Gregg Fairbrothers and Catalina GorlaGregg Fairbrothers and Catalina Gorla, Contributor 

 What Exactly Is Social Entrepreneurship?

We’re talking about success and social value. Today many people lump this in a special category: social entrepreneurship. We’re not sure exactly what that is, so we’re interested in learning more. As it turns out, so were two Tuck class of 2013 students, Christopher Halstedt and Brad Callow. This past spring they did an independent study with Senior Associate Dean Bob Hansen and Gregg on exactly this topic. They set out to see if they could understand what exactly is social entrepreneurship and how it creates social value. Here are some excerpts from what they found:
* * * * * *

We began this independent study with the mindset that we would target social entrepreneurs with for-profit practices (so-called Social Entrepreneurs). In exercise, this was much more difficult to achieve, as a lot of what nonprofits aim to accomplish comes solely from philanthropic influences. Of course we believe that successful nonprofits should think like for-profits and strategically position themselves for growth and scale; however, this mindset comes few and far between.

From our readings and anecdotal discussions, there were three key criteria we believe were essential. Though they were relatively simple, their respective impact on each nonprofit was and will continue to be significant:
• Is the idea worthwhile?
• Is it a good idea for the goal?
• Is there good execution and is it sustainable?

One learning experience from this independent study really revolved around the difficulty of measuring success in a nonprofit setting. We saw it time and time again, and the answer isn’t as simple as profitability, as each nonprofit has its own metrics for measurement of what makes for worthwhile outcomes. It was interesting to see that some nonprofits take a proactive approach in defining these measurements, while others had a tough time answering the basic question, what is your impact?

A clear plan for execution is an essential component of success. One nonprofit we interviewed lacked a simple business plan. They believed that if they had the social mission and supporters to fund that mission, then there was no need to strategically create a plan for the future. We found that those with business plans think strategically, and this is an imperative step to creating best-practices in a nonprofit setting. And of course, execution of the plan has to happen.

To really say there is success, we found it’s necessary to know if the idea can be sustainable. Will this nonprofit be in existence in 10, 20, 30 years? What about this idea makes it sustainable? Frankly in the end it really boiled down to whether the idea was being executed. Finally, we asked about social scalability. This became an important discussion point in our conversations: can this idea be implemented throughout the U.S., throughout the world? Has management considered such an idea and are they willing to expand, grow, or share this with other like-minded social entrepreneurs / philanthropists? Actually, they’re great questions to continue to ask in both the nonprofit and for-profit world.

There is a final lesson we learned in our work: keep it simple stupid! Overcomplicating an issue doesn’t do any good. Keep the strategy and metrics for success simple, and you can make better, sound decisions.

* * * * * *
Gregory J. Dees, teaches Social Entrepreneurship and Nonprofit Management at the Fuqua School ofBusiness at Duke. He has this take on effectiveness of the social entrepreneur:

Any definition of social entrepreneurship should reflect the need for a substitute for the market discipline that works for business entrepreneurs. Social entrepreneurs 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 a heightened sense of accountability to the constituencies served and for the outcomes created.

Sound familiar? It’s essentially the same definition as our for-profit entrepreneur. This shouldn’t be surprising. Execution in pursuit of value creation should look the same no matter what the form. So what’s different? For social enterprises that have the twin goals of social outcomes and earning free cash flow from revenue, mission-related impact is the central criterion, but wealth creation isn’t ignored. “On the surface, many social enterprises look, feel, and even operate like traditional businesses. But looking me deeply, one discovers the defining characteristics of the social enterprise: mission is at the centre of business, with income generation playing an important supporting role.”

The concept of social entrepreneurship is centered not just on mission, but on entrepreneurship, making a social benefit-focused organization become more like a business. The idea is that nonprofits can benefit from the focus of for-profit businesses – customer focus, sound strategy, effective planning, efficient operations, financial discipline. Hopefully the social entrepreneur focuses as intently on excellence in all of these as any back-to-the-wall for-profit entrepreneur. For them, as perhaps it should be for all of us, success is social value.


Post Your Comment

You are logged in as Ann-Marie Bland (Log out)
Ann-Marie Bland

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You’ll be notified if your comment is called out.

  • PRADIPPRADIP 1 year ago

    It is a wrong notion that profit is bad, actually it is not. It is most important as to how this profit is used for further development of social infrastructure like education, healthcare & upliftment of the poor. Basically, these words about social entrepreneurship have arisen due to the failure of Governments all over the world to regulate & govern effectively. Due to the advent of Internet, common people are able to speak out on issues and this development is going against the interest of the political parties who have a hegemony over the working of the Governments. Now this public opinion can be mobilized on day-to-day basis on all important issues and thereby effectively usher in proper democracy and do away with all corruptions related to public life. Would request everyone to visit to understand the future implications of networking through Internet in our own interest and improve the lives of people

    • Called-out comment

  • Jeff MowattJeff Mowatt 1 year ago

    I offer a definition from 2006 strategy paper, described as a ‘Marshall Plan for Ukraine:

    “Enterprise is any organizational activity aimed at a specific output or outcome. Once the output or outcome – the primary objective – is clear, an organization operating to fulfill the objective is by definition an enterprise. Business is the most prominent example of enterprise. A business plan, or organizational map, provides a reference regarding how an organizational scheme will operate to produce a specific outcome: provision of products or services in a way to create profit. Profit in turn is measured numerically in terms of monetary gains, the “bottom line.”

    This is the function of classic capitalism, which has proven to be the most powerful economic engine ever devised.

    An inherent assumption about capitalism is that profit is defined only in terms of monetary gain. This assumption is virtually unquestioned in most of the world. However, it is not a valid assumption. Business enterprise, capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question. It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with.

    That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples – the target objectives of this particular project plan. The same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise. “

    • Called-out comment

  • Jeff MowattJeff Mowatt 1 year ago

    From the same source, an article asking ‘What is Social Enterprise’ after Bill Gates spoke of ‘Creative Capitalism’

    “The corporations involved in this almost fantastical deployment of the machines and communications infrastructure that we now rely on profited for themselves and their shareholders, and certainly produced social and economic benefit around the world. Those efforts were and are so profound in influence as to transform human civilization itself. That is the Information Revolution, and it is nothing short of astonishing.

    So it is safe to say that all these players in the Information Revolution — the enterprises that created it — have engendered almost immeasurable social benefit by way of connecting people of the world together and giving us opportunity to communicate with each other, begin to understand each other, and if we want, try to help each other.

    It is that last phrase — “try to help each other” — which is what the phrase “social enterprise” is getting at. As Bill Gates said in 2000, “poor people don’t need computers.” and rejected a business approach to alleviating poverty. That statement served to mark the clear distinction between what traditional capitalism did and did not do. Gates’ aim at that time was to profit from people who could afford his company’s products, while those who couldn’t were largely or completely ignored. That has been the accepted limit of traditional capitalism. It has been a marvelous means of social benefit and economic advancement for many people. Nevertheless, those excluded are just left out.

    The term “social enterprise” in the various but similar forms in which it is being used today — 2008 — refers to enterprises created specifically to help those people that traditional capitalism and for profit enterprise don’t address for the simple reason that poor or insufficiently affluent people haven’t enough money to be of concern or interest. Put another way, social enterprise aims specifically to help and assist people who fall through the cracks. Allowing that some people do not matter, as things are turning out, allows that other people do not matter and those cracks are widening to swallow up more and more people. Social enterprise is the first concerted effort in the Information Age to at least attempt to rectify that problem, if only because letting it get worse and worse threatens more and more of us. Growing numbers of people are coming to understand that “them” might equal “me.” Call it compassion, or call it enlightened and increasingly impassioned self-interest. Either way, we are all in this together, and we will each have to decide for ourselves what it means to ignore someone to death, or not.”

    As one of 50 million Americans without health insurance, being ignored to death was the fate of the author.

    • Called-out comment

  • Robert PriceRobert Price 1 year ago

    As the Executive Director and co-founder of the Global Entrepreneurship Institute, a non-profit that was founded in 1998, I hope I can address your interesting post. Let me first say that few words are as abused in the lexicon of the business world, as ill-defined in the management literature, and as open to multiple meanings as entrepreneurship. The concept of entrepreneurship has been in our modern society for thousands of years and in the history of economic study the word has been overused, and in some cases underused. Social and nonprofit entrepreneurs who pursue endeavors for the benefit of society have existed since ancient times. In fact, the word philanthropy is derived from a Greek word that means “lover of mankind.” Today it is believed that entrepreneurism and innovation can also help “spark positive social change.” A “social entrepreneur” is doing the entrepreneurship-thing but only in a non-stock, non-profit entrepreneurial activity. Legally, there can’t be any financial upside like a “harvest” “exit” or “IPO event” that financially enriches anyone, because there is no stock that increases in value. I hope this helps.

    • Called-out comment

  • What’s interesting to me is the overarching paradigm in this article is that the realm of social entrepreneurship is simply non-profits that are trying to be entrepreneurial. The scope of social entrepreneurship is a lot more broad than simply non-profits (social) that are learning to be enterprising (entrepreneur).

    We may think that social entrepreneurship is a new, and not well defined term in modern language but the roots and etymology of being an entrepreneur go back to the french meaning of ‘entendre’ – to undertake, and even sanskrit ‘to be self-motivated’. Therefore, an entrepreneur is one who undertakes something as a self-motivated individual. There is nothing in the roots of the definition that indicate that success as an entrepreneur requires financial return, or monetary value.

    The concept of business itself is also something rooted historically in the trades – I give value to you in exchange for value in return. It’s only in the last 100 years that modern society has associated this value with financial exchange, and entrepreneurs as those that undertake a for-profit maximizing business venture.

    I feel we have a current need to add social to the front of entrepreneur as a way to offset the modern day definition of entrepreneur which is tied strictly to a for-profit venture and allow it to connect with it’s original roots of adding value to society by being self-motivated and undertaking some kind of challenge, in this case a social challenge. What about the individual who decides to bakes cookies and visits their isolated seniors – is he/she not a social entrepreneur – undertaking something through self-motivation that trades values between parties involved? One could argue that all self-motivated individuals that attempt to undertake something or start an initiative that addresses some kind of social challenge are themselves social entrepreneurs. Joseph Bazelgette was a civil engineer who spent his career trying to fight the cholera epidemic in mid-1800 London. He saw a challenge, and was self-motivated enough to go out of his way despite a lot of cynicism and criticism to build 1,800 km of underground brick sewer systems, some of which are still in operation today. There was no financial return for his initiative, but I would say he was highly successful and added significant value not only to people in London, but as an example of sewer construction for the rest of Europe.

    The closing statement in the article indicates a hope for the social entrepreneur to be as focused on excellence as the back-to-the-wall for-profit entrepreneur, as if that wasn’t currently the case. As an executive director of a non-profit myself, and someone exploring opportunities to be enterprising and make money doing what we do best, i find this statement a little insulting. The reason I’m doing this is not about me becoming a social entrepreneur, but actually more about trying to find a sustainable and diversified funding source to continue to add value to the communities with which we work. To me this is to adapt to the changing funding landscape, and a shift from donors who are interested in ‘investing’ vs. ‘donating’. It just makes good ‘business’ sense, in our modern capitalistic society. It also indicates a much overdue course correction of seeing the ‘value’ reflected in monetary return of addressing social challenges.

    That said, I would love if the conversation about social entrepreneurship was to encourage excellence and success of those individuals who in small and large ways are self-motivated not by a desire for financial return, but simply by the nature of the global challenges society faces today, that of poverty, environmental crisis, depression, illness, etc, and are undertaking to do something about it. We are at a time and place in the history of our collective human story that requires Bazelgette type excellence, and success in many aspects of our civilization. Let’s not confuse the need or opportunity for social entrepreneurs to help address these challenges by focusing the social entrepreneurship dialogue solely on enterprising non-profits.

    • Called-out comment

  • Jeff MowattJeff Mowatt 1 year ago

    Lindsay, The term social entrepreneurship seems to be used widely in the US to describe the kind of foundation sponsored initiatives pioneered by Ashoka.

    We launched a social enterprise as a self-sustaining business in London 8 years ago and what I’ve written above comes from our work overseas tackling issue of poverty and corruption.

    It began with a paper suggesting an alternative to capitalism.

    I came across one of the early conversation on “profit for a purpose” recently which may be of interest.

    • Called-out comment

  • + expand comment
    • Social Entrepreneurship means different things around the world. With this survey we want to show these differences but it doesn’t stop there. Performance in social entrepreneurship is also a difficult nut to knack, with this survey we believe we have some way to figure that out, thats why we are trying to collect some results regarding this. The last thing is groups. How do that affect performance? We are trying to figure that out too. The results will be available for everyone, but we need the world to respond! Are you a part of the world? Have your voice heard in this matter!

  • Very interesting post. I think it is important for the scholars in the social entrepreneurship field to agree on a definition and set boundaries for further research. My criteria for social entrepreneur is similar to but more “dumbed down” than yours …
    – helping the disadvantaged
    – pursuing an opportunity
    – and using for-profit techniques/resources

    Thanks for a great read. Stay social!

    Michael Brett Walker

    • Called-out comment