Wednesday, April 19, 2006

Social entrepreneur 2.0

Despite efforts to spread an innovation-based definition, far too many people still think of social entrepreneurship in terms of nonprofits generating earned income. Too bad. This shifts attention away from the ultimate goal of any self-respecting social entrepreneur, namely social impact and focuses it on one particular method of generating resources.

This view is too narrow and sorta misses the mark.

Entrepreneurship turned eBay founder Pierre Omidyar into one of the world's richest men. Now, he's betting it can ease one of the world's most daunting problems: poverty. Omidyar, who started eBay 10 years ago, has announce that he is donating $100 million for a new Tufts University program to generate millions of tiny loans, some as small as $40, to finance entrepreneurs trying to escape poverty in India, Bangladesh and other poor countries.

This type of social entrepreneurship began about 30 years ago in rural Bangladesh when economics professor Muhammad Yunus launched what is now Grameen Bank. It has 3.7 million borrowers, virtually all women, relying on the bank's nearly 1,300 branches covering 46,000 villages. Repayment rates are 95% to 98%.

But now the focus has shifted from social impact - a hard indicator to measure - to earned income.

This is only a means to a social end and it is not always the best means. It can even be detrimental - taking valuable talent and energy away from activities more central to delivering on an organization's social mission.

Though it is very popular right now, it is just one funding strategy among many and must be assessed on a case-by-case basis. The key is finding a resource strategy that works.

Focusing on earned income leads people to embrace the problematic idea of a 'double bottom line.' Profits should not be treated with equal importance to social results. No amount of profit makes up for failure on the social impact side of the equation.

Any social entrepreneur who generates profits, but then fails to convert them into meaningful social impact in a cost effective way has wasted valuable resources. From a management point of view, the financial 'bottom line' is certainly important, but it is not on the same level as social impact.

Social entrepreneurs have only one ultimate bottom line by which to measure their success. It is their intended social impact, whether that is building houses for the homeless or expanding ICT programs to reduce the digital divide.

The biggest problem facing micro - entrepreneurs in developing countries is the inability to access the larger public market and its market information. They do not have efficient channels to reach customers.

This creates a significant barrier for the working poor to rise from poverty. This is exactly where the digital divide sits. Often owned by national telekoms, ICT expansion using the national backbone at the local level is limited at best - expensive and segregated at worse.

Indeed, recent discussions, including those within the context of the WSIS, have reiterated the need to sustain and strengthen substantive dialogue in a global, multi-stakeholder, open, inclusive and transparent manner. the national monopolies must listen or loose their markets to the new social technologies like Skype and Jajah.

The window of opportunity is closing ... not fast, not just around the corner but fast enough that action is now needed.

Any form of social entrepreneurship that is worth promoting broadly must be about establishing new and better ways to improve the world. Social entrepreneurs implement innovative programs, organizational structures or resource strategies that increase their chances of achieving deep, broad, lasting and cost-effective social impact.

This resource-shifting function is essential to progress.

As Peter Drucker has said, 'What we need is an entrepreneurial society in which innovation and entrepreneurship are normal, steady and continuous.' Now - who's volunteering?

2 Comments:

Anonymous Nick Temple said...

Interesting post, David. Here at the School for Social Entrepreneurs in the UK, we are grappling with a few of those issues. The debate here (or social enterprise sector) has become very much about structural models or proportions of earned income. But, as you say, just because social impact is difficult to measure doesn't mean it shouldn't be the most important of the various bottom lines.

Or that we should try to measure it as best we can. As the New Economics Foundation (with whom we're conducting an evaluation) put it, "it's better to be vaguely right, than precisely wrong".

11:35 AM, April 20, 2006  
Blogger dannie said...

Do like the comment above, however what I have in mind is a bit different, and I may have written it before on these comments on some more recent post.
It seems to me that you are seeing the big patterns correctly, however I do not see anybody with the right angle on what the problem in development is, or any body who has identified the nature of the challenge, provided that we agree that there is a challenge. It certainly is not technology, not social anything and much less enterpreneurial whatever, and certainly not innovation mumble, that much I do know.
There is something on my mind about local and global, and coherence lengths, correlation depths and other jargon. I am even wondering if the problem is really as complex as we -intellectuals- would like to think it is. (But then I do not consider myself an intellectual, and have thus produced a self-contradictory statement.)

The questions that this here raises are however fascinating and that is why I like reading what you write, you do open up a lot of questioning ground, and I do think that having the right questions is much more important than the right answer, whatever the chimera of the right answer may harbour.

Is there a challenge?
Is this a challenge that anybody has an interest in tackling?
Who would want to tackle it? Why?

What have we learned from history about human behaviour?
Are humans really capable of learning across cultures and epochs?
What is it that influences our collective behaviour?
What is it that creates change in collective behaviour?
Are humans really capable of evolving?
How would you recognize evolution if you experienced it?

(there are a lot more questions... )

10:36 PM, March 20, 2007  

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