Social Entrepreneurship

Social entrepreneurship is all about exploiting opportunities to create social value. Social entrepreneurs set up ventures with the intent to bring about social change. The primary purpose is not to make profits but to create social wealth. Social entrepreneurs are innovative, resourceful and result-oriented.

They draw upon the best think tanks in both the business and non-profit worlds in order to develop strategies that maximize their social impact. These entrepreneurial leaders operate in all kinds of organizations – large and small, new and old, religious and secular; non-profit, for profit and hybrid.

Social Entrepreneurship Meaning

The terms social entrepreneur and social entrepreneurship were used first in the literature on social change in the 1960s. The terms came into widespread use in the 1980s and 1990s, promoted by Bill Drayton the founder of Ashoka – Innovators for the Public, and others such as Charles Lead beater.

From the 1950s to the 1990s Michael Young was a leading promoter of social enterprise and in the 1980s was described by Professor Daniel Bell at Harvard as ‘the world’s most successful entrepreneur of social enterprises because of his role in creating a favourable environment for them.’

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During the nineteenth and twentieth centuries some of the most successful social entrepreneurs successfully straddled the civic, governmental and business worlds – promoting ideas that were taken up by mainstream public services in welfare, schools, and health care.

One well-known contemporary social entrepreneur is Muhammad Yunus, founder and manager of Bangladesh Grameen Bank and its growing family of social venture businesses, who was awarded a Nobel Peace Prize in 2006. The work of Yunus and Grameen echoes a theme among modern day social entrepreneurs that emphasised the enormous synergies and benefits when business principles are unified with social ventures.

In some countries, including Bangladesh, social entrepreneurs have filled the space left by a relatively small state. In other countries, particularly in Europe and South America, they have tended to work more closely with public organisations at both the national and local level.

Today, non-profit and non-governmental organisations, foundations, governments and individuals also play the role to promote, fund and advise social entrepreneurs around the planet. A growing number of colleges and universities are establishing programs focused on educating and training social entrepreneurs.

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India has the world’s second largest labour force, of over 600 million people. According to the latest World Bank report, approximately 350 million people in India currently live below the poverty line. Though hourly wage rates have more than doubled over the past decade or so, the ground realities are very depressing. With an estimated population of 1.2 billion people, this means that every third Indian is living in very poor conditions. Unemployment rates are shooting up. Literacy rates are still quite low.

The case of women and child labour reads like a horror story. Basic amenities like nutrition, education and health care are rarely available to those living below the poverty line. Under the circumstances, there is an urgent need to improve the lines of the poor and marginalized. In a country like India, the pressing problems of the poor can be addressed and resolved properly only by social entrepreneurs whose main job is to bring about social change.

Social entrepreneurs act as change agents for society. They seize opportunities, improve systems, invent new approaches, and offer creative solutions that improve the living standards of millions of people. While a business entrepreneur might create new industries, a social entrepreneur comes up with new solutions to social problems, and then implements them on a large scale. Social entrepreneurs are not content to just give the needy a fish or teach him how to fish. They will not rest until they have revolutionized the fishing industry.

Define Social Entrepreneurship

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Any definition of social entrepreneurship should reflect the need for a substitute for the market discipline that works for business entrepreneurs. We cannot assume that market discipline will automatically weed out social ventures that are not effectively and efficiently utilizing resources.

The following definition combines an emphasis on discipline and accountability with the notions of value creation taken from Say, innovation and change agents from Schumpeter, pursuit of opportunity from Peter F. Drucker, and resourcefulness from Stevenson.

In brief, this definition can be stated as follows:

(i) Social entrepreneurship is when “A person who pursues an innovative idea with the potential to solve a community problem. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives”,

(ii) As Adam Smith explained in “The Wealth of Nations” (1776), “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self- interest.” Smith believed that when individuals pursued their own best interests, they would be guided toward decisions that benefited others. The baker, for example, wants to earn a living to support his family. To accomplish this, he produces a product, bread that feeds and nourishes hundreds of people”,

(iii) According to Jean-Baptiste Say (1767-1832), a French economist, defined a social entrepreneur as “a person who “undertakes” an idea and shifts perspectives in a way that alters the effect that an idea has on society. An entrepreneur is further defined by Say as someone who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.”

(iv) A broad definition of the concept allows interdisciplinary research efforts to understand and challenge the notions behind social entrepreneurship. No matter in which sector of society certain organizations are, social entrepreneurship focuses on the social impact that an endeavour aims at whether social entrepreneurship is altruistic or not is less important, than the effect it has on society.

Role of Social entrepreneurship

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Social entrepreneurship play the role of change agents in the social sector, by:

Adopting a mission to create and sustain social value (not just private value),
Recognizing and relentlessly pursuing new opportunities to serve that mission,
Engaging in a process of continuous innovation, adaptation, and learning,
Acting boldly without being limited by resources currently in hand, and
Exhibiting heightened accountability to the constituencies served and for the outcomes created.

Social Entrepreneurship Example

Example:How Grameen Bank Revolutionized the Lives of Poor Bangladeshis:

Muhammad Yunus, founder of the Grameen Bank, and father of microcredit, provides a classic example of social entrepreneurship. The unfortunate equilibrium he identified consisted of poor Bangladeshis’ limited options for obtaining the tiniest amounts of credit from the banks. The less-privileged sections of society, as a result, resorted to begging or became victims of greedy moneylenders. Yunus challenged the prevailing equilibrium by lending $27 from his own pocket to 42 women from the village of Jobra.

The women repaid the entire loan within no time. Yunus found that with even tiny amounts of capital, women invested in their own capacity for generating income. With a sewing machine, for example, women could tailor garments, earning enough to pay back the loan, buy food, educate their children, and lift themselves out of poverty.

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Grameen Bank sustained itself by charging interest on its loans and then recycling the capital to help other women. Yunus brought inspiration, creativity, direct action, courage, and fortitude to his venture, proved its viability, and over a period of two decades, spawned a global network of other organizations that replicated or adapted his model in other countries and cultures, firmly establishing microcredit as a worldwide industry.

Social entrepreneurs like Muhammad Yunus act as change agents for society, seizing opportunities that others miss and try to improve the systems by inventing new approaches and creating solutions to change society for the better.

While a business entrepreneur might create entirely new industries, a social entrepreneur comes up with new solutions to social problems and then implements them on a large scale:

It indicates the group or person’s efforts
It aims at creating social value, either exclusively or at least in some prominent way;
It shows a capacity to recognise and take advantage of opportunities to create that value (“envision”);
It employs ‘innovation, ranging from outright invention to adapting someone else’s novelty, in creating and/or distributing social value;
It is willing to accept an above-average degree of risk in creating and disseminating social value; and
It is unusually resourceful in being relatively undaunted by scarce-assets in pursuing their social venture.

Features Social Entrepreneurs

Social entrepreneurs are path-breakers with powerful ideas that help in creating social value for the less privileged. They are entrepreneurial, innovative, and creative individuals, who spot opportunities, form alliances, manage people. and resources—ail in order to bring about social change. They engage in a process of continuous innovation, adaptation and learning.

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They recognize and relentlessly pursue opportunities to achieve what they want to in order to serve the disadvantaged sections of the society. They are the people who come out with innovative solutions to society’s most pressing problems. Social entrepreneurs are society’s change agents, creators of innovations that disrupt the status quo and transform the society completely.

The defining features of social entrepreneurs may be listed thus:

1. Bring about Radical Social Change:

To put it bluntly, social entrepreneurs are unreasonable people. They are the mavericks who refuse to accept the status quo. They look at the world; are dissatisfied with what they see and resolve to change it. They are both dreamers as well as doers. They are aware of the challenges that come in the way of converting their dreams into concrete reality. They are prepared to take these risks and undertake the painful journey in order to improve the living standards of society.

2. Create Social Value:

Social entrepreneurs do not seek to create wealth for themselves. They are driven by a passionate desire to create social value (remember, not monetary value). Like most business entrepreneurs, social entrepreneurs are also intensely focused and hard driving in their pursuit of a social vision.

In order to realize their dreams, social entrepreneurs do everything possible—pooling resources, rally people behind a purpose and deliver results. Social entrepreneurs are driven to produce measurable returns. These results transform existing realities, open up new pathways for the marginalized and disadvantaged, and unlock the society’s potential to effect social change.

3. Offer Valuable Solutions:

A social entrepreneur identifies and solves large-scale social problems. Just as commercial entrepreneurs change the face of business, social entrepreneurs act as the change agents for society, seizing opportunities others miss in order to improve systems, invent new approaches, and create sustainable solutions that are valuable to society.

4. Long-Distance Runners:

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And unlike traditional non-profit volunteers, the work of the social entrepreneur is targeted not towards immediate, small-scale effects, but sweeping, long-term change. Identifying, and solving large-scale social problems is the job of a social entrepreneur.

5. Architects of Social Change:

If business entrepreneurs are the catalysts and innovators behind economic progress, then social entrepreneurs are the catalysts and innovators behind social progress. As has been rightly pointed by Bill Drayton, ‘Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.’

Profit-oriented entrepreneurs identify the market gaps and exploit them for some personal financial gain. The intent is to earn adequate returns on the investment so that the venture remains healthy. Social entrepreneurs, on the other hand, are imbued with high ideals and work for a mission that seeks to improve the living standards of society. They do not, of course, shun profit making but that is not their key motto.

Their primary focus is on improving the lot of neglected or highly disadvantaged sections of society. They generally see a segment of humanity suffering due to certain gaps in the system. The social enterprise is set up with the primary intent to correct the unjust equilibrium ensuring a better future for the targeted group and even the society at large.

Characteristics of Social Entrepreneurship

The language of social entrepreneurship may be new, but the phenomenon is not. We have always had social entrepreneurs, even if we did not call them that. They originally built many of the institutions we now take for granted. However, the new name is important in that it implies a blurring of sector boundaries.

In addition to innovative not-for-profit ventures, social entrepreneurship can include social purpose business ventures, such as for-profit community development banks, and hybrid organizations mixing not-for-profit and for-profit elements, such as homeless shelters that start businesses to train and employ their residents. The new language helps to broaden the playing field.

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Social entrepreneurs look for the most effective methods of serving their social missions:

1. Creativity:

It is a must for social entrepreneurship as new ideas have to be explored by such companies in order to make an impact as a socially aware organization. Creativity has two parts: goal-setting and problem-solving. Social entrepreneurs are creative enough to have a vision of what they want to happen and how to make that vision.

Entrepreneurial quality builds from creativity. Not only do entrepreneurs have an idea that they must implemented, they know how to implement it and are realistic in the vision of implementing it

To cite a recent example of TATA – The latest advertisement talks about the increasing crime rate and the complacency of the society, therefore they have made a very impactful advertisement by using the slogan ALARM TO BAJNE DO”

2. Entrepreneurial Quality:

It will be important for the entrepreneur to identify the required qualities and one special quality that separates them from normal entrepreneurs is “concern for the issues of the society and willingness to address them”. Entrepreneurs have in their heads the vision of how society will be different when their idea is at work, and they can’t stop until that idea is not only at work in one place, but is at work across the whole society

3. Social Impacts of the Idea, and Ethical Fibre:

These social entrepreneurs seek profit in social output where others would not expect profit. They also ignore evidence suggesting that their enterprises will fail and attempt to measure results which no one is equipped to measure. They are just concerned with the impact that their endeavour will make on the society and see the ethical standards are upheld. Social impact measures whether the idea itself will be able to cause change after the original founder is gone. If an idea has intrinsic worth, once implemented it will cause change even without the charismatic leadership of the first entrepreneur. Ethical fibre is important because leaders who are about to change the world must be trustworthy.

Components of Social Entrepreneurship

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(i) Identifying a stable but inherently unjust equilibrium that causes the exclusion, marginalisation, or suffering of a segment of humanity that lacks the financial means or political clout to achieve any transformative benefit on its own;

(ii) Identifying an opportunity in an unjust equilibrium, developing a social value proposition, and bringing to bear inspiration, creativity, direct action, courage and fortitude, thereby challenging the stable state’s hegemony; and

(iii) Forging a new, stable equilibrium that releases trapped potential or alleviates the suffering of the targeted group, and through imitation and the creation of a stable ecosystem around the new equilibrium ensures a better future for the targeted group and even society at large.

According to Perrini & Vurro (2006) social entrepreneurship is a dynamic process created and managed by an individual or team (the innovative social entrepreneur), which strives to exploit social innovation with an entrepreneurial mindset and a strong need for achievement, in order to create new social value in the market and community at large.

Skoll Foundation has also stated that the social entrepreneur aims for value in the form of transformational change that will benefit disadvantaged communities and ultimately society at large. Social entrepreneurs pioneer innovative and systematic approaches for meeting the needs of the marginalised, the disadvantaged and the disenfranchised populations that lack the financial means or political clout to achieve lasting benefit on their own.

Types of Social Entrepreneurship

1. Leveraged Non-Profit:

This business model leverages financial and other resources in an innovative way to respond to social needs.

2. Hybrid Non-Profit:

This organizational structure can take a variety of forms, but is distinctive because the hybrid non-profit is willing to use profit from some activities to sustain its other operations which have a social or community purpose. Hybrid non-profits are often created to deal with government failures or market failures, as they generate revenue to sustain the operation without requiring loans, grants, and other forms of traditional funding.

3. Social Business Venture:

These models are set up as businesses that are designed to create change through social means. Social business ventures evolved through a lack of funding. Social entrepreneurs in this situation were forced to become for-profit ventures, because loans and equity financing are hard to get for social businesses.

4. Philanthropreneurship:

There are also a broader range of hybrid profit models, where a conventional business invests some portion of its profits on socially, culturally or environmentally beneficial activities. The term “Philanthropreneurship” has been applied to this type of activity.

5. Corporate Social Entrepreneurship:

Corporate employees can also engage in social entrepreneurship, which may or may not be officially sanctioned by the company. This has been described as “corporate social entrepreneurship” or “Commercial Philanthropy” where commercial businesses are held and operated with all net proceeds going to serve social service needs.

Challenges of Social Entrepreneurship

Social enterprises are not charitable institutions. They are not set up to eat away funds from banks or burn the idle cash of the super-rich class fascinated by noble ideals. In a country like India, establishing a social enterprise and running it on a self-sustaining basis is not easy—as the above examples indicate. For a venture to take shape and stand on its own legs, the social entrepreneurs need to focus attention on certain key areas. Of course, the risks and challenges in social enterprises cannot be put to rest completely.

Challenges confronting a social entrepreneurship:

Underdeveloped investment climate.
Lack of support from government agencies.
Public apathy and disinterest in social enterprises.
Inability to attract qualified and talented employees.
Bureaucratic procedures and hurdles that stifle innovative solutions.
Policy and regulatory challenges.

Most social enterprises collapse under their own weight for fairly obvious reasons— lack of funding support from government as well as non-government agencies. Banks and financial institutions do not seem to get excited by social ventures—however attractive they might look on paper. The support from venture capital funds and angel investors, especially in the initial stages, is minimal—to say the least. Under the circumstances, social entrepreneurs have to burn their own cash, keep the venture in good shape and run the show on a self-sustaining basis.

Unless the idea is fantastic and the opportunity is really big, it is not possible to scale up operations and run the show in a financially sound manner. It is, therefore, not wholly surprising to find many social ventures falling by the wayside—even though the idea is an exciting one. Unless banks and other financial institutions lend support, social ventures cannot survive and flourish in an environment of complete neglect, apathy and negativism.

Another key challenge in running a social enterprise in India is the ability to attract and retain talent. Social entrepreneurs, by nature, are not well equipped to offer juicy carrots to prospective employees. Right at the beginning, they have to literally spend hours and hours convincing the staff about how the passionate dream of one man can be turned into a concrete reality.

Most employees who join—simply because they had no other options left—in a hurry would leave the venture midway, the moment they are able to get a more lucrative offer. Without qualified hands, running a social venture on a self-sustaining basis looks like a wild goose chase.

Finally, social enterprises in India often face policy and regulatory challenges. For example, there are no specific legal frameworks for social enterprise, so businesses either designate themselves as small and medium enterprises or as non-profit organizations—though their income statements cannot be classified into such categories. Adding salt to injury, you have a lot of bureaucratic hurdles to cross till the social idea develops into a concrete social venture. Most social entrepreneurs have to operate in a corrupt environment where, to get things done, they need to pay from their pocket.

Taken together, the funding problems, talent management issues and policy- related hurdles would break the back of even the boldest of social entrepreneurs in India. Unless you have ‘muscles of iron and nerves of steel’, social entrepreneurs will not be able to get ahead and keep the fires burning in a country like India.