard on this at First Book. It’s multilayered. We believe deeply in team leadership. There’s no one head of the organization. It’s a team of four people. We have enormous faith in each other, and that sets a tone because the rest of the organization watches how we interact. They see that Jane [Robinson], the CFO, or Chandler [Arnold, the COO,] or Dan [Stokes, senior vice president of administration,] ask me very difficult questions. I may come up with what I believe is a completely genius idea, and they will shoot it down pretty aggressively. With great caring and great humor, but the interaction is very clear. It emboldens people and teaches them that it’s OK to question. That’s one thing.
I think a second thing is, we really do focus on how we interact at meetings with our team. For example, I’ll present an idea and say to a junior person, “Tell me three things that you love about my idea.” They’ll stand up and come up with three things. Then I’ll say, “Now tell me three things that you hate about my idea.” Usually, it’s so playful that you’ve lowered the barrier and they feel as though they can step forward.
By the way, I think that’s critical. Not just with our internal interactions, but I also think it’s critical for our relationships with corporations. We often have almost identical conversations with the companies that support us because it’s hard sometimes for them to feel like they can be critical of their nonprofit partners. That’s the most important thing they can do for us.
Klein: As the social impact space has evolved, as social enterprise models have evolved, there’s a big focus on data. How are you using data, whether to guide your strategy and your projects or to assess your impact?
Zimmer: We use data every single day at First Book, and we use it in a lot of different ways. From an impact perspective, we survey our recipient groups routinely. In fact, we just closed a pretty large-scale survey and got some wonderful responses. We found that 88% told us that the books that we provided helped them close the achievement gap, and 87% said that they noticed an increase in interest in reading from the children they served as a result of having new books and resources. My favorite number out of the whole thing is that 79% of the teachers we serve came back to us and said that they felt First Book resources gave them the ability to be the best educators they could be, which is fabulous because these are people who are working on the frontlines in very difficult situations.
We also look at other kinds of data. We do focus groups routinely with the people we serve. We get all kinds of feedback from them about what they need, but also what keeps them up at night. What are they worried about in the lives of their kids? We get tremendous input from that. We look at the macro level through data. We are constantly monitoring, how big a buyer are we in the publishing industry? If we’re really about trying to invert the market for publishers, how close are we to doing that? I’m happy to report we’re one of the largest specialty buyers of most of the major publishers in the U.S. now, which is terrific. But we watch those numbers so we know what our impact is at the macro level.
“Young people who are trying to start social enterprises need to step out and ask for help.”
Klein: That makes me think of the times when you’ve talked to me about your impact on publishing. Is First Book changing the publishing market, what gets published and for whom?
Zimmer: I think we are, in small ways, right now. We’re taking bigger and bigger steps in that. I believe that a couple of things have happened. I think that we have opened the eyes of traditional publishers to the fact that there’s another market out there that they haven’t served. I believe that they have been more deliberate in the choices they’ve made about the cultural identities of authors they back because they know that First Book will be there as an open market to them.
Let me give you an example. Almost everybody knows Goodnight Moon. I’ve read that to my own kids a thousand times. There was an English version and a Spanish version. Our network responded to us and said, “Don’t make us buy both. We really need a bilingual edition.” We learned that there wasn’t one, so we went to the publisher and said, “How about if we buy 30,000 copies?” Of course, that was welcome news to the publisher because it’s non-returnable. It’s all great. When we did that, that had never been done before. Because when you’re selling it to a retail market, at the high end of the market, if they need both, they just buy both copies. I think we’ve been through 115,000 copies of that book now. Now it’s available at retail, but it wasn’t before we began that.
Our work for Stories For All is a program at First Book that focuses on cultural diversity, which is a dramatic need in children’s literature, in the U.S. especially. We have really held hands with publishers and said we will buy the first 10,000 copies of books that we hand-select before they are ever chosen by the publisher. That enables the publisher to take a gamble on an author that they might not be as confident about the retail market for because they know that the first 10,000 are out the door.
Klein: What are you thinking about for the future? Maybe a puzzle that you haven’t quite cracked or a new venture?
Zimmer: This is my favorite part of my job. We have several big plans underway. One is recognizing that not only are we focused on publishing, but we’re focused on what are the resource needs that are barriers for these kids. We’ve already stepped out, as I said, in winter coats and hygiene kits for homeless children, and many other areas.
What we’re realizing more and more is that not only has the publishing industry been designed really to only serve the upper veneer, but so is the retail industry. It’s not anybody’s fault. They are victims of their own market design. They’re victims of their own business strategy. Now we have a gigantic and growing number of families who are at the very bottom of the poverty ladder, and these are people who can’t afford diapers. They can’t afford books. They can’t afford school supplies. They can’t afford the very basic items that allow you to raise a child in a healthy environment.
We’re looking at them and saying, “What’s our role in that?” We have some strategies underway for that. We are also working on developing a research arm. We have 300,000 members of our network, and they have big opinions and share them with us very openly. With that, we’ve realized we have a unique opportunity to really harness the voice of people who are serving kids in need. We’re beginning something called First Book Insights that we’re looking at launching this next year.
Article by Knowledge@Wharton