Understanding Social Entrepreneurship

In 2017, I applied for an internship at a small startup called Piconergy which had a clear mission-to facilitate access to clean, affordable, and reliable energy solutions for the financially poor. To secure the internship I had to take a test which included reading a paper about Social Entrepreneurship (SE) and discussing my thoughts about it. This was the first time I was introduced to the concept of social entrepreneurship and these are my thoughts about it..

In September 1970, while students in America were protesting the Vietnam war, a highly influential man, considered a forward thinker, expressed the following remark in an article in The New York Times Magazine,”There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game,..”.While these words might sound very harsh, they come from Milton Friedman, a Nobel prize laureate who is regarded as one of the most influential architects of neoliberal economic and business field. Embracing his ideas, that is: concentrating on increasing profits and shareholder value, many companies started following this path and have it as dominant business practice even today.Here’s what ensued:

Since 1997, the population of publicly listed companies has declined by 38% in the U.S. and 48% in Britain and the life expectancy of these businesses has declined from an average of 69 years to 15 years today. (src: Innosight)

While businesses that embrace Friedman’s ideology still emerge, do they really succeed? After reading Dees’s paper, I wondered whether the top multinationals today have achieving profit from their technology as their ideal or do they have higher purpose.

The paper that I’ve tried to analyze was presented by J. Gregory Dees in 1998 attempts to define Social Entrepreneurship, which was a fairly new business practice at the time, albeit the phenomenon wasn’t. In the Nonprofit sector, this concept has been rapidly emerging. Defining what social entrepreneurship is, and what its conceptual boundaries are, is not an easy task. This is in part because the concept is inherently complex, and in part because the literature in the area is new. The piece tries to answer various questions and how continuous innovation, adaptation, and learning and most importantly the social impact sets SE apart from profit oriented businesses and also what makes a business entrepreneurial.

I came across four names: Say, Schumpeter, Drucker and Stevenson that the writer cites to come up with a wholesome definition. Evidently, the concept is more complex but what it means to me is:

In places where governmental and philanthropic efforts fall short, enterprises that step up to create social improvements using resources in a creative, ingenious way to set in motion sustainable change while possibly profiting from it. The reason why government programs fail, I think, is most programs have clearly defined outcomes. They are designed for the villagers and not with them. Experimenting and exploring is what lacks. Another major characteristic of SE I think, is creativity. Creativity, in this context, includes acting on opportunities and not being limited by resources. Asking the right questions, phrasing the questions properly is what Elon Musk believes are the best creative skills.

I came across a documentary on India’s Mega Kitchens: Lijjat Papad, by serendipity. The brain child of 7 Gujarati women, Lijjat Papad today employs over 43000 women and have gone from selling it at a local grocery to exporting out to 28 countries.After getting back to the article, I wondered if Lijjat can be classified as a SErise. Lijjat had started a huge movement that has changed so many lives.I mean, they could’ve just bought machinery and produce the papads at a faster rate and made more profits but they had a mission and created sustainable social value.

I think the principles of SE are not limited to a particular sector. So, what if we have it all wrong? What if the success of Apple, Google, Tesla is not due to their technology, their innovations or even their founders/CEOs? Maybe the root of their success is an inspiring purpose to have a social impact. You can say we are in the early stages of a shift towards a purpose driven economy. I found a 2016 Deloitte study which revealed that 83% millennials make decisions about companies based on their positive impact, 77% based on the company’s purpose and 47% believe that part of purpose of a company is to improve society and protect the environment. Young generations are avoiding businesses that are harming the environment and people. My understanding of SE has only started to take shape but I do think, in the near future all business will require to have a social sustainability approach towards innovating products and services.

The development of the SE marks and serves for the advancement of society. Appropriate operation is the foundation for a SE to keep a balance between its economic profits and social values, as well as finally accomplish its social mission. To be able to understand the unique and complex environmental conditions that one faces in developing countries and the underlying factors that ensure sustainable creation of social capital for the economy is the essence of SE.

However, I think it’s important to keep in mind as one tries to make the world better and make money out of it, that it can be stressful, more in this case because you believe in it more. Hence, being a social entrepreneur is not for everyone because your personal passion should coincide with the job you do to achieve best results. Social Entrepreneurship is not for the faint of heart. You’ll need all the skill of a run-of-the-mill entrepreneur, but you’ll have the added difficulty of ensuring that your profit helps your customers and the community at large, which will require dedication and smarts that far outstrip any average businessperson.

Sources: https://phys.org/news/2017-05-electricity-poor-rural-india-reaping.html

https://www.bloomberg.com/news/features/2017-01-24/living-in-the-dark-240-million-indians-have-no-electricity

The Deloitte Millennial Survey 2016
Sustainable Entrepreneurial Models: Understanding the Entrepreneurial Conundrum by Shivani Anand(2011 International Conference on E-business)

Business Model Innovation of Social Entrepreneurship Firm: A Case Study of TerraCycle LI Yi School of Management, Zhejiang University, Hangzhou 310058, P.R.China

Perpetually curious.