Social Enterprise

Beyond Sexy

Let’s start telling social entrepreneurial aspirants the truth and get those who support the field financially to acknowledge that staying power and relationship-building are ineluctable partners to innovation. Part two of a series.

Jeremy Hockenstein appears to embody one of those feel good stories we see a lot of these days: MBA becomes McKinsey consultant; looks for more meaningful work; founds a social enterprise, Digital Divide Data, which starts off training Cambodians in tech and workplace skills in the context of an outsourcing business that pays the bills; wins a $1 million award from Skoll Foundation; becomes a perennial invitee at Skoll World Forum. “You too can be Jeremy Hockenstein” is the subliminal message where the social entrepreneur tribe gathers, pulsing through conferences in Oxford, San Francisco, New York, Berlin, and Rio; at hackathons and start-up weekends; and, of course, in the co-work hubs springing up like toadstools in rainmaker forests.

Here are a couple more data points about Jeremy. He’s been at it for 12 years. He’s not endured privation, but he’s not living a McKinsey consultant life either. Today, Digital Divide Data has expanded its operations from Cambodia to Laos and Kenya. It employs 1,000 people in those countries. The Skoll money is long (and well) spent. The social enterprise is succeeding, but it’s a long haul; Jeremy spends a lot of time flying coach class between Phnom Penh, Vientiane, Nairobi, and New York, where he has two small kids. It’s a grind, and it shows no signs of being anything but.


Jeremy Hockenstein reflects on a decade in trenches at Digital Divide Data’s 10th anniversary celebration. (Photo courtesy of Digital Divide Data)

I’ve known Jeremy for 7 of those 12 years. If there’s a word for him, it is “centered.” He doesn’t get flustered; he is passionate and witty, but level. He seems like he really, really likes what he does—enough to fly those trips for twelve years and counting.

He’s critical, in his level way, about what some increasingly see as a social enterprise echo chamber that encourages a short-term, quick-fix mentality toward working with the poor and addressing the causes of poverty. He told me:

I do think the focus on scale and speed can often be unhelpful. Of course, it is good to push everyone to think about the sustainability and potential scope of innovations, but there is often a focus on finding new solutions, rather than continuing to grow existing ones. So there’s an incentive to start something new; you have a much better chance of being recognized. There’s a bias toward innovations that help lots of people to a small degree, rather than innovations that have a deep impact on a smaller population.

Mathias Craig, who I mentioned in my last post, started the much-lauded blueEnergy social enterprise to address clean water and sustainability issues in Central America. He was even more pointed in his analysis:

What alarms me is the trend that everything has to be new, fast, financially profitable in the transaction with the end user, and perpetually sustainable.

There's a limit to what is productive in terms of revenue-generating business models for different situations. I see that we face a myriad of very different challenges in society, and we have a spectrum of models and solutions—a toolkit if you will—where we have to be smart about which tool to apply in which situation. Alas, a lot of it is not sexy.

So much of creating real, meaningful, lasting impact is just the grind, the determination, the follow-through …

What Mathias says strikes me as just common sense. The internet has transformed social interactions and speeded up a lot of transactions, but it hasn’t yet speeded up deep changes in consciousness and cultural practice. Or maybe it has speeded up those deep changes so that they will happen in mere decades and not epochs (or never). I’m bullish about the changes that technological enablement can facilitate, but it’s just wishful thinking to expect that the pace of change will accommodate itself to career hops and resume-building. Social change is still a marathon, and you need to be running for the right reasons. Going back to Mathias:

The fact is, those of us [who] have dedicated significant time to this sector get something very enriching out of it. Not money, but a deep sense of purpose and connection. If you feel you are sacrificing to work in this sector, then you probably shouldn’t be here.

For Mathias, unrealistic expectations end up:

… doing a huge disservice to young people entering the social entrepreneurship space; funders looking for effective ways to spend their money; and, ultimately, the poor we purport to serve, who end up being experimented on ad nauseam by ill-conceived interventions without the staying power to deliver results.

Lack of local contextual understanding, poor choice of technology, lack of training, lack of follow up, etc., leads most efforts to fail. There is a loud chorus for the social sector to study best practices more, to collaborate more, to share more. But when you look at the incentive structures in the funding process, you see they are totally out of line with this.

They are indeed. Innovations that promise quick, measurable impact and sustainability within a few years can find investment or philanthropic funding. But how about the dry work of capacity-building? Of collaboration? As Jeremy put it, “There aren't a lot of awards for having expanded someone else's innovation.”

This can change! We can start telling social entrepreneurial aspirants the truth about the career upon which they are embarking. And those who support the field financially can acknowledge that staying power and relationship-building are ineluctable partners to innovation.

Here’s to the day when there is an award for expanding someone else’s innovation and other ones for building something deeply meaningful over a long time.

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  • BY Michael Saunders

    ON June 21, 2013 02:50 PM

    Hi Daniel,

    As always, tremendous insights.  What I find most interesting is that the discussions in this area, to the degree that these things are discussed, have not progressed significantly over the last decade. 

    The fascination with the shiny new object still pervades human nature.

  • BY Matthew Chanoff

    ON June 21, 2013 04:13 PM


    Thanks for these posts.  Your skepticism toward self-styled innovative, social enterprise startups is a valuable complement to the skepticism that people like Dambisa Moyo and Bill Easterly bring to more traditional large-scale development aid, and that David Roodman brings to micro-lending.

    All this criticism, though, leaves a big problem:  If the traditional stuff spends billions of dollars in vain, and the new social enterprise stuff is both high risk - and therefore often fails - and possibly immoral, performing useless experiments on the poor - then what, if anything, should people who care about these issues do?

    You highlight three main issues:  #1 people getting into the field often have unrealistic expectations about making large, significant changes rapidly, #2 The economic and reward structure around development incents people to start new things rather than putting their energies into existing solutions that work, and #3 funders and social entrepreneurs both have unrealistic expectations about creating economically self-sustaining models.  Let me offer a couple comments on each:

    Re #1:  There’s a Silicon Valley ethos that marries expectations about getting rich quick with a certain lifestyle.  It’s not surprising to see a version of this that combines “do good quick” with the social entrepreneur lifestyle.  Maybe the difference that people are missing is that there’s no IPO or acquisition market for social enterprises.  Even when they’re truly sustainable, or truly scalable, they still have more in common with lifestyle businesses than with tech startups, because even if you have a winner, you can’t sell it and move on.  This is a useful warning, but maybe the people who don’t heed it, who get disillusioned and quit their social enterprise after a couple years to go to Wall Street or wherever, still accomplish something for themselves and for others, that would have been missed if they’d just gone to Wall Street to begin with.

    Re #2:  There are some interesting ways around this.  For example, take a look at RefugePoint, which started out as an innovator trying to address refugee issues that large NGOs like UNHCR and IOM were missing.  One of the things they do now, at the behest of UNHCR, is teach other NGOs how to interact with UNHCR to document and process refugee cases.  It’s an innovation that doesn’t try to replace the standard way of doing things, but support and complement.

    Re #3:  What is an economically self sustaining model anyway?  It seems to me that it can be useful for social enterprise startups to adapt Osterwalder’s business model canvas to their situation.  (I can’t put a link or picture in here, but pictures and explanations of the canvas are easy to google.)  Basically, it’s a set of nine boxes.  The middle box is labeled “value proposition” and it contains a description of the value or set of values your social enterprise provides.  To the right are three boxes where you describe who you’re providing that value to, how you’re relating to them, and through what channels.  Underneath all that is a “revenue” box, showing what you get from doing all that work.  To the right are three boxes showing your actual, day-to-day activities, the assets you need to perform those activities, and the partners you need.  Underneath all that is a “cost” box showing the cost of what you need to do to provide the value you want to provide. A business is sustainable when the revenue from customers adds up to a larger number than the number in the “costs” box, on an ongoing basis.

    Social enterprises, though, aren’t obviously sustainable in that way, because the end users, or customers, normally can’t pay at all, or can’t pay the full costs of, the value provided.  If they could, then the value you’re offering could be offered on a commercial basis and you wouldn’t need a social enterprise at all. 

    There’s an answer to this, though.  Lots of for-profit companies, Google’s a good example, have a two-sided customer model.  Google’s customers are the hundreds of millions of people who do internet searches for free, but they are also the millions of businesses that pay to put ads in front of that first group.  Providing what the free customers want creates value for the paying customers.  It’s the same way with social enterprises.  Frequently, social enterprises have both end user customers, like poor women in Ecuador who need skills, or farmers in South Sudan who need electricity.  But they also have paying customers, like Skoll and Rockefeller and USAID and all those people who contribute on Kickstarter.  Those are customers too.  They are buying something, some change in the world that they want.  A sustainable social enterprise is one that can reliably and repeatably meet the authentic demand from their two sets of customers, and through doing that, generate enough money to keep going.

    I offer all that by way of suggesting that maybe, despite all the skepticism, there are worthwhile opportunities for this new generation of social enterprise. 


  • Gerry Salole's avatar

    BY Gerry Salole

    ON June 22, 2013 12:05 AM

    I found these two blogs to be refreshingly candid and realistic.  Its so good to get away from the unrealistic hype. Much appreciated from my perspective.

  • BY Serg Raicher

    ON June 22, 2013 01:23 AM

    We have learnt from venture capital that we can make a quick flip and deliver good IRR but it takes years to build sustainable companies and generate high multiples. The same applies to social investments… where multiples should be measured (also) in terms of societal impact.

    Thank you Daniel for reminding us the vertue of long term comittment.
    May social entrepreneurs aAND THEIR FUNDERS hear you.

  • BY Daniel Ben-Horin

    ON June 22, 2013 12:18 PM

    Matt, Thanks for the thoughtful comment. I’d like to push back a little.

    You write, “If the traditional stuff spends billions of dollars in vain, and the new social enterprise stuff is both high risk - and therefore often fails - and possibly immoral, performing useless experiments on the poor - then what, if anything, should people who care about these issues do?”

    To which I would say that, not all the traditional billions were spent in vain and, certainly, not all new social enterprises fail (nor are immoral). I don’t think we should throw either baby out with its respective bathwater. Re social enterprise, It seems you took what i wrote as more of a generic slam on SE than I intended; I am arguing for clarity of motivation and goals, and for support those who are prepared to stay the course on a personal, life choice level. I said more about this in a comment on the other article.

    Your 1-3 itemization of my critique is fair and your comments on each are very helpful. I love the RefugePoint example and would just add that it feels like an exception that proves the rule. But it does spark the idea that there ought to be innovation challenges to specifically build out on and improve existing institutions (in addition to challenges to replace those institutions with innovative alternatives!)

    I do get the two-sided customer model. TechSoup Global itself is based on such a model. I agree that there is a new set of opportunities that is based on understanding this model, although I would stipulate that it’s a delicate balancing act to keep the two sides in the right equilibrium. The current spike in African objection to the ‘neo-Colonialism’ of bilateral, multilateral and large philanthropy funding demonstrates the delicacy of this balancing act.

  • BY Loic Comolli

    ON June 23, 2013 11:24 AM

    Daniel, very good article, and very timely. NESsT, which you’ve kindly cited in your blog, has been advocating for long term social enterprise support for many years. We need to bring the elements of the Slow Food Movement to the social enterprise space. Call it the Slow Social Enterprise Movement. It’s all about nurturing, trial and error, governance, leadership, team-building, and financing. And seeing the results until the model is proven - which in our case takes 3-5 years, minimum.

    Thanks for being a voice on this.

  • Pete M's avatar

    BY Pete M, United Ways of California

    ON June 25, 2013 11:14 PM

    “The internet has transformed social interactions and speeded up a lot of transactions, but it hasn’t yet speeded up deep changes in consciousness and cultural practice…. Social change is still a marathon, and you need to be running for the right reasons.”
    Very thought-provoking,  Daniel. Thanks!

  • BY Daniel Ben-Horin

    ON June 26, 2013 08:45 AM

    A friend, once in the Foundation world, now in academia, writes:

    ” It’s going on three years since I left the Foundation to inhabit the ivory tower . All joking aside, there’s a real emphasis here on how the work of the university impacts the outside world. Words like strategy, innovation, partnership, and impact get used a lot.

    “As I think about the process of social reform and transformation, I especially welcomed your posts. One of your quotes mentions “effectiveness” and I’ve long wondered the widespread ramifications of the focus on effectiveness in nonprofits. The origins of the shift are innocent enough – who could be against effectiveness? Certainly not me, and my point isn’t to somehow endorse waste, fraud, or abuse in nonprofits. I believe in competence, integrity, and accountability like any proponent of effectiveness.

    “Yet, when addressing major problems of the human condition like poverty, disease, and ignorance, there’s something of a conceptual mismatch to frame the issue in terms of effectiveness. It’s reductive in the sense that rules of cause and effect may not apply. A well-meaning philanthropist like Bill Gates originally thought poverty could be eradicated in the next 100 years. At least I remember reading a quote from him at some point expressing such a notion. I think he really believed (or believes) this is true. His thought process was something along the lines of cause and effect – if we eliminate the cause, the effect will go away. It’s no surprise the Gates Foundation focuses so much on vaccines—measurement is easy. They can count up the number of vaccines administered. I certainly hope polio is eradicated, don’t get me wrong. But eradicating polio is a far cry from eliminating poverty.

    “In funding terms, the push for effectiveness translates into project grants as opposed to general support grants. It may be easily to quantify results and measure effectiveness of project grants, but it also narrows and possibly skews the focus of the nonprofit receiving the grant. 

    “In the Prince, Machiavelli writes that the treatise is intended to describe the “effective truth.” I’ve always been fascinated by that concept and wondered what it meant. On the face of it, I think he means to remove politics (or human affairs) from the realm of philosophy (truth). The realm of truth is separated from the realm of the made; metaphysics from physics; being from time. The tension is that human beings inhabit both realms.

    “This is where your quote from the bishop comes into play, because I think you’re tapping into something deep, almost religious or metaphysical, about human motivations. What motivates those who stick to their nonprofit work for the long haul? The satisfaction received is other worldly. It’s hard to quantify. Of course, aspects of work over the long haul can be quantified – the number of dollars spent, the number of jobs created, the number of lives touched, etc. But the appeal for someone into it for the long haul isn’t effectiveness. It’s not transactional. It’s really more a state of being.

    “Thanks for allowing me to think about these issues and I apologize if this message is hopelessly abstract.”

  • BY Gayle Carpentier

    ON June 26, 2013 02:55 PM

    In all candor, I have to admit I share Daniel’s hope that there is a world where there is serious recognition for “expanding someone else’s innovation and other ones for building something deeply meaningful over a long time.” especially since I’ve had the honor and privilege of being TechSoup Global’s Chief Business Development Officer for nearly 12 years now.  That early warehouse full of demo copies of software, and the hope to create a program to delivery donated technology resources to nonprofits in real time, is where I entered the story.  No schematic, no business plan, merely a really good idea that I got to present to visionary companies who said, “That makes sense, sure, we’ll give it a shot!”

    Hard work?  Certainly.  Guarantees?  No such thing existed then (or now for that matter), but following the spirit of what feels right still continues to be satisfying in the extreme.  In the nearly 1,000 companies I’ve winnowed through to find those right partners for TSG, I’ve seen examples of every one of the perspectives and pitfalls he mentions above, and I entirely support his assumptions - people who want to believe this is easy, should really reconsider their options before leaping.

    Myself, I’m glad I did and overjoyed to see this method of supporting good social efforts growing and gaining serious traction and business analysis. 

    Well said Daniel!

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