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The business world offers ready made mechanisms for turning good ideas into large scale enterprises. Social entrepreneurs who really want to change the world should take advantage of those mechanisms. -
By Bunker Roy
The nature of business is to impose change from above. Addressing difficult social problems requires the kind of change that bubbles up from below, from the community itself.
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Matthew Bishop
Using capitalism to scale a good idea
We all love the social entrepreneur who steps up in a community, takes on the power structures, and creates an organization or movement that makes a difference in the lives of the poor. Yet such talent is rare. Which comes as no surprise, since those skills and passion are equally rare among entrepreneurs in the business world. Where business has succeeded and the social sector has failed (with a few honorable exceptions such as Muhammad Yunus's Grameen Bank), is in finding ways to take the new, innovative ideas to a scale at which they really can change the world.
One of the great achievements of capitalism has been the evolution of different kinds of capital to support businesses at different stages of growth—from family, friends and other angel investors who support start-ups to the venture capitalists who help high-potential organizations grow, all the way through to the public-debt and -equity markets for large, scalable ideas. Different skills are required at different stages along the way—from the single-minded determination of the entrepreneur with an idea to the visionary and organizational capacities of the CEO leading a large corporation. Those like Bill Gates who make it all the way from the garage to the corporate boardroom as the head of their firm are remarkably rare.
Contrast this with the social sector, where the praise and reward always seems to be focused on innovative new ideas rather than the boring challenge of taking these ideas to scale. Social entrepreneurs are rightly celebrated, but we should also celebrate the social bankers, social venture capitalists, social equity investors, and so on. This is why I'm excited by the influx of suited MBAs into the world of doing good. And why, more generally, I think that those who want social change need to embrace the language and methods of business.
That does not mean that delivering social change should become a business— though if social entrepreneurs can find a way to harness the profit motive to achieve social good more quickly than through charity, as has recently happened in microfinance and is starting to take place in basic education, health care, etc then they would be daft not to do so. But the "philanthrocapitalists" that Michael Green and I write about are not looking to make a profit, they are trying to deliver social change. And, from Bill Gates and George Soros to Michael Bloomberg and Mo Ibrahim, they believe that the language and techniques that helped them succeed in business can be, if carefully applied to the admittedly more complex context of the social sector, a powerful force for good.
These philanthrocapitalists, armed with the tools of business, are starting to take on the challenges of finding and scaling solutions to the problems that blight the lives of more than a billion people on this planet who live in grinding poverty. Rather than bristling at the alien culture of business, social entrepreneurs in poor communities should be figuring out how to speak its language—and welcoming its arrival as the chance to finally have the impact they have always craved.
Bunker Roy
The soul of a social entrepreneur
If they do . . . then in my eyes they are not social entrepreneurs. The practice of business may improve the quality of life of some people—specifically, those who reap the profits—but ultimately its goal is to maintain the status quo of existing power relationships at all costs. Too often, would-be social entrepreneurs who come at their tasks with a business model end up with a top down organization that presumes to know, without living and working with the poor, how the poor think and what they need to tackle poverty. But what is worse, because of their need to prove their success to investors, they are prone to exaggerating claims and overpublicizing successes. Modesty and humility are not their strong points.
Real social entrepreneurs are a breed apart. They have a fire in their belly that makes them constantly question the system. They are driven to prove that a different world is possible—without regard to whether they make money at it—and they set basic urgent priorities that money alone cannot solve. A social entrepreneur must first be a social activist addressing the issues that cannot possibly be tackled through the practices of business. Only then can the social entrepreneur have a feeling for the poor.
Indeed, true social entrepreneurs (unlike those in the blinkered, risk-averse world of business) are willing to fight injustice, exploitation, discrimination, and corruption. They find practical ways for addressing these issues. They bring hope and courage to the very poor who cannot fight these battles alone. Social entrepreneurs are willing to defy the powerful and the entrenched and to turn the world upside down to show that the impossible is possible.
The problem with a business-model approach is that the conflict between righting societal wrongs and showing a profit makes it difficult to do either well. This conflict is not difficult to resolve—but only if the vision and priorities are clear. The practice of business does not have to be unethical, often it is non-inclusive and non-accountable to the public.
I'd like to describe one non-business model that I believe shows social entrepreneurship at its best. It's an organization of workers and peasants in India called the MKSS that was founded in a mud hut in the early '90s by three visionaries, all activists. There were no written proposals and no grants from foreign groups, and it did not even have a legal status. Instead, it survived on public donations. Those who ran it took only modest wages ($60 per month) but in barely ten years this group galvanized their simple messages into a national movement and got two acts passed in Parliament—The Right to Information Act and the National Rural Employment Guarantee Act—that changed the face of rural India. The first act requires public officials to answer any questions in the public interest. The second, unique in the world, guarantees 100 days of work to a population that is more than double that of the United States. On the strength of these two acts alone, the present government was elected back into power.
I believe that to change the world, a true passion for the cause is far more powerful than any MBA.
07 May 2010 · 08:42:14 PM GMT
The arguments against implementing or leveraging successful business practices are so short-sighted they’re hardly worth reading anymore. Anyone who operates a social enterprise and refuses to consider ways to be more successful purely for...—Jeff Hancock
In response to Should social entrepreneurs adopt the language and practices of business?
01 May 2010 · 04:38:37 AM GMT
The false dichotomy of business-model versus a social-impact model is a vestige of a dying world. As an entrepreneur turned social entrepreneur, I think Bukner is describing all entrepreneurs, not just social ones when he says “Real…...—theGeoffDavis
In response to Should social entrepreneurs adopt the language and practices of business?
30 Apr 2010 · 03:01:47 AM GMT
‘passionate social entrepreneurs’ are a figment of the romantic imagination. also the ‘poor’ are not a separate species. most humans want the same things: a full belly; security, education and medical support for the family. d...—vikram sundarji
In response to Should social entrepreneurs adopt the language and practices of business?
27 Apr 2010 · 05:12:22 PM GMT
Yes, where appropriate just as some businesses are adopting language and practices from social entrepreneurs. It is an evolving path so there will be stumbles on all sides. Yet in this ever more connected world, savvy people who want to st...—Kare Anderson
In response to Should social entrepreneurs adopt the language and practices of business?
24 Apr 2010 · 02:53:45 AM GMT
Should social entrepreneurs adopt the language and practices of business?Social entrepreneurism and the word ‘business’ have very different connotations. Where one is viewed in the light of service to the society regardless of whether it ...—Savita Rao
In response to Should social entrepreneurs adopt the language and practices of business?
24 Apr 2010 · 02:12:45 AM GMT
To me it appears that the debate would benefit by moving away from the tyranny of “or” and move towards the benefits of “and”. The question is not about business management practices vs the passion of social entrepreneurship. ...—Durga Prasad Duvvuri
In response to Should social entrepreneurs adopt the language and practices of business?
- Acumen Fund
- Change.org
- Changemakers
- David Bornstein Stories of Change
- Draper Richards Foundation
- McKinsey Learning for Social Impact
- McKinsey Social Sector Office
- The Schwab Foundation for Social Entrepreneurship
- Social Impact Exchange
- Social ROI
- Social Venture Network
- Stanford Social Innovation Review
- The University Network for Social Entrepreneurship
The arguments against implementing or leveraging successful business practices are so short-sighted they’re hardly worth reading anymore.
Anyone who operates a social enterprise and refuses to consider ways to be more successful purely for philosophical reasons is destined to fail when (not if) more efficient and effective enterprises emerge.
The in-kind match may light the fire in the belly, but with a blind eye to the future, they’re destined to be hoisted by their own petard.
Posted 7 May 2010, 20:42 by Jeff Hancock
The false dichotomy of business-model versus a social-impact model is a vestige of a dying world.
As an entrepreneur turned social entrepreneur, I think Bukner is describing all entrepreneurs, not just social ones when he says “Real…entrepreneurs are a breed apart…They have a fire in their belly that makes them constantly question the system. They are driven to prove that a different world is possible—without regard to whether they make money at it.”
The best entrepreneurs are driven by vision, not profits; profits follow if the vision is achieved.
Existing large companies who get it are starting to make money WHILE creating social impact(Coke’s water projects, Wal Mart’s eco-friendly packaging, Toyota’s hybrids); new social entrepreneurs are starting to make money BY creating social impact (Tom’s shoes, Better World Books, WasteVentures).
This is just the start of what will prove to be a revolution as impactful as the industrial and technological revolutions.
Posted 1 May 2010, 04:38 by theGeoffDavis
‘passionate social entrepreneurs’ are a figment of the romantic imagination. also the ‘poor’ are not a separate species. most humans want the same things: a full belly; security, education and medical support for the family. development is not about activism and fighting. armed struggle and other forms of invasive socio-political surgery are not sustainable. life is about taking time off from survival activity to enjoy the experience of being human. the ‘poor’ have as much right to this as the rich. neither does sustainable development imply government/foreign handouts. as a working social entrepreneur currently seeking to change the scale of my business all i need is a source of intelligent credit. even a 20-25% interest rate is ok. where conventional business fails is that it is structurally inefficient and more suited to supporting financial scamsters than genuine productive activity. more sensitive, nuanced project evaluation and credit alone could dissolve away the symptomatic ills of corruption and feudalism. the poor do not need activists or politicians. they need to be financially empowered through productive and not extortionary activity. if they are financially empowered neither political nor activist icons are necessary. a good sustainable job is more powerful than a bullet.
Posted 30 April 2010, 03:01 by vikram sundarji
Yes, where appropriate just as some businesses are adopting language and practices from social entrepreneurs.
It is an evolving path so there will be stumbles on all sides.
Yet in this ever more connected world, savvy people who want to stay relevant are adopting the language (and practices and service and product offerings) where apt, from other professions and industries to better serve their “customers.”
Younger, more well-travelled and widely curious individuals seem to be the early adopters of such an approach to their work and their live
Posted 27 April 2010, 17:12 by Kare Anderson
Should social entrepreneurs adopt the language and practices of business?Social entrepreneurism and the word ‘business’ have very different connotations. Where one is viewed in the light of service to the society regardless of whether it generates profit or not, the other is viewed chiefly as a profit making institution regardless of the actual service it may be doing to the society. Now-a-days we do have Corporate Social Responsibility as an important aspect of some businesses, but all do not implement it.
It takes more than a knowledge of business management to run any successful business.More so in the case of social entrepreneurship, where a genuine desire for the betterment of the people involved is essential. The passion to make a change in the lives of the target society is fuelled by the desire to see the change even at the cost of running into a loss. The benefits may not be visible right away, but over a period of time and sustained efforts, there is bound to be a change. Just as businesses can fail inspite of having trained professionals at the helm, it is possible for social entrepreneurs to fail without the xpertise of handling the organisational system. But this need not mean that employing business methods will boost the social entrepreneurship.
Posted 24 April 2010, 02:53 by Savita Rao
To me it appears that the debate would benefit by moving away from the tyranny of “or” and move towards the benefits of “and”. The question is not about business management practices vs the passion of social entrepreneurship. It is more about bringing the practices and precepts of both into play for each of these endeavours. In fact, much of management literature is moving towards understanding managing organisations and organisational environments from a generic perspective. Business management is itself a limited application of management knowledge.
The larger concern, in my view, in both the arenas has been that of goal displacement. I have been consulting in the supposedly hard-nosed corporate sector and the development sector including governments for the last twenty years only to find that at least in India the issues are more or less the same—low ability to stick to the stated purpose. Most organisations—whether with profit maximisation or social good maximisation goals tend to stray from the stated objective more often than not. Such goal displacement leads to all kinds of performance pathologies. I do not think mere application of basic tools of “business” management leads to significant benefits if the goal directed behaviour of the organisation is suspect.
Hence, in my view, the critical issue is for organisations of both kind in India to be on track rather than being “managed“well!
Posted 24 April 2010, 02:12 by Durga Prasad Duvvuri
Interesting debate. After working for three decades as a banker founded an NGO for education to underprivileged children. Social entrepreneurship yet non-profit. The experience in the corporate sector and networking helps bring effective management to grow the mission. Ideas develop into projects. Scale and sustainability follow passion and a fire in the belly to bring about change and give back to society. My take is that People,planet and profit are important but profit need not necessarily be in money terms – I feel what we are doing is an investment in the future generation – that is our bottomline.
Posted 23 April 2010, 13:40 by Neena Singh
One thing I found interesting is how Bunker Roy mentioned the National Rural Employment Guarantee Act. I didn’t know it was the result of grassroots activism. It has undoubtedly been beneficial to the rural people, but it is so much less effective than a more “market-based” solution, but has ironically spurred the creation of a VC funded company (A Little World) that has helped create bank accounts for rural villagers, which will arguably do more good in the long run than the act itself.
Apparently there is a condition to the act which does not allow workers to work with certain types of tools, so they are not able to work on anything infrastructure related. There are tons of people who are being paid by the government, but the jobs they are being asked to do don’t always fill a need – like cutting bushes in one case.
However, this nationwide scheme triggered an entrepreneurial idea called A Little World. To get the employment funds to the workers, the government paired with “banking correspondents” which are non-profit organizations that deliver the funds to the rural villages. In an effort to keep this process corruption-free, the government requires a technology-based system. A company called A Little World created the rural bank-in-a-box, which is essentially a cell phone, fingerprint reader and printer that creates real bank accounts for the villagers and allows them to receive funds. Because A Little World used the language of business in their talks with external VC investors and banks, they are able to fund this project. Thanks to the government program, they are able to reach a lot of people with their technology. Now the technology solution can be used to transfer money from the village out in a corruption-free way, which is helping lay the foundation of financial literacy in rural India.
I think that’s proof – passion, commitment and business savvy are ALL important.
Posted 23 April 2010, 13:11 by Ashley Metz Cummings
There are sure lot of common factors between what a business does and what a social activist does. The fire in the belly, vision, ability to inspire, ability to create a vision and convince others that it is a valid vision and will benefit all the stakeholders etc form major common factors.
Where the two differ is in terms of benefits available and means / methods of sharing them. For the corporate world, the benefits are clearly monetory. Their vision is also meant for sharing the benefits within the direct and for most part internal stakeholders – employees, business partners, investors, promoters and other people who have lent their money and other resources.
For the social entrepreneurs – the vision for both benefits to achieve and means / mechanism to share them may not be so clear. For all we know, the benefits may not really be tangible – at least in the short term. then when it comes to share them, the definition and closing of real stakeholders group may be another and bigger challenge. For that reason, the benefit sharing also may very well become intangible and wooly.
On top of it, the organized business can and will select the individuals who will be the “insider stakeholders”. By careful selection of market, their customers and some other business partners, they may also be able select and restrict the “external stakeholders” as well. In case of social entrepreneurs, neither of these may be possible in the first place. In second place the social entrepreneurs may not have any mechanism or (legal?) standing to restrict the later gate crashing of people who come in demand their ‘share’ of benefits.
In this situation, the usual business scenarios for motivating the team, keeping them goal oriented or bringing in more of these people / foot soldiers to scale up will not really work. The entire scenario does not seem to be good for usage of business paradigms.
Only way / reason the business thinking or means to drive better performance or growth may work may be by showing the team that their contribution is taking them closer to given goal of spreading societal benefits. Hence sharing information, goals, means of achieving better results etc will work very well, feedback from foot soldiers, reassessment of goals and tactics employed and other review and management techniques also may work.
At the heart it is necessary to understand the difference in basic drivers and ‘currencies’ as mentioned above. If the management communications or techniques are modified in line with these differences and means of motivation, the basic techniques may very well work for social entrepreneur too. If this can be done, there is no reason why social entrepreneurs should not chose the corporate mechanisms to carry their work forward and scale up or expand like the corporate world does.
Posted 23 April 2010, 07:30 by Shashank Tilak
Financial prudence / acumen is not required for profits alone, but for sustaining and growing an enterprise – or any form, social or commercial.
I was working with an NGO in Brazil that was in existence for the past 20 years. They are truly social entrepreneurs – working in the middle of corporates, government and citizens. Their sphere of influence was increasing, but their financials were completely out of place…they didnt have any surplus (profit) from operations and they didnt have positive cash flow. Another 6 months and this place would have to shut shop if they dont organize some more money. The leaders of the organization have already committed personal funds to their capacity (which is low since they draw average salaries).
Now it would be tragic for an NGO that has been working for 2 decades towards improving lives of hundreds of people in Latin America and promoting CSR within the world’s biggest firms to stop doing that just because they dont have working capital (which banks hardly fund there for NGOs).
It is only for the greater good, that they start making some surpluses, so that they can increase the number of co-ordinators and keep doing what they have built expertise and reputation on over such a long period of service. And if that requires increased business / financial prudence, its a no brainer what they should do. Yes, this surplus is not for the promoters to take home but for the organization to sustain itself and grow.
So lets not equate business skills to a desire for personal profiteering. Social entrepreneurship, for me, almost by definition requires one to manage financial resources like any other to build purposeful organizations to scale.
Posted 23 April 2010, 06:11 by Mayank K Agrawal