The Real Problem Solvers: Social Entrepreneurs in America
Ruth A. Shapiro
256 pages, Stanford Business Books, 2012
How does one apply a business model to social change? While few would argue that one can take an entirely capitalist model to carry out social good, many in the field look to facets of profit-seeking behavior and traditional business models to explain and develop the field of social entrepreneurship. Jim Fruchterman, CEO of Benetech, put it this way:
“Entrepreneurs must understand their market. Just about every social question and issue you may address can be recast into market questions, such as: Who is the customer? What is the value proposition? And who is the competition? Understanding your customers, their environment, and their needs is crucial to any social venture.”
Elkington and Hartigan write in their book The Power of Unreasonable People that “the real measure of social entrepreneurship is a direct action that generates a paradigm shift in the way societal need is met.” Within a business context, this is the goal of creative destruction, the term rehabilitated by Joseph Schumpeter to mean system change or transformation as a result of an extraordinary innovation. In Schumpeter’s theory, new innovations destroy the need for old, as cars replace horses, computers replace typewriters, and so on.
This notion of an innovation changing the status quo has been embraced to a breathtaking degree by those within Silicon Valley. While social entrepreneurship has captured the imagination of people around the world, nowhere is this more true than in Silicon Valley, where many of the most successful men and women devote extraordinary resources to the continued stimulus and support of the field. As we will see throughout the book, there are significant parallels between the goals of a high-tech entrepreneur and those of a social entrepreneur. As Daniel Bornstein wrote in his groundbreaking book on Ashoka and the social entrepreneurial movement, “Everywhere you look, conceptual firewalls that once divided the world into social and economic realms are coming down and people are engaging the world with their whole brains.”
Aside from the overarching goal of widespread social change, the transfer of a business mind-set to civil society has brought about strategic and behavioral changes to how individuals and organizations conduct their work. These changes have primarily manifested in three ways: (1) a blurring of the demarcation between for profit and nonprofit activities; (2) an increased emphasis on results and measuring impact; and (3) a focus on scale—how to find successful innovations and cause them to proliferate widely to create the greatest societal change. Throughout this book, these three themes will provide important frameworks within which to look at the field as a whole and how it is changing nonprofit management and strategy.
The first theme, the “nonprofit” versus “for profit” question, and an increased blurring between these two, continues to be a hot topic of debate, as you will read in the various chapters of this book. Nonprofit organizations are still alive and well in the United States. We have a long history of robust civil society organizations, and this continues to gain strength: From 1995 to 2005, the number of nonprofit organizations registered with the IRS grew by 53 percent. However, the traditional definitions of the nonprofit are being challenged. The term nonprofit organization implies that the organization, focused on social change and impact, does not make a profit. In the past, this equating of social service work with nonprofit balance sheets was sacrosanct. To do good, common practice and wisdom told us, we could not also do well financially. Now that notion is being turned on its head. Not only do social investors believe that it is possible to do good and do well, but other aspects of an old mind-set are also falling away. Many of these organizations come with skilled and passionate people, innovative funding streams, and new ideas about solutions to our social problems. And many nonprofit organizations are developing profitable income streams to help both their constituencies and the sustainability of their organizations. For example, Juma Ventures, a pioneer in the field of integrating non- and for-profit activities, works holistically with youth at risk by helping them to build job skills, prepare for college, and develop business acumen. Throughout this book, stories of individuals and organizations who blur the distinction between profit and nonprofit will be presented.
The second important theme is an increased focus on and attention to results. Again, this impulse stems from the business world, where measuring results is fairly straightforward. Are we making money? In the world of social change, other measurements need to be put on place. What is success in the nonprofit world? What is the difference between a dreamer and an effective do-gooder? Social entrepreneurs are keenly interested in understanding impact. There is great effort to measure efficacy and seek means of improvement. The Acumen Fund has created a management system called Pulse that establishes metrics to determine these very things in delivering social good. Room to Read measures every dollar against the number of schools, libraries, books published and distributed, and the time it takes to accomplish each task.
The third spirited discussion taking place within the field of social entrepreneurship is about scale. While there are numerous examples of extraordinary people overcoming obstacles to create and put in place innovative programs, many of these are rather small and confined in scale. How does one take an individual intervention and scale it up to have an impact on larger sets of communities, nations, and even the world? Social equity investors believe that private enterprise must play a role in such a pursuit. Others believe that, within the nonprofit paradigm, scale is achievable.